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~~March 31, 2022

☐	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,~~April 29, 2022, there were 34,406,683 Series A Preferred Units and ~~41,516,643~~41,856,847 common units outstanding.

Table of Contents

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~~2021, and ~~September 30, 2021~~March 31, 2022	1
	Condensed Consolidated Statements of Operations for the ~~Three and~~ ~~Nine~~Three Months Ended~~September 30, 2020~~March 31, 2021 and ~~2021~~2022	2
	Condensed Consolidated Statements of Changes in Partners’ Capital (Deficit) for the ~~Three and~~ ~~Nine~~Three Months Ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022	3
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022	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~~Property, Plant and Equipment	108
	6. Debt	8
	7. Net Income Per Limited Partner Unit	10
	8. Partners’ Capital and Distributions	11
	9. Related-party Transactions	11
	10. Long-Term Incentive Plan	12
	~~7. Partners’ Capital and Distributions~~11. Fair Value Measurements	13
	~~8. Related-party Transactions~~	13
	~~9. Long-Term Incentive Plan~~12. Commitments and Contingencies	14
	~~10. Fair Value Measurements~~	15
	~~11. Commitments and Contingencies~~	15
	~~12.~~13. Recently Issued Accounting Standards	1614
	~~13.~~14. Subsequent Events	1614
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1715
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2220
Item 4.	Controls and Procedures	2220

PART II	OTHER INFORMATION	2321
Item 1.	Legal Proceedings	2321
Item 1A.	Risk Factors	2321
Item 2.	Unregistered Sales of Equity Securities	2321
Item 6.	Exhibits	2422

Table of Contents

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*			*As of*			*As of*
	*December 31, 2020*			*September 30, 2021*			*December 31, 2021*			*March 31, 2022*
	(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	805		$	555		$	1,172		$	1,052
Accounts receivable, net		3,297			4,258			2,989			4,938
Receivables from related parties, net		507			1,193			369			615
Other current assets		2,355			2,876			3,112			5,815
Current assets of discontinued operations		96,945			299			2			0
Total current assets		103,909			9,181			7,644			12,420
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
Property, plant and equipment, net of accumulated depreciation of $204,101 and $206,495 at December 31, 2021, and March 31, 2022, respectively								106,389			116,028
Goodwill		6,728			6,728			6,728			6,728
Debt issuance costs, net		1,340			2,852			2,854			2,652
Operating lease assets		8,548			7,281			7,855			7,539
Intangible assets, net		7,531			5,744			5,088			4,088
Other noncurrent assets		252			605			340			735
Total assets	$	233,017		$	138,369		$	136,898		$	150,190
LIABILITIES AND PARTNERS’ CAPITAL(DEFICIT)
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable	$	1,635		$	1,669		$	2,105		$	2,627
Accounts payable to related parties		31			960			1,047			2,023
Accrued interest payable		274			234			250			293
Accrued property taxes payable		1,757			2,076			1,660			1,618
Unearned revenue		1,789			3,362			1,932			2,799
Unearned revenue with related parties		4,603			4,748			4,875			1,619
Accrued payroll		4,977			3,998			4,782			1,789
Current operating lease liability		1,684			1,271			1,418			1,383
Other current liabilities		1,349			1,259			1,711			4,074
Current liabilities of discontinued operations		17,248			348			240			0
Total current liabilities		35,347			19,925			20,020			18,225
Long-term unearned revenue with related parties		4,153			4,702			4,390			4,351
Other long-term liabilities		168			253			228			289
Noncurrent operating lease liability		6,980			6,210			6,703			6,394
Long-term debt		252,592			101,000			98,000			115,000
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
Commitments and contingencies (Note 12)
Partners’ capital (deficit):
Common unitholders (41,550,681 and 41,856,847 units issued and outstanding at December 31, 2021, and March 31, 2022, respectively)								390,310			388,702
Preferred unitholders (34,406,683 units issued and outstanding at both dates)								248,729			248,729
General partner interest (1.6% interest with 1,225,409 general partner units outstanding at both dates)								(631,482	)		(631,500	)
Total partners’ capital								7,557			5,931
Total liabilities and partners’ capital							$	136,898		$	150,190

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

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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,*						*Three Months Ended March 31,*
	*2020*			*2021*			*2020*			*2021*			*2021*			*2022*
	(unaudited)
Service revenue:
Third-party revenue	$	7,514		$	7,919		$	21,201		$	22,150		$	6,919		$	7,606
Related-party revenue		4,849			5,153			12,945			15,037			4,849			5,121
Lease revenue:
Third-party revenue		9,142			9,222			27,051			25,926			8,303			8,487
Related-party revenue		7,490			8,045			19,239			22,060			7,004			7,246
Total revenue		28,995			30,339			80,436			85,173			27,075			28,460
Costs and expenses:
Operating expense		15,571			15,836			46,461			47,799			15,880			17,576
General and administrative expense		3,237			2,967			10,501			9,921			3,982			3,371
Loss on disposal of assets														0			24
Total costs and expenses		18,808			18,803			56,962			57,720			19,862			20,971
Gain(loss) on disposal of assets		324			(129	)		250			(129	)
Operating income		10,511			11,407			23,724			27,324			7,213			7,489
Other income(expenses):
Other income (expenses):
Other income		176			2,187			969			2,529			233			127
Interest expense		(1,302	)		(968	)		(4,417	)		(3,996	)		(1,333	)		(964	)
Income before income taxes		9,385			12,626			20,276			25,857			6,113			6,652
Provision for income taxes		0			10			(1	)		30			10			10
Income from continuing operations		9,385			12,616			20,277			25,827			6,103			6,642
Income(loss) from discontinued operations, net		5,008			(20	)		(4,533	)		75,705
Income from discontinued operations, net														75,550			0
Net income	$	14,393		$	12,596		$	15,744		$	101,532		$	81,653		$	6,642

Allocation of net income(loss) for calculation of earnings per unit:
Allocation of net income for calculation of earnings per unit:
General partner interest in net income	$	228		$	200		$	249		$	1,608		$	1,292		$	105
Preferred interest in net income	$	6,278		$	6,177		$	18,836		$	18,674		$	6,341		$	6,150
Net income(loss) available to limited partners	$	7,887		$	6,219		$	(3,341	)	$	81,250
Net income available to limited partners													$	74,020		$	387

Basic and diluted net income(loss) from discontinued operations per common unit	$	0.12		$	0		$	(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

Basic and diluted net income from discontinued operations per common unit													$	1.75		$	0
Basic and diluted net income (loss) from continuing operations per common unit													$	(0.01	)	$	0.01
Basic and diluted net income per common unit													$	1.74		$	0.01

Weighted average common units outstanding - basic and diluted		41,166			41,514			41,072			41,471			41,430			41,817

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

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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 0 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 0 0 115
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 0 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 0 0 170
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 $ 0 $ 3 194
Repurchase of Preferred Shares
0 $ (244 ) $ 0 (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 $ 0 $ 0 106
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 0 9 339
Repurchase of preferred units
0 (5,407 ) 0 (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 0 0 154
Balance, September 30, 2021
$ 389,053 $ 248,728 $ (631,502 ) $ 6,279

