Note 3 - Related-party Transactions

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

(3) Related-Party Transactions

Affiliate Agreements

Financial and Operational Agreements.  Blue Dolphin and certain of its subsidiaries are currently parties to several financial and operational agreements with Affiliates.

Agreement/Transaction	Parties	Effective Date	Key Terms
Blue Dolphin Guaranty Fee Agreement	Blue Dolphin Jonathan Carroll	01/01/2023	Related to payoff of Blue Dolphin $2.0 million SBA loan; Jonathan Carroll receives a cash fee equal to 2.00% per annum of outstanding principal balance owed under Blue Dolphin Term Loan Due 2051 as consideration for providing his personal guarantee.
Jet Fuel Purchase Agreements	LE LEH	04/21/2023	Product agreements for the purchase of jet fuel by LE from LEH; first transaction dated April 21, 2023 for approximately 1.9 million gallons of jet fuel; second transaction dated May 10, 2023 for approximately 2.0 million gallons of jet fuel; the jet fuel was priced at LEH’s product cost; LE sold the products back to LEH under a prior jet fuel sales agreement between the parties.
Amended and Restated Jet Fuel Sales Agreement	LE LEH	04/01/2023	Jet fuel sales by LE to LEH; 1-year automatic renewals; LEH lifts the jet fuel from LE as needed and sells it to the DLA under preferential pricing terms due to LEH's HUBZone certification.
Affiliate Revolving Credit Agreement	Blue Dolphin and subsidiaries LEH and affiliates	04/01/2024	Credit agreement for working capital purposes up to a maximum of $5.0 million in the aggregate; advances are at LEH's sole discretion; initial term expires on  April 30, 2025; automatically renews for one year periods unless sooner terminated by the parties; interest accrues at the WSJ Prime rate plus 2.00%, compounded annually, and paid quarterly.
LE Amended and Restated Guaranty Fee Agreement	LE Jonathan Carroll	01/01/2023	Related to payoff of LE $25.0 million Veritex loan; Jonathan Carroll receives a cash fee equal to 2.00% per annum of outstanding principal balance owed under LE Term Loan Due 2034 as consideration for providing his personal guarantee.
LE Amended and Restated Master Services Agreement	LE Ingleside	03/01/2023	For storage of products intended for customer receipt by barge; tank rental fee $0.1 million per month.
LRM Amended and Restated Guaranty Fee Agreement	LRM Jonathan Carroll	01/01/2023	Related to payoff of LRM $10.0 million Veritex loan; Jonathan Carroll receives a cash fee equal to 2.00% per annum of outstanding principal balance owed under LRM Term Loan Due 2034 as consideration for providing his personal guarantee.
NPS Guaranty Fee Agreement	NPS Jonathan Carroll	01/01/2023	Related to payoff of NPS $10.0 million GNCU loan; Jonathan Carroll receives a cash fee equal to 2.00% per annum of outstanding principal balance owed under NPS Term Loan Due 2031 as consideration for providing his personal guarantee.
NPS Terminal Services Agreement	NPS LEH	11/01/2022	For LEH storage of jet fuel at the Nixon facility; tank rental fee $0.2 million per month; 1-year term on an evergreen basis; either party may cancel upon 60 days’ prior written notice.
Office Sub-Lease Agreement	BDSC LEH	05/31/23	12-month extension of prior office sublease; term expires 08/31/2024; office lease Houston, Texas; rent approximately $0.003 million per month; management is currently exploring leasing options.
Third Amended and Restated Operating Agreement	Blue Dolphin LE         LRM NPS      BDPL BDPC   BDSC LEH	04/01/2024	1-year term; expires 04/01/2025 or notice by either party at any time of material breach or 90 days Board notice; LEH receives management fee of 5% of all consolidated operating costs, excluding crude costs, depreciation, amortization, and interest, of Blue Dolphin, LE, LRM, NPS, BDPL, BDPC and BDSC

Debt Agreements.  BDPL was a party to the BDPL-LEH Loan Agreement with LEH at March 31, 2024 and December 31, 2023.  Summaries of the debt agreements follow:

Loan Description	Parties	Maturity Date	Interest Rate	Loan Purpose
BDPL-LEH Loan Agreement (in forbearance)	BDPL	Aug 2018	16.00%	Original principal amount of $4.0 million; Blue Dolphin working capital
	LEH

Forbearance and Defaults.

