Blueknight Energy Partners, L.P. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - March 13, 2012

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Exhibit 99.1
BKEP LOGO

Blueknight Energy Partners, L.P.
Announces Fourth Quarter and Full Year 2011 Results

TULSA, Okla., March 13, 2012 -- Blueknight Energy Partners, L.P.  (“BKEP” or the “Partnership”) (NASDAQ: BKEP and BKEPP), a midstream energy company focused on providing integrated services for companies engaged in the production, distribution and marketing of crude oil, asphalt and other petroleum products, today announced adjusted EBITDA of $19.8 million and $68.2 million for the three and twelve months ended December 31, 2011, respectively.  This represents increases of $6.7 million or 51% and $9.1 million or 15% as compared to the three and twelve months ended December 31, 2010, respectively.  An explanation of adjusted EBITDA, including a reconciliation of such measure to net income (loss), is provided in the section of this release entitled “Non-GAAP Financial Measures.”

The Partnership reported net income of $7.6 million on total revenues of $45.6 million for the three months ended December 31, 2011, compared to a net loss of $13.2 million on total revenues of $39.1 million for the three months ended December 31, 2010.  For the twelve months ended December 31, 2011, the Partnership reported net income of $33.5 million on total revenues of $176.7 million, compared to a net loss of $23.8 million on total revenues of $152.6 million for the twelve months ended December 31, 2010.  The Partnership’s financial results for twelve months ended December 31, 2011 were impacted by non-cash gains of approximately $22.1 million related to the change in estimated fair market value of the embedded derivative related to convertible debentures that were redeemed in the fourth quarter of 2011 and the rights offering liability that was settled in the fourth quarter of 2011.  For further information regarding the Partnership’s results of operations, please see the Partnership’s Annual Report on Form 10-K for the year ending December 31, 2011.
 
“Our financial results for the fourth quarter of 2011 reflect the successful completion of the recapitalization and resolution of predecessor litigation.   The recent payment of a quarterly distribution on our common units is a significant achievement.  Our first distribution since 2008, the payment is an indicator of the progress we have made to lay a foundation to support growth as we meet increased demand for our midstream services,” commented J. Michael Cockrell, Blueknight Energy Partners’ president and chief operating officer.
 
Alex Stallings, Blueknight Energy Partners’ chief financial officer added, “Revenues for the year increased $24.1 million or 16% as a result of increases in our crude oil pipeline, crude oil trucking and producer field services, and asphalt businesses.  Increases in crude oil pipeline revenues were driven by the addition of the Eagle pipeline and increased utilization on the southern portion of our Oklahoma mainline and East Texas pipeline systems.   Continued significant demand in West Texas for our crude oil trucking services and the producer field services business we acquired in late 2010 led to increases in revenue in crude oil trucking and producer field services. Furthermore, our asphalt services segment recorded a strong year on account of several customers exceeding annual contractual thresholds and the re-contracting of 43 of our 44 asphalt facilities, which, in the majority of instances, extended contract expiration dates to near the end of 2016.”
 

 
 
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Results of Operations

The following table summarizes the financial results for the three and twelve months ended December 31, 2010 and 2011 (in thousands except per unit data):


   
Three Months Ended
December 31,
  
Twelve Months Ended
December 31,
   
2010
  
2011
  
2010
  
2011
                                 
Service revenues:
                        
Third party revenue
  
$
31,189
    
$
32,870
    
$
129,083
    
$
132,618
  
Related party revenue
    
7,904
      
12,712
      
23,541
      
44,089
  
Total revenue
    
39,093
      
45,582
      
152,624
      
176,707
  
Expenses:
                                
Operating
    
24,215
      
29,117
      
97,655
      
114,843
  
General and administrative
    
9,417
      
3,247
      
20,454
      
17,311
  
Total expenses
    
33,632
      
32,364
      
118,109
      
132,154
  
Loss contingency, net of insurance recovery
    
7,200
      
—
      
7,200
      
—
  
Operating income (loss)
    
(1,739
)
    
13,218
      
27,315
      
44,553
  
Other (income) expense
                                
Interest expense
    
9,135
      
5,614
      
48,638
      
32,898
  
Change in fair value of embedded derivative within convertible debt
    
6,650
      
—
      
6,650 
      
(20,224
)
Change in fair value of rights offering contingency
    
(4,384
)
    
(45
)
    
(4,384
)
    
(1,883
)
Income (loss) before income taxes
    
(13,140
)
    
7,649
      
(23,589
)
    
33,762
  
Provision for income taxes
    
56
      
68
      
207
      
287
  
Net income (loss)
  
$
(13,196
)
  
$
7,581
    
$
(23,796
)
  
$
33,475
  
Allocation of net income (loss) for purpose of calculating earnings per unit:
                                
General partners interest in net income (loss)
  