	*Common Unitholders*			*Series A Preferred Unitholders*			*General Partner Interest*			*Total Partners’ Capital (Deficit)*
	(unaudited)
Balance, December 31, 2020	$	312,591		$	253,923		$	(632,737	)	$	(66,223	)
Net income		73,896			6,465			1,292			81,653
Equity-based incentive compensation		(80	)		0			3			(77	)
Repurchase of preferred units		0			(5,163	)		0			(5,163	)
Distributions		(1,700	)		(6,279	)		(128	)		(8,107	)
Proceeds from sale of 32,696 common units pursuant to the Employee Unit Purchase Plan		48			0			0			48
Balance, March 31, 2021	$	384,755		$	248,946		$	(631,570	)	$	2,131

Balance, December 31, 2021	$	390,310		$	248,729		$	(631,482	)	$	7,557
Net income		386			6,150			106			6,642
Equity-based incentive compensation		245			0			4			249
Distributions		(1,827	)		(6,150	)		(128	)		(8,105	)
Proceeds from sale of 25,772 common units pursuant to the Employee Unit Purchase Plan		77			0			0			77
Other		(489	)		0			0			(489	)
Balance, March 31, 2022	$	388,702		$	248,729		$	(631,500	)	$	5,931

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

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BLUEKNIGHT ENERGY PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	*Nine Months Ended September 30,*						*Three Months Ended March 31,*
	*2020*			*2021*			*2021*			*2022*
	(unaudited)						(unaudited)
Cash flows from operating activities:
Net income	$	15,744		$	101,532		$	81,653		$	6,642
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		17,698			8,977			3,065			3,397
Amortization and write-off of debt issuance costs		753			1,385			391			209
Tangible asset impairment charge		6,417			156			156			0
Gain on sale of assets		(426	)		(74,990	)
Gain from insurance settlement related to investing activities		0			(1,059	)
(Gain) loss on disposal of assets								(75,069	)		24
Equity-based incentive compensation		640			339			(77	)		249
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 (increase) in accounts receivable								10,022			(1,948	)
Increase in receivables from related parties								(157	)		(246	)
Decrease (increase) in other current assets								1,630			(1,202	)
Decrease (increase) in other non-current assets								379			(80	)
Increase in accounts payable								412			381
Increase (decrease) in payables to related parties								(17	)		38
Decrease in accrued crude oil purchases		(4,244	)		(3,868	)		(3,868	)		0
Decrease in accrued crude oil purchases to related parties		(4,382	)		(8,842	)		(8,842	)		0
Increase in accrued interest payable		25			289			5			43
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 property taxes								(743	)		(273	)
Increase (decrease) in unearned revenue								(373	)		918
Decrease in unearned revenue from related parties								(227	)		(3,545	)
Decrease in accrued payroll		(29	)		(2,367	)		(3,822	)		(3,002	)
Decrease in other accrued liabilities		(2,145	)		(1,761	)
Increase (decrease) in other accrued liabilities								860			(572	)
Net cash provided by operating activities		43,900			35,272			5,378			1,033
Cash flows from investing activities:
Acquisition of DEVCO from Ergon (Note 8)		(12,221	)		0
Capital expenditures		(12,381	)		(6,394	)		(2,044	)		(9,600	)
Net proceeds from sale of assets		2,409			155,173
Proceeds from insurance settlement related to investing activities		0			1,059
Net cash provided by(used in) investing activities		(22,193	)		149,838
Net proceeds (costs) of asset disposal								155,316			(24	)
Net cash provided by (used in) investing activities								153,272			(9,624	)
Cash flows from financing activities:
Payments on other financing activities		(2,166	)		(1,105	)		(171	)		(501	)
Debt issuance costs		0			(372	)		(49	)		0
Borrowings under credit agreement		181,000			79,486			48,000			28,000
Payments under credit agreement		(176,000	)		(234,000	)		(194,000	)		(11,000	)
Proceeds from equity issuance		170			154			48			77
Repurchase of preferred units		0			(5,407	)		(5,163	)		0
Distributions		(24,297	)		(24,116	)		(8,107	)		(8,105	)
Net cash used in financing activities		(21,293	)		(185,360	)
Net increase(decrease) in cash and cash equivalents		414			(250	)
Net cash provided by (used in) financing activities								(159,442	)		8,471
Net decrease in cash and cash equivalents								(792	)		(120	)
Cash and cash equivalents at beginning of period		558			805			805			1,172
Cash and cash equivalents at end of period	$	972		$	555		$	13		$	1,052

Supplemental disclosure of non-cash financing and investing cash flow information:
Non-cash changes in property, plant and equipment	$	1,185		$	2,013		$	(74	)	$	2,434
Increase in accrued liabilities related to insurance premium financing agreement	$	2,324		$	1,208		$	1,208		$	0

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

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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 1 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~~March 31, 2022, the condensed consolidated statements of operations for the three ~~and~~ ~~nine~~months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022, the condensed consolidated statements of changes in partners’ capital (deficit) for the three ~~and~~ ~~nine~~months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022, and the condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022, 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~~2021 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~~2021, filed with the Securities and Exchange Commission (the “SEC”) on March ~~10, 2021~~9, 2022 (the “~~2020~~2021 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~~2021 Form 10-K.

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		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
Remainder of 2022							$	30,529	$	45,549	$	76,078
2023		28,126		43,483		71,609		36,739		53,125		89,864
2024		28,169		43,520		71,689		36,009		52,337		88,346
2025		26,852		38,523		65,375		33,801		46,268		80,069
2026								24,753		30,670		55,423
Thereafter		37,666		45,820		83,486		23,639		33,902		57,541
Total revenue related to future performance obligations	$	166,451	$	241,034	$	407,485	$	185,470	$	261,851	$	447,321

___________________

(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~~March 31, 2022.

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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*										*Three Months Ended March 31, 2021*
	*Revenue from contracts with customers*				*Lease revenue*						*Revenue from contracts with customers*				*Lease revenue*
	*Third-party revenue*		*Related-party revenue*		*Third-party revenue*		*Related-party revenue*		*Total*		*Third-party revenue*		*Related-party revenue*		*Third-party revenue*		*Related-party revenue*		*Total*
Fixed storage and throughput revenue	$	5,097	$	4,079	$	-	$	-	$	9,176	$	5,064	$	4,721	$	0	$	0	$	9,785
Fixed lease revenue		-		-		7,766		6,552		14,318		0		0		7,801		6,785		14,586
Variable cost recovery revenue		1,665		552		499		154		2,870		1,735		128		502		219		2,584
Variable throughput and other revenue		752		218		877		784		2,631		120		0		0		0		120
Total	$	7,514	$	4,849	$	9,142	$	7,490	$	28,995	$	6,919	$	4,849	$	8,303	$	7,004	$	27,075

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*										*Three Months Ended March 31, 2022*
	*Revenue from contracts with customers*				*Lease revenue*						*Revenue from contracts with customers*				*Lease revenue*
	*Third-party revenue*		*Related-party revenue*		*Third-party revenue*		*Related-party revenue*		*Total*		*Third-party revenue*		*Related-party revenue*		*Third-party revenue*		*Related-party revenue*		*Total*
Fixed storage and throughput revenue	$	15,232	$	14,162	$	-	$	-	$	29,394	$	5,186	$	4,861	$	0	$	0	$	10,047
Fixed lease revenue		-		-		23,445		20,356		43,801		0		0		8,122		6,988		15,110
Variable cost recovery revenue		6,125		452		1,387		694		8,658		2,313		260		363		258		3,194
Variable throughput and other revenue		793		423		1,094		1,010		3,320		107		0		2		0		109
Total	$	22,150	$	15,037	$	25,926	$	22,060	$	85,173	$	7,606	$	5,121	$	8,487	$	7,246	$	28,460

Contract Balances

~~Billed accounts~~Accounts receivable from contracts with customers were ~~$2.1~~$2.2 million and ~~$3.0~~$2.1 million at December 31, ~~2020~~2021, and ~~September 30, 2021~~March 31, 2022, respectively. Contract assets were $2.0 million at March 31, 2022, and were immaterial at December 31, 2021.

The Partnership records unearned revenues when cash payments are received in advance of performance. Unearned revenue related to contracts with customers was ~~$3.2~~$3.4 million and ~~$4.0~~$2.5 million at December 31, ~~2020~~2021, and ~~September 30, 2021~~March 31, 2022, respectively. For the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022, the Partnership recognized ~~$2.3~~$1.6 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.

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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~~segments for the three ~~and~~ ~~nine~~months ended ~~September 30, 2020~~March 31, ~~and~~ 2021.

As part of the crude oil pipeline sale, ~~$1.4~~$1.2 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, 2021*
	*Crude Oil Trucking Services*		*Crude Oil Pipeline Services*		*Crude Oil Terminalling Services*		*Total*
ASSETS
Other assets		0		1		1		2
Total assets of discontinued operations	$	0	$	1	$	1	$	2

LIABILITIES
Current liabilities	$	12	$	218	$	10	$	240
Total liabilities of discontinued operations	$	12	$	218	$	10	$	240

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

Statement of Operations for Discontinued Operations (in thousands)		*Three Months Ended March 31, 2021*
	*Crude Oil Trucking Services*			*Crude Oil Pipeline Services*			*Crude Oil Terminalling Services*			*Total*
Revenue:
Third-party service revenue	$	9		$	413		$	3,643		$	4,065
Intercompany service revenue		409			0			0			409
Third-party product sales revenue		0			15,591			0			15,591
Costs and expenses:
Operating expense		1,333			1,438			910			3,681
Intercompany operating expense		0			409			0			409
Cost of product sales		0			4,994			0			4,994
Cost of product sales from related party		0			9,461			0			9,461
General and administrative expense		59			118			0			177
Tangible asset impairment expense		92			41			23			156
Gain on disposal of assets		(3	)		(1,694	)		(73,372	)		(75,069	)
Interest expense		0			72			634			706
Income (loss) before income taxes		(1,063	)		1,165			75,448			75,550
Provision for income taxes		0			0			0			0
Net income (loss) from discontinued operations	$	(1,063	)	$	1,165		$	75,448		$	75,550

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
$ 0 $ 0 $ 299 $ 299
Total assets of discontinued operations
$ 0 $ 0 $ 299 $ 299

LIABILITIES

Current liabilities
$ 12 $ 232 $ 104 $ 348
Total liabilities of discontinued operations
$ 12 $ 232 $ 104 $ 348

Select cash flow information (in thousands)
	*Crude Oil Trucking Services*		*Crude Oil Pipeline Services*		*Crude Oil Terminalling Services*		*Total*
	*Three Months Ended March 31, 2021*
Amortization	$	3	$	14	$	15	$	32
Capital expenditures	$	0	$	10	$	109	$	119

Table of Contents

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 0 0 1,434
Third-party product sales revenue
0 51,390 0 51,390
Costs and expenses:

Operating expense
2,415 3,366 2,363 8,144
Intercompany operating expense
0 1,434 0 1,434
Cost of product sales
0 19,833 0 19,833
Cost of product sales from related party
0 22,627 0 22,627
General and administrative expense
71 93 0 164
(Gain)loss on disposal of assets
76 (261 ) 0 (185 )
Interest expense
2 206 962 1,170
Income(loss) before income taxes
(360 ) 4,504 865 5,009
Provision for income taxes
1 0 0 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
$ 0 $ 0 $ 656 $ 656
Costs and expenses:

Operating expense
(7 ) (1 ) 676 668
General and administrative expense
0 (11 ) 0 (11 )
(Gain)loss on disposal of assets
26 0 (7 ) 19
Income(loss) before income taxes
(19 ) 12 (13 ) (20 )
Provision for income taxes
0 0 0 0
Net income(loss) from discontinued operations
$ (19 ) $ 12 $ (13 ) $ (20 )

5.	PROPERTY, PLANT AND EQUIPMENT

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 0 0 4,364
Third-party product sales revenue
0 119,068 0 119,068
Costs and expenses:

Operating expense
9,890 10,149 6,566 26,605
Intercompany operating expense
0 4,364 0 4,364
Cost of product sales
0 41,133 0 41,133
Cost of product sales from related party
0 63,671 0 63,671
General and administrative expense
212 295 0 507
Tangible asset impairment expense
1,330 2,821 2,266 6,417
Gain on disposal of assets
(120 ) (56 ) 0 (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 0 0 9
Net income(loss) from discontinued operations
$ (2,132 ) $ (2,784 ) $ 383 $ (4,533 )

~~Table of Contents~~

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 0 0 409
Third-party product sales revenue
0 15,591 0 15,591
Costs and expenses:

Operating expense
1,419 1,552 2,184 5,155
Intercompany operating expense
0 409 0 409
Cost of product sales
0 4,994 0 4,994
Cost of product sales from related party
0 9,461 0 9,461
General and administrative expense
61 112 0 173
Tangible asset impairment expense
92 41 23 156
(Gain)loss on disposal of assets
23 (1,644 ) (73,498 ) (75,119 )
Interest expense
0 72 635 707
Income(loss) before income taxes
(1,177 ) 1,129 75,753 75,705
Provision for income taxes
0 0 0 0
Net income(loss) from discontinued operations
$ (1,177 ) $ 1,129 $ 75,753 $ 75,705

	*Estimated Useful*		*December 31,*			*March 31,*
	*Lives (Years)*		*2021*			*2022*
			(dollars in thousands)
Land		N/A	$	21,826		$	23,313
Land improvements		10-20		5,125			5,145
Storage and terminal facilities		10-35		257,433			262,453
Office property and equipment and other		3-30		21,751			22,529
Construction-in-progress		N/A		4,355			9,083
Property, plant and equipment, gross				310,490			322,523
Accumulated depreciation				(204,101	)		(206,495	)
Property, plant and equipment, net			$	106,389		$	116,028

Capital expenditures for the three months ended March 31, 2022, include an asphalt terminal and industrial park acquisition that closed in January 2022 and costs related to an expansion project at an existing terminal.

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
$ 0 $ 30 $ 106 $ 136

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5.6.

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~~April 29, 2022, approximately $~~96.0~~110.0 million of revolver borrowings and $~~0.7~~0.6 million of letters of credit were outstanding under the credit agreement, leaving the Partnership with approximately $~~203.3~~189.4 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”~~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~~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,~~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.

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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 3.50 to 1.00, but this covenant is only tested 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 minimum permitted consolidated interest coverage ratio (as defined in the credit agreement, but generally computed as the ratio of consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges to consolidated interest expense) is 2.50 to ~~1.00.~~1.00.In

~~Table of Contents~~

In addition, the credit agreement contains various covenants that, among other restrictions, limit the Partnership’s ability to:

•

create, issue, incur or assume indebtedness;

•

create, incur or assume liens;

•

consummate mergers or acquisitions;

•

sell, transfer, assign or convey assets;

•

repurchase the Partnership’s equity, make distributions to unitholders, and make certain other restricted payments;

•

make investments;

•

modify the terms of certain indebtedness, or prepay certain indebtedness;

•

engage in transactions with affiliates;

•

enter into certain hedging contracts;

•

enter into certain burdensome agreements;

•

change the nature of the Partnership’s business; and

•

make certain amendments to the Fourth Amended and Restated Agreement of Limited Partnership of the Partnership (the “Partnership’s partnership agreement”).

At ~~September 30, 2021~~March 31, 2022, the Partnership’s consolidated total leverage ratio was ~~1.87~~2.17 to 1.00 and the consolidated interest coverage ratio was ~~14.83~~16.66 to 1.00. The Partnership was in compliance with all covenants of its credit agreement as of ~~September 30, 2021~~March 31, 2022. B ased on current operating plans and forecasts, the Partnership expects to remain in compliance with all covenants of the credit agreement for at least the next year.

The credit agreement permits the Partnership to make quarterly distributions of available cash (as defined in the Partnership’s partnership agreement) to unitholders so long as, on a pro forma basis after giving effect to such distributions, the Partnership is in compliance with its financial covenants under the credit agreement and no default or event of default exists under the credit agreement. Additionally, the credit agreement permits the Partnership to repurchase up to an aggregate of $40.0 million of its units (including preferred units), up to $10.0 million for each calendar year, so long as, on a pro forma basis after giving effect to such repurchases, the Partnership’s total leverage ratio is less than 4.00 to 1.00, no default or event of default exists under the credit agreement, and availability under the revolving credit facility is at least 20% of the total commitments thereunder.

In addition to other customary events of default, the credit agreement includes an event of default if:

(i)

the general partner ceases to own 100% of the Partnership’s general partner interest or ceases to control the Partnership;

(ii)

Ergon ceases to own and control 50% or more of the membership interests of the general partner; or

(iii)

during any period of 12 consecutive months, a majority of the members of the Board of the general partner ceases to be composed of individuals:

(A)

who were members of the Board on the first day of such period;

(B)

whose election or nomination to the Board was approved by individuals referred to in clause (A) above constituting at the time of such election or nomination at least a majority of the Board; or

(C)

whose election or nomination to the Board was approved by individuals referred to in clauses (A) and (B) above constituting at the time of such election or nomination at least a majority of the Board, provided that any changes to the composition of individuals serving as members of the Board approved by Ergon will not cause an event of default.

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If an event of default relating to bankruptcy or other insolvency events occurs with respect to the general partner or the Partnership, all indebtedness under the credit agreement will immediately become due and payable. If any other event of default exists under the credit agreement, the lenders may accelerate the maturity of the obligations outstanding under the credit agreement and exercise other rights and remedies. In addition, if any event of default exists under the credit agreement, the lenders may commence foreclosure or other actions against the collateral.

If any default occurs under the credit agreement, or if the Partnership is unable to make any of the representations and warranties in the credit agreement, the Partnership will be unable to borrow funds or to have letters of credit issued under the credit agreement.

On ~~May 26, 2021,~~ ~~as part of the credit agreement refinancing, there was a non-cash increase in credit borrowings of $2.9 million and a non-cash increase in debt issuance costs of $2.5 million.~~

The following table sets forth financial information pertaining to the credit agreement (in thousands, except for interest rate):

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*						*Three Months Ended March 31,*
	*2020*			*2021*			*2020*			*2021*			*2021*			*2022*
Debt issuance costs capitalized	$	0		$	51		$	0		$	2,897		$	49		$	8
Write off of debt issuance costs due to amendments(1)		0			0			0			147			147			0
Write off of debt issuance costs due to new credit facility		0			0			0			583
Interest expense related to amortization of debt issuance costs		251			193			753			655			244			209
Credit facility interest expense⁽¹⁾		1,046			771			3,652			2,606
Weighted average interest rate under credit facility⁽¹⁾		3.56	%		3.47	%		4.11	%		3.73	%
Credit facility interest expense⁽²⁾														942			779
Weighted average interest rate under credit facility⁽²⁾														3.83	%		3.69	%

___________________

(1)	On January 8,2021, the previous credit facility was amended to, among other things, reduce the revolving loan facility from $400.0 million to $350.0 million upon the sale of the crude oil terminalling segment.
(2)	Excludes interest expense related to amortization and write off of debt issuance costs for the ~~nine~~three months ending ~~September 30,~~March 31, 2021.

6.7.

NET INCOME PER LIMITED PARTNER UNIT

For purposes of calculating earnings per unit, preferred units, general partner units, and common units are first allocated net income to the extent they receive a distribution. Next, the excess of distributions over earnings or excess of earnings over distributions for each period are allocated to the Partnership’s general partner based on the general partner’s ownership interest at the time. For the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022, the preferred units were also allocated income for the excess consideration paid over carrying value for the repurchase of preferred units. The remainder is allocated to common units. The following sets forth the computation of basic and diluted net income per common unit (in thousands, except per unit data):

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2021

2020

2021

Net income
$ 14,393 $ 12,596 $ 15,744 $ 101,532
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 weighted average number of units:

Common units
41,166 41,514 41,072 41,471
Restricted and phantom units
1,354 1,549 1,259 1,422
Total units
42,520 43,063 42,331 42,893

Basic and diluted net income(loss) from discontinued operations per common unit
$ 0.12 $ 0 $ (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

	*Three Months Ended March 31,*
	*2021*			*2022*
Net income	$	81,653		$	6,642
General partner interest in net income		1,292			105
Preferred interest in net income		6,341			6,150
Net income available to limited partners	$	74,020		$	387

Basic weighted average number of units:
Common units		41,430			41,817
Restricted and phantom units		1,166			1,279
Total units		42,596			43,096

Basic and diluted net income from discontinued operations per common unit	$	1.75		$	0
Basic and diluted net income (loss) from continuing operations per common unit	$	(0.01	)	$	0.01
Basic and diluted net income per common unit	$	1.74		$	0.01

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7.8.

PARTNERS’ CAPITAL AND DISTRIBUTIONS

During the three months ended ~~September 30,~~March 31, 2021, the Partnership repurchased a total of ~~30,102~~688,417 outstanding preferred units at ~~a weighted average cost of $8.11~~$7.50 per unit or total cash consideration of ~~$0.2 million. During the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~the Partnership repurchased a total of 718,519 outstanding preferred units at a weighted average cost of $7.53 per unit or total cash consideration of $5.4~~$5.2 million. The consideration paid was based on the fair market value of the units at the time of purchase. The carrying value of the units was $7.23 per unit. The preferred units were allocated additional net income for the three ~~and~~ ~~nine~~months ended ~~September 30,~~March 31, 2021, of ~~less than $0.1 million and~~ $0.2 million ~~respectively,~~ for the consideration paid in excess of carrying value. All repurchased units were subsequently retired.

On ~~October~~April 26, ~~2021~~2022, the Board approved a cash distribution of $0.17875 per outstanding preferred unit for the three months ended ~~September 30, 2021~~March 31, 2022. The Partnership will pay this distribution on ~~November 12, 2021~~May 13, 2022, to unitholders of record as of ~~November 5, 2021~~May 6, 2022. The total distribution will be approximately $6.2 million, with approximately $6.2 million and $0.1 million to be paid to the Partnership’s preferred unitholders and general partner, respectively.

In addition, the Board approved a cash distribution of ~~$0.04~~$0.0425 per outstanding common unit for the three months ended ~~September 30, 2021~~March 31, 2022. The Partnership will pay this distribution on ~~November 12, 2021~~May 13, 2022, to unitholders of record on ~~November 5, 2021~~May 6, 2022. The total distribution will be approximately ~~$1.8~~$1.9 million, with approximately ~~$1.7~~$1.8 million to be paid to the Partnership’s common unitholders, less than $0.1 million to be paid to the general partner, and approximately ~~$0.1~~$0.1 million to be paid to holders of phantom and restricted units pursuant to awards granted under the Partnership’s Long-Term Incentive Plan.

8.9.

RELATED-PARTY TRANSACTIONS

The Partnership leases asphalt facilities and provides asphalt terminalling services to Ergon. For the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022, the Partnership recognized related-party revenues of ~~$12.4~~$11.9 million and ~~$13.2 million, respectively, for services provided to Ergon. For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020~~ ~~and~~ ~~2021~~~~, the Partnership recognized related-party revenues of $32.3 million and $37.1~~$12.4 million, respectively, for services provided to Ergon. As of December 31, ~~2020~~2021, and ~~September 30, 2021~~March 31, 2022, the Partnership had receivables from Ergon of ~~$0.5~~$0.4 million and ~~$1.2~~$0.6 million, respectively. As of December 31, ~~2020~~2021, and ~~September 30, 2021~~March 31, 2022, the Partnership had unearned revenues from Ergon of ~~$8.8~~$9.3 million and ~~$9.5~~$6.0 million, ~~respectively.~~respectively, which primarily relates to cash received in advance for the following month's lease and storage fees, and capital project reimbursements and deductibles that are being recognized straight-line over the term of the existing revenue contracts.

Ergon also provides certain operations and maintenance services to certain of the Partnership's asphalt facilities that ~~it leases under an agreement dated~~ ~~August 1, 2020.~~ have existing revenue contracts between the parties. For the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021,~~2022, the Partnership recognized operating expense of ~~$3.1~~$4.6 million and ~~$4.6~~$4.8 million, respectively, for these services. ~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020~~ ~~and~~ ~~2021,~~ ~~the Partnership recognized operating expense of $3.1 million and $13.9 million, respectively.~~

~~As of~~ ~~December 31, 2019,~~ the Partnership had a contingent liability to Ergon of $12.2 million related to the Cimarron Express project, a previously disclosed joint venture between Kingfisher Midstream and Ergon’s development company (“DEVCO”) that was cancelled in ~~December 2018.~~ The contingent liability reflected Ergon's investment in the joint venture and accrued interest, for which the Partnership, in accordance with the membership interest purchase agreement with Ergon, was meant to bear the risk of loss related to DEVCO’s portion of the project. The Partnership paid this liability in full on ~~January 3, 2020,~~ ~~and it is reflected as an acquisition of the DEVCO on the consolidated statement of cash flows for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020~~.

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9.10.

LONG-TERM INCENTIVE PLAN

In July 2007, the general partner adopted the Long-Term Incentive Plan (the “LTIP”), which is administered by the compensation committee of the Board. The Partnership’s unitholders have approved 8.1 million common units to be reserved for issuance under the incentive plan, subject to adjustments for certain events. Although other types of awards are contemplated under the LTIP, currently outstanding awards include “phantom” units, which convey the right to receive common units upon vesting, and “restricted” units, which are grants of common units restricted until the time of vesting. The phantom unit awards also include distribution equivalent rights (“DERs”).

Subject to applicable earning criteria, a DER entitles the grantee to a cash payment equal to the cash distribution paid on an outstanding common unit prior to the vesting date of the underlying award. Recipients of restricted and phantom units are entitled to receive cash distributions paid on common units during the vesting period which are reflected initially as a reduction of partners’ capital. Distributions paid on units which ultimately do not vest are reclassified as compensation expense. Awards granted to date are equity awards and, accordingly, the fair value of the awards as of the grant date is expensed over the vesting period.

~~Restricted~~Each year, restricted common units are granted to the independent directors ~~on each anniversary~~that may or may not have vesting requirements. In December 2021, the directors received a total of ~~joining the Board. The~~21,228 units ~~vest in~~ ~~one~~-with a grant date fair value of $3.26 per unit and a total grant date fair value of $0.1 million, that do ~~third~~not ~~increments over~~ ~~three~~ ~~years.~~have a vesting requirement. The following table includes information on outstanding grants made to the directors under the ~~LTIP:~~LTIP that vest in one-third increments over three years:

Grant Date	*Number of Units*		*Weighted Average Grant Date Fair Value(1)*		*Grant Date Total Fair Value (in thousands)*		*Number of Units*		*Weighted Average Grant Date Fair Value(1)*		*Grant Date Total Fair Value (in thousands)*
December 2018		23,436	$	1.20	$	28
December 2019		7,500	$	1.07	$	8		7,500	$	1.07	$	8
December 2020		7,500	$	2.06	$	15		7,500	$	2.06	$	15
December 2021								22,743	$	3.26	$	74

(1)	Fair value is the closing market price on the grant date of the awards.

The Partnership also grants phantom units to employees. These grants are equity awards under ASC 718 – Stock Compensation and, accordingly, the fair value of the awards as of the grant date is expensed over the vesting period. All grants made in 2019,2020 and 2021 vest after three~~-year vesting period.~~ years. The grant made in 2022 vests in one-third increments over three years. The following table includes information on the outstanding grants:

Grant Date	*Number of Units*		*Weighted Average Grant Date Fair Value(1)*		*Grant Date Total Fair Value (in thousands)*		*Number of Units*		*Weighted Average Grant Date Fair Value(1)*		*Grant Date Total Fair Value (in thousands)*
March 2019		524,997	$	1.14	$	598
June 2019		46,168	$	1.08	$	50		46,168	$	1.08	$	50
March 2020		600,396	$	0.90	$	540		600,396	$	0.90	$	540
October 2020		16,339	$	1.53	$	25		16,339	$	1.53	$	25
March 2021		530,435	$	2.71	$	1,437		530,435	$	2.71	$	1,437
March 2022								558,411	$	3.25	$	1,815

(1)	Fair value is the closing market price on the grant date of the awards.

The unrecognized estimated compensation cost of outstanding phantom and restricted units at ~~September 30, 2021~~March 31, 2022, was ~~$1.2~~$3.0 million, which will be expensed over the remaining vesting period.

The Partnership’s equity-based incentive compensation expense for ~~each of~~ the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022, was ~~$0.2 million. The Partnership’s equity-based incentive compensation expense for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020~~ ~~and~~ ~~2021~~~~, was $0.6~~$0.1 million and ~~$0.5~~$0.2 million, ~~respectively.~~ respectively .

Activity pertaining to phantom and restricted common unit awards granted under the LTIP was as follows:

Number of Units

Weighted Average Grant Date Fair Value

Nonvested at December 31, 2020
1,350,366 $ 1.81
Granted
530,435 $ 2.71
Vested
335,444 $ 4.15
Forfeited
0 $ 0
Nonvested at September 30, 2021
1,545,357 $ 1.61

	*Number of Units*		*Weighted Average Grant Date Fair Value*
Nonvested at December 31, 2021		1,555,290	$	1.66
Granted		558,411	$	3.25
Vested		426,297	$	1.14
Nonvested at March 31, 2022		1,687,404	$	2.30

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~~10.~~11.

FAIR VALUE MEASUREMENTS

The Partnership uses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost) to value assets and liabilities required to be measured at fair value, as appropriate. The Partnership uses an exit price when determining the fair value. The exit price represents amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The Partnership utilizes a three-tier fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1

Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2

Inputs other than quoted prices that are observable for these assets or liabilities, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3

Unobservable inputs in which there is little market data, which requires the reporting entity to develop its own assumptions.

This hierarchy requires the use of observable market data, when available, to minimize the use of unobservable inputs when determining fair value.

As of December 31, ~~2020,~~2021, and ~~September 30, 2021~~March 31, 2022, the Partnership had 0no recurring financial assets or liabilities subject to fair value measurement.

Fair Value of Other Financial Instruments

The following disclosure of the estimated fair value of financial instruments is made in accordance with accounting guidance for financial instruments. The Partnership has determined the estimated fair values by using available market information and valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

At ~~September 30, 2021~~March 31, 2022, the carrying values on the unaudited condensed consolidated balance sheets for cash and cash equivalents (classified as Level 1), accounts receivable, and accounts payable approximate their fair value because of their short-term nature.

Based on the borrowing rates currently available to the Partnership for credit agreement debt with similar terms and maturities and consideration of the Partnership’s non-performance risk, long-term debt associated with the Partnership’s credit agreement at ~~September 30, 2021~~March 31, 2022, approximates its fair value. The fair value of the Partnership’s long-term debt was calculated using observable inputs ~~(Eurodollar Rate~~(eurodollar rate for the risk-free component) and unobservable company-specific credit spread information. As such, the Partnership considers this debt to be Level 3.

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~~11.~~12.

COMMITMENTS AND CONTINGENCIES

The Partnership is from time to time subject to various legal actions and claims incidental to its business. Management believes that these legal proceedings will not have a material adverse effect on the financial position, results of operations or cash flows of the Partnership. Once management determines that information pertaining to a legal proceeding indicates that it is probable that a liability has been incurred and the amount of such liability can be reasonably estimated, an accrual is established equal to its estimate of the likely exposure. As part of the consideration for the purchase of the asphalt terminal during the three months ended March 31, 2022, the Partnership assumed environmental liabilities of approximately $2.0 million related to consent orders with a state regulatory agency. The assumption of the environmental liabilities had no impact on the statement of operations, and actual costs are not expected to vary significantly from the current accrual.

The Partnership has contractual obligations to perform dismantlement and removal activities in the event that some of its asphalt product and residual fuel oil terminalling and storage assets are abandoned. These obligations include varying levels of activity including completely removing the assets and returning the land to its original state. The Partnership has determined that the settlement dates related to the retirement obligations are indeterminate. The assets with indeterminate settlement dates have been in existence for many years and with regular maintenance will continue to be in service for many years to come. Also, it is not possible to predict when demands for the Partnership’s terminalling and storage services will cease, and the Partnership does not believe that such demand will cease for the foreseeable future. Accordingly, the Partnership believes the date when these assets will be abandoned is indeterminate. With no reasonably determinable abandonment date, the Partnership cannot reasonably estimate the fair value of the associated asset retirement obligations. Management believes that if the Partnership’s asset retirement obligations were settled in the foreseeable future the present value of potential cash flows that would be required to settle the obligations based on current costs are not material. The Partnership will record asset retirement obligations for these assets in the period in which sufficient information becomes available for it to reasonably determine the settlement dates.

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~~12.~~13.

RECENTLY ISSUED ACCOUNTING STANDARDS

~~Except as discussed in the~~ ~~2020~~ ~~Form~~ 10~~-K, there~~There have been no new accounting pronouncements that have become effective or have been issued during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022, that are of significance or potential significance to the Partnership.

~~13.~~14.

SUBSEQUENT EVENTS

Merger Agreement

On October 8, 2021, Ergon filed an amendment to its Schedule 8,13D ~~2021,~~with the SEC disclosing that Ergon ~~publicly announced that it submitted~~made a non-binding proposal to the Board, ~~a non-binding proposal,~~ pursuant to which Ergon would acquire all the outstanding common units and ~~preferred units~~Preferred Units of the Partnership ~~that~~not already owned by Ergon and its ~~affiliates do~~affiliates.

On April 21, 2022, the Partnership, the General Partner, Ergon Asphalt & Emulsions, Inc. (“Parent”) and Merle, LLC (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as a wholly owned subsidiary of Parent (the “Merger”).

Under the terms of the Merger Agreement, at the effective time of the Merger, (i) each issued and outstanding common unit representing a limited partner interest in the Partnership (each, a “Common Unit”) other than Common Units owned by Parent, the Partnership and their subsidiaries will be converted into the right to receive $4.65 in cash without any interest thereon (the “Common Unit Merger Consideration”), and (ii) each issued and outstanding Series A Preferred Unit of the Partnership (each, a “Preferred Unit”), other than Preferred Units owned by Parent, the Partnership and their subsidiaries will be converted into the right to receive $8.75 in cash without any interest thereon (the “Preferred Unit Merger Consideration” and, together with the Common Unit Merger Consideration, the “Merger Consideration”). In connection with the Merger, (i) the General Partner’s non-economic general partner interest in the Partnership, (ii) the incentive distribution rights held by the General Partner and (iii) the Common Units and the Preferred Units owned by Parent and its subsidiaries, in each case, will not ~~already own~~be cancelled, will not be converted into the right to receive the Merger Consideration and will remain outstanding following the Merger.

Immediately prior to the effective time of the Merger, all restricted units and phantom units outstanding immediately prior to the effective time will fully vest, and each holder of such units will receive an amount equal to the Merger Consideration with respect to each such unit that becomes vested pursuant to the terms of the Merger Agreement.

The Partnership has entered into a Support Agreement, dated as of April 21, 2022 (the “Support Agreement”), with Parent, pursuant to which Parent has agreed to vote the Covered Units (as defined in ~~exchange for $3.32 per common unit~~the Support Agreement) it beneficially owns in favor of the Merger Agreement and ~~$8.46 per preferred unit.~~the transactions contemplated thereby, including the Merger.

The ~~transaction, as proposed,~~Merger is subject to ~~a number of contingencies,~~customary closing conditions, including ~~the~~ approval of the conflicts committee of the Board, the approval by the Partnership’s unitholders and the satisfaction of any conditions to the consummation of a transaction set forth in any definitive agreement concerning the transaction. There can be no ~~assurance that a definitive agreement will be executed or that any transaction will materialize.~~

unitholders.