LEH Payment Agreement.  Pursuant to the LEH Payment Agreement, LEH agreed to forbear from exercising any of its rights and remedies related to existing defaults pertaining to payment violations under the BDPL-LEH Loan Agreement.  Under the terms of the LEH Payment Agreement, BDPL agreed to make interest-only monthly payments approximating $0.05 million beginning in May 2023, continuing on the fifteenth of each month through April 2025. Beginning in May 2025, BDPL agreed to make principal and interest monthly payments approximating $0.4 million through April 2027. Interest will be incurred throughout the agreement term, including the interest-only payment period. BDPL paid LEH approximately $0.1 million and $0 for the three months ended March 31, 2024 and 2023. As of the filing date of this report, the BDPL-LEH Loan Agreement was in forbearance related to past defaults.

Covenants, Guarantees and Security.

The BDPL-LEH Loan Agreement contains representations and warranties, affirmative and negative covenants, and events of default that we consider usual and customary for a credit facility of this type.  Certain BDPL property serves as collateral under the BDPL-LEH Loan Agreement.

See “Notes (1) and (10)” to our consolidated financial statements for additional information regarding defaults under our secured loan agreements and their potential effects on our business, financial condition, and results of operations.

Related-Party Financial Impact

Consolidated Balance Sheets.

Accounts receivable, related party.  Accounts receivable—related party for the sale of jet fuel to LEH totaled $11.7 million and $4.2 at March 31, 2024 and December 31, 2023, respectively. Amounts Blue Dolphin owed to LEH under the Third Amended and Restated Operating Agreement were net settled against amounts LEH owed to LE under the Amended and Restated Jet Fuel Sales Agreement. Excess amounts owed by LEH to LE were reflected in accounts receivable—related party on our consolidated balance sheet.

Accounts payable, related party.  Accounts payable, related party totaled approximately $0.0 million and $0.9 million at March 31, 2024 and December 31, 2023.  Accounts payable, related party at December 31, 2023 reflected tank rental fees owed by LE to Ingleside under the LE Amended and Restated Master Services Agreement plus amounts owed to LTRI for previously purchased refinery equipment.

Long-term debt, related party, net of current portion and accrued interest payable, related party, net of current portion.

	March 31,		December 31,
	2024		2023
	(in thousands)
LEH
BDPL-LEH Loan Agreement (in forbearance)	$	5,308	$	5,308
LEH Total		5,308		5,308
Less: Long-term debt, related party, current portion		-		-
Less: Accrued interest payable, related party, current portion		-		-
	$	5,308	$	5,308

Consolidated Statements of Operations.

Total revenue from operations.

	Three Months Ended March 31,
	2024				2023
	(in thousands, except percent amounts)
Refinery operations
LEH	$	27,394	30.1	%	$	35,345	30.3	%
Third-Parties		62,521	68.7	%		79,295	68.0	%
Tolling and terminaling
LEH		540	0.6	%		540	0.5	%
Third-Parties		567	0.6	%		1,481	1.3	%
	$	91,022	100.0	%	$	116,661	100.0	%

Interest expense.

	Three Months Ended March 31,
	2024		2023
	(in thousands)
Jonathan Carroll
Guaranty Fee Agreements
Tied to First Term Loan Due 2034	$	98	$	102
Tied to NPS Term Loan Due 2031		50		50
Tied to Second Term Loan Due 2034		41		43
Tied to Blue Dolphin Term Loan Due 2051		10		10
LEH
BDPL-LEH Loan Agreement (in forbearance)		106		160
	$	305	$	365

Other.  BDSC received sublease income from LEH totaling $0.01 million for both three-month periods ended March 31, 2024 and 2023.

The LEH operating fee, related party totaled $0.2 million for the three-month period ended March 31, 2024 compared to approximately $0.1 million for the three-month period ended March 31, 2023. The increase between the periods related to higher manufacturing overhead costs including insurance.

Lease expense associated with the LE Amended and Restated Master Services Agreement totaled $0.3 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively.