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Table of Contents


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from __________ to _________ 

Commission File Number 001-33503

BLUEKNIGHT ENERGY PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of incorporation or organization)

20-8536826

(IRS Employer Identification No.)

 

6060 American Plaza, Suite 600

Tulsa, Oklahoma 74135

(Address of principal executive offices, zip code)

 

Registrant’s telephone number, including area code: (918) 237-4000

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    ☒    No   ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   ☒   No   ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐

 

Accelerated filer ☐

Non-accelerated filer ☒

 

Smaller reporting company 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No ☒

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Units

BKEP

The Nasdaq Global Market

Series A Preferred Units

BKEPP

The Nasdaq Global Market

 

 As of November 4, 2021, there were 34,406,683 Series A Preferred Units and 41,516,643 common units outstanding.  
 

 

 

 

 

Table of Contents

 

    Page
PART I FINANCIAL INFORMATION 1
Item 1. Unaudited Condensed Consolidated Financial Statements 1
  Condensed Consolidated Balance Sheets as of December 31, 2020, and September 30, 2021 1
  Condensed Consolidated Statements of Operations for the Three and Nine Months EndedSeptember 30, 2020 and 2021 2
  Condensed Consolidated Statements of Changes in Partners’ Capital (Deficit) for the Three and Nine Months Ended September 30, 2020 and 2021 3
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2021 4
  Notes to the Unaudited Condensed Consolidated Financial Statements 5
  1. Organization and Nature of Business 5
  2. Basis of Presentation 5
  3. Revenue 5
  4. Discontinued Operations 7
  5. Debt 10
  6. Net Income Per Limited Partner Unit 12
  7. Partners’ Capital and Distributions 13
  8. Related-party Transactions 13
  9. Long-Term Incentive Plan 14
  10. Fair Value Measurements 15
  11. Commitments and Contingencies 15
  12. Recently Issued Accounting Standards 16
  13. Subsequent Events 16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
Item 4. Controls and Procedures 22
     
PART II OTHER INFORMATION 23
Item 1. Legal Proceedings 23
Item 1A. Risk Factors 23
Item 2. Unregistered Sales of Equity Securities 23
Item 6. Exhibits 24

 

i

 

 

PART I. FINANCIAL INFORMATION

 

Item 1.    Unaudited Condensed Consolidated Financial Statements

 

BLUEKNIGHT ENERGY PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except unit data)

 

  

As of

  

As of

 
  

December 31, 2020

  

September 30, 2021

 
  

(unaudited)

 

ASSETS

        

Current assets:

        

Cash and cash equivalents

 $805  $555 

Accounts receivable, net

  3,297   4,258 

Receivables from related parties, net

  507   1,193 

Other current assets

  2,355   2,876 

Current assets of discontinued operations

  96,945   299 

Total current assets

  103,909   9,181 

Property, plant and equipment, net of accumulated depreciation of $197,561 and $202,164 at December 31, 2020, and September 30, 2021, respectively

  104,709   105,978 

Goodwill

  6,728   6,728 

Debt issuance costs, net

  1,340   2,852 

Operating lease assets

  8,548   7,281 

Intangible assets, net

  7,531   5,744 

Other noncurrent assets

  252   605 

Total assets

 $233,017  $138,369 

LIABILITIES AND PARTNERS’ CAPITAL(DEFICIT)

        

Current liabilities:

        

Accounts payable

 $1,635  $1,669 

Accounts payable to related parties

  31   960 

Accrued interest payable

  274   234 

Accrued property taxes payable

  1,757   2,076 

Unearned revenue

  1,789   3,362 

Unearned revenue with related parties

  4,603   4,748 

Accrued payroll

  4,977   3,998 

Current operating lease liability

  1,684   1,271 

Other current liabilities

  1,349   1,259 

Current liabilities of discontinued operations

  17,248   348 

Total current liabilities

  35,347   19,925 

Long-term unearned revenue with related parties

  4,153   4,702 

Other long-term liabilities

  168   253 

Noncurrent operating lease liability

  6,980   6,210 

Long-term debt

  252,592   101,000 

Commitments and contingencies (Note 11)

          

Partners’ capital(deficit):

        

Common unitholders (41,214,856 and 41,516,643 units issued and outstanding at December 31, 2020, and September 30, 2021, respectively)

  312,591   389,053 

Preferred unitholders (35,125,202 and 34,406,683 units issued and outstanding at December 31, 2020, and September 30, 2021, respectively)

  253,923   248,728 

General partner interest (1.6% interest with 1,225,409 general partner units outstanding at both dates)

  (632,737)  (631,502)

Total partners’ capital(deficit)

  (66,223)  6,279 

Total liabilities and partners’ capital(deficit)

 $233,017  $138,369 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1

 

 

BLUEKNIGHT ENERGY PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit data)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2020

   

2021

   

2020

   

2021

 
   

(unaudited)

Service revenue:

                               

Third-party revenue

  $ 7,514     $ 7,919     $ 21,201     $ 22,150  

Related-party revenue

    4,849       5,153       12,945       15,037  

Lease revenue:

                               

Third-party revenue

    9,142       9,222       27,051       25,926  

Related-party revenue

    7,490       8,045       19,239       22,060  

Total revenue

    28,995       30,339       80,436       85,173  

Costs and expenses:

                               

Operating expense

    15,571       15,836       46,461       47,799  

General and administrative expense

    3,237       2,967       10,501       9,921  

Total costs and expenses

    18,808       18,803       56,962       57,720  

Gain(loss) on disposal of assets

    324       (129 )     250       (129 )

Operating income

    10,511       11,407       23,724       27,324  

Other income(expenses):

                               

Other income

    176       2,187       969       2,529  

Interest expense

    (1,302 )     (968 )     (4,417 )     (3,996 )

Income before income taxes

    9,385       12,626       20,276       25,857  

Provision for income taxes

    -       10       (1 )     30  

Income from continuing operations

    9,385       12,616       20,277       25,827  

Income(loss) from discontinued operations, net

    5,008       (20 )     (4,533 )     75,705  

Net income

  $ 14,393     $ 12,596     $ 15,744     $ 101,532  
                                 

Allocation of net income(loss) for calculation of earnings per unit:

                               

General partner interest in net income

  $ 228     $ 200     $ 249     $ 1,608  

Preferred interest in net income

  $ 6,278     $ 6,177     $ 18,836     $ 18,674  

Net income(loss) available to limited partners

  $ 7,887     $ 6,219     $ (3,341 )   $ 81,250  
                                 

Basic and diluted net income(loss) from discontinued operations per common unit

  $ 0.12     $ -     $ (0.11 )   $ 1.74  

Basic and diluted net income from continuing operations per common unit

  $ 0.07     $ 0.14     $ 0.03     $ 0.15  

Basic and diluted net income(loss) per common unit

  $ 0.19     $ 0.14     $ (0.08 )   $ 1.89  
                                 
                                 

Weighted average common units outstanding - basic and diluted

    41,166       41,514       41,072       41,471  

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2

 

 

BLUEKNIGHT ENERGY PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (DEFICIT)

(in thousands)

 

  Common Unitholders  Series A Preferred Unitholders  General Partner Interest  Total Partners’ Capital (Deficit) 
  

(unaudited)

 

Balance, June 30, 2020

 $342,651  $253,923  $(632,252) $(35,678)

Net income(loss)

  7,887   6,278   228   14,393 

Equity-based incentive compensation

  210   -   3   213 

Distributions

  (1,703)  (6,278)  (128)  (8,109)

Proceeds from sale of 104,954 common units pursuant to the Employee Unit Purchase Plan

  115   -   -   115 

Balance, September 30, 2020

 $349,160  $253,923  $(632,149) $(29,066)
                 

Balance, December 31, 2019

 $356,777  $253,923  $(632,023) $(21,323)

Net income(loss)

  (3,341)  18,836   249   15,744 

Equity-based incentive compensation

  630   -   10   640 

Distributions

  (5,076)  (18,836)  (385)  (24,297)

Proceeds from sale of 158,326 common units pursuant to the Employee Unit Purchase Plan

  170   -   -   170 

Balance, September 30, 2020

 $349,160  $253,923  $(632,149) $(29,066)
                 

Balance, June 30, 2021

 $384,265  $248,946  $(631,578) $1,633 

Net income

  6,214  $6,182  $200   12,596 

Equity-based incentive compensation

  191  $-  $3   194 

Repurchase of Preferred Shares

  -  $(244) $-   (244)

Distributions

  (1,723) $(6,156) $(127)  (8,006)

Proceeds from sale of 44,958 common units pursuant to the Employee Unit Purchase Plan

  106  $-  $-   106 

Balance, September 30, 2021

 $389,053  $248,728  $(631,502) $6,279 
                 

Balance, December 31, 2020

 $312,591  $253,923  $(632,737) $(66,223)

Net income

  81,121   18,803   1,608   101,532 

Equity-based incentive compensation

  330   -   9   339 

Repurchase of preferred units

  -   (5,407)  -   (5,407)

Distributions

  (5,143)  (18,591)  (382)  (24,116)

Proceeds from sale of 77,654 common units pursuant to the Employee Unit Purchase Plan

  154   -   -   154 

Balance, September 30, 2021

 $389,053  $248,728  $(631,502) $6,279 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3

 

 

BLUEKNIGHT ENERGY PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

  

Nine Months Ended September 30,

 
  

2020

   

2021

 
  

(unaudited)

 

Cash flows from operating activities:

         

Net income

 $15,744   $101,532 

Adjustments to reconcile net income to net cash provided by operating activities:

         

Depreciation and amortization

  17,698    8,977 

Amortization and write-off of debt issuance costs

  753    1,385 

Tangible asset impairment charge

  6,417    156 

Gain on sale of assets

  (426)   (74,990)

Gain from insurance settlement related to investing activities

  -    (1,059)

Equity-based incentive compensation

  640    339 

Changes in assets and liabilities:

         

Decrease in accounts receivable

  8,677    12,699 

Decrease (increase) in receivables from related parties

  104    (686)

Decrease in other current assets

  3,032    2,554 

Decrease in other non-current assets

  1,767    846 

Decrease in accounts payable

  (379)   (433)

Decrease in payables to related parties

  (1,256)   (31)

Decrease in accrued crude oil purchases

  (4,244)   (3,868)

Decrease in accrued crude oil purchases to related parties

  (4,382)   (8,842)

Increase in accrued interest payable

  25    289 

Increase (decrease) in accrued property taxes

  204    (183)

Increase in unearned revenue

  318    972 

Increase(decrease) in unearned revenue from related parties

  1,382    (257)

Decrease in accrued payroll

  (29)   (2,367)

Decrease in other accrued liabilities

  (2,145)   (1,761)

Net cash provided by operating activities

  43,900    35,272 

Cash flows from investing activities:

         

Acquisition of DEVCO from Ergon (Note 8)

  (12,221)   - 

Capital expenditures

  (12,381)   (6,394)

Net proceeds from sale of assets

  2,409    155,173 

Proceeds from insurance settlement related to investing activities

  -    1,059 

Net cash provided by(used in) investing activities

  (22,193)   149,838 

Cash flows from financing activities:

         

Payments on other financing activities

  (2,166)   (1,105)

Debt issuance costs

  -    (372)

Borrowings under credit agreement

  181,000    79,486 

Payments under credit agreement

  (176,000)   (234,000)

Proceeds from equity issuance

  170    154 

Repurchase of preferred units

  -    (5,407)

Distributions

  (24,297)   (24,116)

Net cash used in financing activities

  (21,293)   (185,360)

Net increase(decrease) in cash and cash equivalents

  414    (250)

Cash and cash equivalents at beginning of period

  558    805 

Cash and cash equivalents at end of period

 $972   $555 
          

Supplemental disclosure of non-cash financing and investing cash flow information:

         

Non-cash changes in property, plant and equipment

 $1,185   $2,013 

Increase in accrued liabilities related to insurance premium financing agreement

 $2,324   $1,208 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 

 

4

 

BLUEKNIGHT ENERGY PARTNERS, L.P.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1.

ORGANIZATION AND NATURE OF BUSINESS

 

Blueknight Energy Partners, L.P. and subsidiaries (collectively, the “Partnership”) is a publicly traded master limited partnership with operations in 26 states. The Partnership provides integrated terminalling services for companies engaged in the production, distribution, and marketing of liquid asphalt. The Partnership manages its operations through one operating segment, asphalt terminalling services. The Partnership’s common units and preferred units, which represent limited partnership interests in the Partnership, are listed on the Nasdaq Global Market under the symbols “BKEP” and “BKEPP,” respectively. The Partnership was formed in February 2007 as a Delaware master limited partnership.

 

The Partnership previously provided integrated terminalling, gathering, and transportation services for companies engaged in the production, distribution, and marketing of crude oil in three different operating segments: (i) crude oil terminalling services, (ii) crude oil pipeline services, and (iii) crude oil trucking services. On December 21, 2020, the Partnership announced it had entered into multiple definitive agreements to sell these segments. These transactions closed in February and March of 2021. These segments are presented as discontinued operations for all periods presented. Unless otherwise noted, information in these notes to the consolidated financial statements relates to continuing operations. As the Partnership is only operating through one operating segment, a segment footnote is no longer required.

 

 

2.

BASIS OF PRESENTATION

 

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2021, the condensed consolidated statements of changes in partners’ capital (deficit) for the three and nine months ended September 30, 2020 and 2021, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2021, are unaudited. In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments necessary to state fairly the financial position and results of operations for the respective interim periods. All adjustments are of a recurring nature unless otherwise disclosed herein. The 2020 year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2021 (the “2020 Form 10-K”). Interim financial results are not necessarily indicative of the results to be expected for an annual period. The Partnership’s significant accounting policies are consistent with those disclosed in Note 3 of the Notes to Consolidated Financial Statements in its 2020 Form 10-K.

 

 

3.

REVENUE

 

The Partnership recognizes revenue from contracts with customers as well as lease revenue. The following table includes revenue associated with contractual commitments in place related to future performance obligations as of the end of the reporting period, which are expected to be recognized in revenue in the specified periods (in thousands):

 

  

Revenue from Contracts with Customers(1)

 

Revenue from Leases

 

Total

Remainder of 2021

 $9,813  $14,644  $24,457 

2022

  35,825   55,044   90,869 

2023

  28,126   43,483   71,609 

2024

  28,169   43,520   71,689 

2025

  26,852   38,523   65,375 

Thereafter

  37,666   45,820   83,486 

Total revenue related to future performance obligations

 $166,451  $241,034  $407,485 

___________________

(1)

Excluded from the table is revenue that is either constrained or related to performance obligations that are wholly unsatisfied as of September 30, 2021.

 

5

 

Disaggregation of Revenue

 

Disaggregation of revenue from contracts with customers and lease revenue by revenue type is presented as follows (in thousands):

 

  

Three Months Ended September 30, 2020

  

Revenue from contracts with customers

 

Lease revenue

    
  

Third-party revenue

 

Related-party revenue

 

Third-party revenue

 

Related-party revenue

 

Total

Fixed storage and throughput revenue

 $5,097  $4,079  $-  $-  $9,176 

Fixed lease revenue

  -   -   7,766   6,552   14,318 

Variable cost recovery revenue

  1,665   552   499   154   2,870 

Variable throughput and other revenue

  752   218   877   784   2,631 

Total

 $7,514  $4,849  $9,142  $7,490  $28,995 

 

 

  

Three Months Ended September 30, 2021

  

Revenue from contracts with customers

 

Lease revenue

    
  

Third-party revenue

 

Related-party revenue

 

Third-party revenue

 

Related-party revenue

 

Total

Fixed storage and throughput revenue

 $5,084  $4,721  $-  $-  $9,805 

Fixed lease revenue

  -   -   7,823   6,785   14,608 

Variable cost recovery revenue

  2,296   160   420   250   3,126 

Variable throughput and other revenue

  539   272   979   1,010   2,800 

Total

 $7,919  $5,153  $9,222  $8,045  $30,339 

 

 

  

Nine Months Ended September 30, 2020

  

Revenue from contracts with customers

 

Lease revenue

    
  

Third-party revenue

 

Related-party revenue

 

Third-party revenue

 

Related-party revenue

 

Total

Fixed storage and throughput revenue

 $15,318  $9,861  $-  $-  $25,179 

Fixed lease revenue

  -   -   24,479   17,914   42,393 

Variable cost recovery revenue

  4,754   2,866   1,575   541   9,736 

Variable throughput and other revenue

  1,129   218   997   784   3,128 

Total

 $21,201  $12,945  $27,051  $19,239  $80,436 

 