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~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this quarterly report, unless we indicate otherwise: (1) “Blueknight,” “our,” “we,” “us” and similar terms refer to Blueknight Energy Partners, L.P., together with its subsidiaries, (2) our “General Partner” refers to Blueknight Energy Partners G.P., L.L.C., and (3) “Ergon” refers to Ergon, Inc., its affiliates and subsidiaries (other than our General Partner and us). The following discussion analyzes the historical financial condition and results of operations of the Partnership and should be read in conjunction with our financial statements and notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations presented in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which was filed with the Securities and Exchange Commission (the “SEC”) on March ~~10, 2021~~9, 2022 (the ~~“2020~~“2021 Form 10-K”).

Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the federal securities laws. Statements included in this quarterly report that are not historical facts (including any statements regarding plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto), including, without limitation, the information set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, are forward-looking statements. These statements can be identified by the use of forward-looking terminology including “may,” “will,” “should,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “continue,” or other similar words. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other “forward-looking” information. We and our representatives may from time to time make other oral or written statements that are also forward-looking statements.

Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of the filing of this report. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will prove to be correct. Important factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include, among other things, those set forth in “Part I, Item 1A. Risk Factors” in the ~~2020~~2021 Form 10-K.

All forward-looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this report.

Overview

We are a publicly traded master limited partnership with operations in 26 states. We have the largest independent asphalt facility footprint in the nation, and through that we provide integrated terminalling services for companies engaged in the production, distribution, and marketing of liquid asphalt for infrastructure or other end markets. We manage our operations through a single operating segment, asphalt terminalling services.

We 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, we announced that we had entered into multiple definitive agreements to sell these segments. The transactions closed in February and March of 2021, and these segments are presented as discontinued operations for all periods.

Our 5354 asphalt facilities are well-positioned to provide asphalt terminalling services in the market areas they serve throughout the continental United States. With our approximately ~~8.7~~9.0 million barrels of total liquid asphalt storage capacity, we provide our customers the ability to effectively manage their liquid asphalt inventories while allowing significant flexibility in their processing and marketing activities. Our asphalt terminalling business delivers a stable cash flow profile through long-term take-or-pay contracts that generally have original terms of 5 to 710 years with options to extend the term. The stability comes from the contract structure that is comprised primarily of ~~take-or-pay~~ fixed fees and cost reimbursements, which make up approximately 95% of our revenues on an annual ~~basis after excluding cost reimbursements primarily for utilities.~~basis. The remaining revenue is variable, primarily consisting of volume-based throughput fees.

We have contractual agreements in place for all of our asphalt terminalling facilities. We lease certain facilities for operation by our customers and at the remaining facilities ~~our employees operate the facility~~we store, process, blend, and manufacture products, among other things, to meet our customers’ specifications. The agreements have, based on a weighted average by remaining fixed revenue, approximately ~~5.2~~5.1 years remaining under their terms as of ~~November 4, 2021.~~April 29, 2022. Approximately 5%13% of our tank capacity will expire at the end of ~~2021~~2022 if not renewed with the current customer or a new customer, and the remaining capacity expires at varying times thereafter, through ~~2028.~~2035. Our varying contract expiration dates provide for staggered renewals, which provides additional stability to the cash flow.

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Merger Agreement

On October 8, 2021, Ergon filed an amendment to its Schedule 13D with the SEC disclosing that Ergon made a non-binding proposal to the Board, pursuant to which Ergon would acquire all the outstanding common units and Preferred Units of the Partnership not already owned by Ergon and its affiliates.

On April 21, 2022, the Partnership, the General Partner, Ergon Asphalt & Emulsions, Inc., and Merle, LLC, entered into the Merger Agreement, pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as a wholly owned subsidiary of Parent. See Note 14 to our unaudited condensed consolidated financial statements for additional information.

Potential Impact of Certain Factors on Future Revenues

Due to the high percentage of fixed and reimbursement revenue from our long-term contracts, our focus and our primary risk is renewing contracts at favorable terms. Our ability to renew agreements on favorable terms, or at all, could be impacted if our customers experience negative market conditions. These factors include infrastructure spending, the strength of state and local economies, and the level of allocations of tax funding to transportation spending from state or federal funds. Public transportation infrastructure projects historically have been a relatively stable portion of state and federal budgets and represent a significant share of the United States construction market. Federal funds are allocated on a state-by-state basis, and each state is required to match a portion of the federal funds that it receives. Currently, from a macroeconomic view, there are positive indicators for the infrastructure and construction sector, such as ~~continued discussion and support for~~the federal infrastructure spending ~~from all sides of the federal government, low interest rates,~~bill that was passed in November 2021 and a recovering ~~economy since mid-2020.~~economy. However, due to ~~the novel coronavirus disease (“COVID-19”), as discussed below,~~COVID-19 some uncertainty exists.

~~Due to~~ Despite the ~~global pandemic related to COVID-19, the economy experienced a significant downturn during part of 2020. Despite this economic volatility,~~uncertainty, our cash flows have remained stable and are expected to remain stable moving forward. While our customers may be impacted by the economic volatility, they are primarily high-quality counterparties, with over 50% of our revenues earned from those that are investment grade quality, which minimizes our counterparty credit risk. We do not expect any supply chain disruptions from COVID-19 to affect our customers. Whilestable. Further, while we are unaware of any potential negative impact of COVID-19 on our business at this time, we ~~are continuing~~continue to monitor the situation and have prepared our employees to take precautions and planning for unexpected events, which may include disruptions to our workforce, customers, vendors, facilities and communities in which we operate.situation.

Infrastructure spending is currently a focus at the federal, state, and local levels. The current federal administration ~~has targeted~~ infrastructure ~~as a top priority. Based on recent history, infrastructure investment has been renewed at increased levels,~~spending bill (the Infrastructure Investment and ~~based on recent federal proposals, we expect the~~Jobs Act) that was passed in November 2021, provides long-term funding ~~to continue to increase.~~and support for road construction and repair. Increased funding potentially impacts us through favorable customer contract renewals, including facility expansion opportunities, as well as increased customer volumes through our terminals. ~~Any new federal infrastructure spending will likely not~~Separate from these funds, COVID-19 relief funds remain available and could have a ~~significant~~positive impact on ~~customers’ 2021 throughput volumes, but it could for future years. This asphalt season, customer throughput volumes are trending~~the allocation of state and local spending. Further, there has been an increase in ~~line with prior years,~~state and ~~as such we expect the financial impact~~local initiatives to support infrastructure funding, and a high percentage of ~~variable throughput revenues to trend in line with prior years as well.~~those initiatives have been approved by voters.

Another factor impacting us and our customers, from a short-term perspective, is weather patterns. Our customers’ volumes could be significantly impacted by prolonged rain or snow seasons or any severe weather that occurs. Damage to our terminal facilities from severe weather, such as flooding or hurricanes, could impact our operating results through additional costs and/or loss of revenue.

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Results of Operations

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with generally accepted accounting principles, or “GAAP”, management uses additional measures that are known as “non-GAAP financial measures” in its evaluation of past performance and prospects for the future. The primary measure used by management is operating margin, excluding depreciation and amortization.

Management believes that the presentation of such additional financial measures provides useful information to investors regarding our performance and results of operations because these measures, when used in conjunction with related GAAP financial measures, (i) provide additional information about our core operating performance and ability to generate and distribute cash flow; (ii) provide investors with the financial analytical framework upon which management bases financial, operational, compensation and planning decisions and (iii) present measurements that investors, rating agencies and debt holders have indicated are useful in assessing us and our results of operations. These additional financial measures are reconciled to the most directly comparable measures as reported in accordance with GAAP, and should be viewed in addition to, and not in lieu of, our unaudited condensed consolidated financial statements and footnotes.