$
(260
)
  
$
158
    
$
(470
)
  
$
912
  
Preferred partners interest in net income
  
$
—
    
$
5,322
    
$
—
    
$
16,446
  
Accretion of discount on increasing rate Preferred Units
  
$
—
    
$
2,243
    
$
—
    
$
2,243
  
Beneficial conversion feature attributable to Preferred Units
  
$
8,114
    
$
10,198
    
$
8,114
    
$
43,259
  
Beneficial conversion feature attributable to repurchase of Preferred Units
  
$
—
    
$
(6,892
) 
  
$
—
    
$
(6,892
)
Gain on extinguishment attributable to redemption of convertible debt, recorded as a capital transaction
  
$
—
    
$
(2,375
) 
  
$
—
    
$
(2,375
)
Net loss available to limited partners
  
$
(21,050
)
  
$
(1,073
)
  
$
(31,440
)
  
$
(20,118
)
                                 
Basic and diluted net loss per common unit
  
$
(0.61
)
  
$
(0.05
)
  
$
(0.91
)
  
$
(0.61
)
Basic and diluted net loss per subordinated  unit
  
$
(0.61
)
  
$
—
    
$
(0.91
)
  
$
(0.52
)
                                 
Weighted average common units outstanding - basic and diluted
    
21,794
      
22,567
      
21,744
      
22,059
  
Weighted average subordinated units outstanding - basic and diluted
    
12,571
      
—
      
12,571
      
8,817
  

 
 
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Non-GAAP Financial Measures
 
This press release contains the non-GAAP financial measure of adjusted EBITDA.  Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization and impairment, expenses relating to refinancing debt or settlement costs, reserves established for litigation and other miscellaneous non-cash items.   The use of adjusted EBITDA should not be considered as an alternative to GAAP measures such as net income or cash flows from operating activities. Adjusted EBITDA is presented because the Partnership believes it provides additional information with respect to its business activities and is used as a supplemental financial measure 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 to net income (loss) for the periods shown (in thousands):

   
Three Months Ended
  
Twelve Months Ended
   
December 31,
  
December 31,
   
2010
  
2011
  
2010
  
2011
Net income (loss)
  
$
(13,196
)
  
$
7,581
    
$
(23,796
)
  
$
33,475
  
Interest expense
    
9,135
      
5,614
      
48,638
      
32,898
  
Income taxes
    
56
      
68
      
207
      
287
  
Depreciation, amortization and impairment
    
5,219
      
6,576
      
22,226
      
23,642
  
Professional fees related to refinancing
    
2,400
      
—
      
2,400
      
—
  
Loss contingency, net of insurance receivable
    
 7,200
      
—
      
 7,200
      
—
  
Change in fair value of embedded derivative within convertible debt
    
6,650
      
—
      
 6,650
      
(20,224
) 
Change in fair value of rights offering contingency
    
(4,384
) 
    
(45
) 
    
 (4,384
) 
    
(1,883
)
Adjusted EBITDA
  
$
13,080
    
$
19,794
    
$
59,141
    
$
68,195
  
 
Investor Conference Call
 
The Partnership will hold a conference call on Wednesday, March 14, 2012 at 1:00 p.m. Central Time (2:00 p.m. Eastern Time) to discuss fourth quarter and full year 2011 results. The conference call can be accessed through the Investors section of the Partnership's Web site at http://investor.bkep.com/presentations or by telephone at 1-877-317-6789. International locations may dial-in by calling 1-412-317-6789.
 
Participants should dial in five to ten minutes prior to the scheduled start time. An audio replay will be available on the Web site for at least 30 days, and a recording will be available by phone for 30 days. To hear the replay, call 1-877-344-7529 in the U.S. or call 1-412-317-0088 from international locations. The pass code for both is 10011351.
 
Forward-Looking Statements
 
This release includes forward-looking statements. Statements included in this release that are not historical facts (including, without limitation, any statements concerning plans and objectives of management for future operations or economic performance or assumptions related thereto) 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.
 

 
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About Blueknight Energy Partners, L.P.
 
BKEP owns and operates a diversified portfolio of complementary midstream energy assets consisting of approximately 7.8 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 1,289 miles of crude oil pipeline located primarily in Oklahoma and Texas, approximately 300 crude oil transportation and oilfield services vehicles deployed in Kansas, Colorado, New Mexico, Oklahoma and Texas and approximately 7.2 million barrels of combined asphalt product and residual fuel oil storage located at 44 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 based in Oklahoma City, Oklahoma and Tulsa, Oklahoma. For more information, visit the Partnership’s Web site at www.bkep.com.
 
Contact:
 
BKEP Investor Relations, 918-237-4032
 
investor@bkep.com
 
or
 
BKEP Media Contact:
Brent Gooden, (405) 715-3232 or (405) 818-1900

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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