 

  

Nine Months Ended September 30, 2021

  

Revenue from contracts with customers

 

Lease revenue

    
  

Third-party revenue

 

Related-party revenue

 

Third-party revenue

 

Related-party revenue

 

Total

Fixed storage and throughput revenue

 $15,232  $14,162  $-  $-  $29,394 

Fixed lease revenue

  -   -   23,445   20,356   43,801 

Variable cost recovery revenue

  6,125   452   1,387   694   8,658 

Variable throughput and other revenue

  793   423   1,094   1,010   3,320 

Total

 $22,150  $15,037  $25,926  $22,060  $85,173 

 

Contract Balances

 

Billed accounts receivable from contracts with customers were $2.1 million and $3.0 million at December 31, 2020, and September 30, 2021, respectively.

 

The Partnership records unearned revenues when cash payments are received in advance of performance. Unearned revenue related to contracts with customers was $3.2 million and $4.0 million at  December 31, 2020, and September 30, 2021, respectively. For the nine months ended September 30, 2021, the Partnership recognized $2.3 million of revenues that were previously included in the unearned revenue balance.

 

Practical Expedients and Exemptions

 

The Partnership does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

 

6

 
 

4.

DISCONTINUED OPERATIONS

 

On December 21, 2020, the Partnership announced that it entered into agreements to sell its crude oil trucking services, crude oil pipeline services, and crude oil terminalling services segments. These segments are reported as discontinued operations in the results of operations and financial position for all periods presented. The crude oil trucking services agreement closed in two phases, one on December 15, 2020, and one on February 2, 2021. The crude oil pipeline services agreement closed on February 1, 2021. Loss recognized on the classification of held for sale and disposal of these assets was recorded in the year ended  December 31, 2020. The transaction related to the crude oil terminalling services segment closed on March 1, 2021. The Partnership has allocated interest to discontinued operations on debt that was required to be repaid as a result of the sales of the crude oil pipeline and terminalling services segment for the three and nine months ended September 30, 2020 and 2021.

 

As part of the crude oil pipeline sale, $1.4 million of the gross sale proceeds are currently being held in escrow, subject to post-closing settlement terms and conditions. The Partnership expects to receive the majority of this in increments over the two years following the date of sale.

 

Exit and disposal costs related to these sales, in the form of employee severance payments, totaled $1.9 million. The Partnership provided limited transition services to both of the buyers of the crude oil pipeline and terminalling services segments, with the final transition services being completed during the third quarter of 2021. The contracts were designed to recover the costs of providing services, so there is minimal income statement impact for these services.

 

During the three months ended March 31, 2020, an impairment of $4.9 million was recognized to write-down the value of the Partnership's crude oil linefill based on the market price of crude oil as of March 31, 2020.  During the three months ended June 30, 2020, the Partnership recognized asset impairment expense of $1.3 million in its crude trucking services segment based on expected future cash flows and market interest compared to carrying value.

 

Assets and Liabilities of Discontinued Operations (in thousands)

 

As of December 31, 2020

 
  

Crude Oil Trucking Services

  

Crude Oil Pipeline Services

  

Crude Oil Terminalling Services

  

Total

 

ASSETS

                

Accounts receivable, net

 $81  $13,711  $167  $13,959 

Plant, property, and equipment

  442   23,541   52,854   76,837 

Other assets

  331   547   5,271   6,149 

Total assets of discontinued operations

 $854  $37,799  $58,292  $96,945 
                 

LIABILITIES

                

Current liabilities

 $1,017  $14,921  $1,310  $17,248 

Total liabilities of discontinued operations

 $1,017  $14,921  $1,310  $17,248 

 

 

Assets and Liabilities of Discontinued Operations (in thousands)

 

As of September 30, 2021

 
  

Crude Oil Trucking Services

  

Crude Oil Pipeline Services

  

Crude Oil Terminalling Services

  

Total

 

ASSETS

                

Accounts receivable, net

 $-  $-  $299  $299 

Total assets of discontinued operations

 $-  $-  $299  $299 
                 

LIABILITIES

                

Current liabilities

 $12  $232  $104  $348 

Total liabilities of discontinued operations

 $12  $232  $104  $348 

 

7

 

Statement of Operations for Discontinued Operations (in thousands)

  Three Months Ended September 30, 2020 
  

Crude Oil Trucking Services

  

Crude Oil Pipeline Services

  

Crude Oil Terminalling Services

  

Total

 

Revenue:

                

Third-party service revenue

 $770  $412  $4,190  $5,372 

Intercompany service revenue

  1,434   -   -   1,434 

Third-party product sales revenue

  -   51,390   -   51,390 

Costs and expenses:

                

Operating expense

  2,415   3,366   2,363   8,144 

Intercompany operating expense

  -   1,434   -   1,434 

Cost of product sales

  -   19,833   -   19,833 

Cost of product sales from related party

  -   22,627   -   22,627 

General and administrative expense

  71   93   -   164 

(Gain)loss on disposal of assets

  76   (261)  -   (185)

Interest expense

  2   206   962   1,170 

Income(loss) before income taxes

  (360)  4,504   865   5,009 

Provision for income taxes

  1   -   -   1 

Net income(loss) from discontinued operations

 $(361) $4,504  $865  $5,008 

 

Statement of Operations for Discontinued Operations (in thousands)

 

Three Months Ended September 30, 2021

 
  

Crude Oil Trucking Services

  

Crude Oil Pipeline Services

  

Crude Oil Terminalling Services

  

Total

 

Revenue:

                

Third-party service revenue

 $-  $-  $656  $656 

Costs and expenses:

                

Operating expense

  (7)  (1)  676   668 

General and administrative expense

  -   (11)  -   (11)

(Gain)loss on disposal of assets

  26   -   (7)  19 

Income(loss) before income taxes

  (19)  12   (13)  (20)

Provision for income taxes

  -   -   -   - 

Net income(loss) from discontinued operations

 $(19) $12  $(13) $(20)

 

 

Statement of Operations for Discontinued Operations (in thousands)

 

Nine Months Ended September 30, 2020

 
  

Crude Oil Trucking Services

  

Crude Oil Pipeline Services

  

Crude Oil Terminalling Services

  

Total

 

Revenue:

                

Third-party service revenue

 $4,834  $1,287  $12,613  $18,734 

Intercompany service revenue

  4,364   -   -   4,364 

Third-party product sales revenue

  -   119,068   -   119,068 

Costs and expenses:

                

Operating expense

  9,890   10,149   6,566   26,605 

Intercompany operating expense

  -   4,364   -   4,364 

Cost of product sales

  -   41,133   -   41,133 

Cost of product sales from related party

  -   63,671   -   63,671 

General and administrative expense

  212   295   -   507 

Tangible asset impairment expense

  1,330   2,821   2,266   6,417 

Gain on disposal of assets

  (120)  (56)  -   (176)

Interest expense

  9   762   3,398   4,169 

Income(loss) before income taxes

  (2,123)  (2,784)  383   (4,524)

Provision for income taxes

  9   -   -   9 

Net income(loss) from discontinued operations

 $(2,132) $(2,784) $383  $(4,533)

 

8

 

 

Statement of Operations for Discontinued Operations (in thousands)

 

Nine Months Ended September 30, 2021

 
  

Crude Oil Trucking Services

  

Crude Oil Pipeline Services

  

Crude Oil Terminalling Services

  

Total

 

Revenue:

                

Third-party service revenue

 $9  $535  $5,097  $5,641 

Intercompany service revenue

  409   -   -   409 

Third-party product sales revenue

  -   15,591   -   15,591 

Costs and expenses:

                

Operating expense

  1,419   1,552   2,184   5,155 

Intercompany operating expense

  -   409   -   409 

Cost of product sales

  -   4,994   -   4,994 

Cost of product sales from related party

  -   9,461   -   9,461 

General and administrative expense

  61   112   -   173 

Tangible asset impairment expense

  92   41   23   156 

(Gain)loss on disposal of assets

  23   (1,644)  (73,498)  (75,119)

Interest expense

  -   72   635   707 

Income(loss) before income taxes

  (1,177)  1,129   75,753   75,705 

Provision for income taxes

  -   -   -   - 

Net income(loss) from discontinued operations

 $(1,177) $1,129  $75,753  $75,705 

 

 

Select cash flow information (in thousands)

                
  

Crude Oil Trucking Services

  

Crude Oil Pipeline Services

  

Crude Oil Terminalling Services

  

Total

 
  

Nine Months Ended September 30, 2020

 

Depreciation and amortization

 $531  $3,435  $3,409  $7,375 

Capital expenditures

 $2,019  $2,974  $472  $5,465 
                 
  

Nine Months Ended September 30, 2021

 

Amortization

 $3  $14  $41  $58 

Capital expenditures

 $-  $30  $106  $136 

 

9

 
 

5.

DEBT

 

On May 26, 2021, the Partnership entered into an amended and restated credit agreement with a revolving loan facility of $300.0 million. As of  November 4, 2021, approximately $96.0 million of revolver borrowings and $0.7 million of letters of credit were outstanding under the credit agreement, leaving the Partnership with approximately $203.3 million available capacity for additional revolver borrowings and letters of credit under the credit agreement, although the Partnership’s ability to borrow such funds is limited by the financial covenants in the credit agreement. The proceeds of loans made under the credit agreement may be used for working capital and other general corporate purposes of the Partnership.

 

The credit agreement is guaranteed by all of the Partnership’s existing subsidiaries. Obligations under the credit agreement are secured by first priority liens on substantially all of the Partnership’s assets and those of the guarantors.

 

The credit agreement includes procedures for additional financial institutions to become revolving lenders, or for any existing lender to increase its revolving commitment thereunder, subject to an aggregate maximum of $450.0 million for all revolving loan commitments under the credit agreement.

 

The credit agreement will mature on May 26, 2025, and all amounts outstanding under the credit agreement will become due and payable on such date. The credit agreement requires mandatory prepayments of amounts outstanding thereunder with the net proceeds of certain asset sales, property or casualty insurance claims and condemnation proceedings, unless the Partnership reinvests such proceeds in accordance with the credit agreement, but these mandatory prepayments will not require any reduction of the lenders’ commitments under the credit agreement.

 

Borrowings under the credit agreement bear interest, at the Partnership’s option, at either the reserve-adjusted eurodollar rate (as defined in the credit agreement) (“Eurodollar Rate”) plus an applicable margin that ranges from 2.0% to 3.25% or the alternate base rate (the highest of the agent bank’s prime rate, the federal funds effective rate plus 0.5%, and the 30-day Eurodollar Rate plus 1.0%) plus an applicable margin that ranges from 1.0% to 2.25%. The Partnership pays a per annum fee on all letters of credit issued under the credit agreement, which fee equals the applicable margin for loans accruing interest based on the Eurodollar Rate, and the Partnership pays a commitment fee ranging from 0.375% to 0.5% on the unused commitments under the credit agreement. The applicable margins for the Partnership’s interest rate, the letter of credit fee and the commitment fee vary quarterly based on the Partnership’s consolidated total leverage ratio (as defined in the credit agreement, being generally computed as the ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation, amortization, and certain other non-cash charges).

 

The credit agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter.

 

Prior to the date on which the Partnership issues qualified senior notes in an aggregate principal amount (when combined with all other qualified senior notes previously or concurrently issued) that equals or exceeds $200.0 million, the maximum permitted consolidated total leverage ratio is 4.75 to 1.00; provided that the maximum permitted consolidated total leverage ratio may be increased to 5.25 to 1.00 for certain quarters, based on the occurrence of a specified acquisition (as defined in the credit agreement, but generally being an acquisition for which the aggregate consideration is $15.0 million or more).

 

From and after the date on which the Partnership issues qualified senior notes in an aggregate principal amount (when combined with all other qualified senior notes previously or concurrently issued) that equals or exceeds $200.0 million, the maximum permitted consolidated total leverage ratio is 5.00 to 1.00; provided that from and after the fiscal quarter ending immediately preceding the fiscal quarter in which a specified acquisition occurs to and including the last day of the second full fiscal quarter following the fiscal quarter in which such acquisition occurred, the maximum permitted consolidated total leverage ratio will be 5.50 to 1.00.

 

The maximum permitted consolidated senior secured leverage ratio (as defined in the credit agreement, but generally computed as the ratio of consolidated total secured debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) is