The table below summarizes our financial results for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021,~~2022, reconciled to the most directly comparable GAAP measure:

	Three Months Ended						Three Months Variance						Nine Months Ended						Nine Months Variance						Three Months Ended						Variance
Operating results	September 30,						Favorable/(Unfavorable)						September 30,						Favorable/(Unfavorable)						March 31,						Favorable/(Unfavorable)
(dollars in thousands)	2020			2021						$%			2020			2021						$%			2021			2022			$			%
Fixed fee revenue	$	23,494		$	24,413		$	919			4	%	$	67,572		$	73,195		$	5,623			8	%	$	24,371		$	25,157		$	786			3	%
Variable cost recovery revenue		2,870			3,126			256			9	%		9,736			8,658			(1,078	)		(11	)%		2,584			3,194			610			24	%
Variable throughput and other revenue		2,631			2,800			169			6	%		3,128			3,320			192			6	%		120			109			(11	)		(9	)%
Total revenue		28,995			30,339			1,344			5	%		80,436			85,173			4,737			6	%		27,075			28,460			1,385			5	%
Operating expenses, excluding depreciation and amortization		(12,517	)		(12,917	)		(400	)		(3	)%		(36,137	)		(38,880	)		(2,743	)		(8	)%		(12,847	)		(14,179	)		(1,332	)		(10	)%
Total operating margin, excluding depreciation and amortization		16,478			17,422			944			6	%		44,299			46,293			1,994			5	%		14,228			14,281			53			0	%

Depreciation and amortization		3,054			2,919			135			4	%		10,324			8,919			1,405			14	%		3,033			3,397			(364	)		(12	)%
General and administrative expense		3,237			2,967			270			8	%		10,501			9,921			580			6	%		3,982			3,371			611			15	%
(Gain)loss on disposal of assets		(324	)		129			(453	)		(140	)%		(250	)		129			(379	)		(152	)%
Loss on disposal of assets																										-			24			(24	)		N/A
Operating income		10,511			11,407			896			9	%		23,724			27,324			3,600			15	%		7,213			7,489			276			4	%

Other income(expenses):
Other income (expenses):
Other income		176			2,187			2,011			1,143	%		969			2,529			1,560			161	%		233			127			(106	)		(45	)%
Interest expense		(1,302	)		(968	)		334			26	%		(4,417	)		(3,996	)		421			10	%		(1,333	)		(964	)		369			28	%
Provision for income taxes		-			(10	)		(10	)		N/A			1			(30	)		(31	)		(3,100	)%		(10	)		(10	)		-			0	%
Income from continuing operations		9,385			12,616			3,231			34	%		20,277			25,827			5,550			27	%		6,103			6,642			539			9	%
Income(loss) from discontinued operations, net		5,008			(20	)		(5,028	)		(100	)%		(4,533	)		75,705			80,238			1,770	%
Income from discontinued operations, net																										75,550			-			(75,550	)		(100	)%
Net income	$	14,393		$	12,596		$	(1,797	)		(12	)%	$	15,744		$	101,532		$	85,788			545	%	$	81,653		$	6,642		$	(75,011	)		(92	)%

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Revenues. Total revenues increased to ~~$30.3~~$28.5 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$29.0~~$27.1 million for the same period in ~~2020, and increased to $85.2 million for the nine months ended September 30, 2021, as compared to $80.4 million for the same period in 2020.~~2021. Revenues consist primarily of fixed fees for items such as storage and minimum throughput requirements, with consideration of annual consumer price index (“CPI”) adjustments built into our agreements. ~~In addition to CPI escalations, the increase in fixed fee revenue is primarily due to certain contracts that changed from a lease arrangement to an operating arrangement.~~ Variable cost recovery revenue is driven by certain reimbursable operating expenses, such as utility costs, and therefore have no net impact on operating margin or net income. Variable throughput revenue is primarily driven by our customers’ excess volumes over annual minimum thresholds and ~~the timing of those~~such thresholds ~~being~~are typically reached during the ~~year. The increase in variable throughput revenue for~~latter part of the ~~three and nine month periods is due to the timing of certain customers reaching their thresholds and certain customer volumes trending favorably.~~year.

Operating expenses, excluding depreciation and amortization. Operating expense, excluding depreciation and amortization, increased to ~~$12.9~~$14.2 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$12.5~~$12.8 million for the same period in ~~2020, and increased~~2021. The increase was primarily due to $38.9 million for the nine months ended September 30, 2021, as compared to $36.1 million for the same period in 2020. Significant factors contributing to this change include certain contracts that changed from a lease arrangement to an operating arrangement and higher utility costs, ~~from rising prices,~~ which are recoverable costs from our ~~customers.~~customers, and timing of maintenance and repair projects.

Depreciation and amortization expense. Depreciation and amortization expense ~~decreased slightly~~increased to ~~$2.9~~$3.4 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$3.1~~$3.0 million for the same period in ~~2020, and decreased to $8.9 million for the nine months ended September 30, 2021, as compared to $10.3 million for the same period in 2020.~~2021. This ~~decrease~~increase is primarily related to the ~~result~~timing of ~~certain assets reaching~~placing maintenance capital projects in-service and the ~~end of their depreciable lives.~~asphalt terminal and industrial park acquisition that closed in January 2022.

General and administrative expense. General and administrative expense decreased to ~~$3.0~~$3.4 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$3.2~~$4.0 million for the same period in ~~2020, and decreased to $9.9 million for the nine months ended September 30, 2021, as compared to $10.5 million for the same period in 2020.~~2021. The decrease for the three month period was primarily due to corporate cost synergies realized after the completion of the crude oil business sales, which included lower compensation costs ~~in 2021 due to reductions in corporate overhead in~~after the first quarter of 2021. For the nine month period, decreases due to separation costs incurred in the second quarter of 2020 related to the resignation of the former Chief Executive Officer of our general partner and the lower compensation costs in 2021 due to reductions in corporate overhead were partially offset by severance paid in the first quarter of 2021 related to the crude business sales.

~~Other income.~~ Other income for the three and nine months ended September 30, 2021 and 2020, primarily related to insurance claim recoveries related to damages incurred in 2019 and 2020 at certain asphalt facilities.

Interest expense. Interest expense represents interest on borrowings under our credit agreement as well as amortization of debt issuance costs. The following table presents the significant components of interest expense (dollars in thousands):

	Three Months Ended				Three Months Variance					Nine Months Ended				Nine Months Variance						Three Months Ended					Variance
	September 30,				Favorable/(Unfavorable)					September 30,				Favorable/(Unfavorable)						March 31,					Favorable/(Unfavorable)
	2020		2021				$%			2020		2021					$%			2021		2022			$		%
Credit agreement interest	$	1,046	$	771	$	275		26	%	$	3,652	$	2,606	$	1,046			29	%	$	942	$	779		$	163		17	%
Amortization of debt issuance costs		251		193		58		23	%	$	753		655		98			13	%		244		209			35		14	%
Write-off of debt issuance costs		-		-		-		0	%	$	-		730		(730	)		N/A			147		-			147		100	%
Other		5		4		1		20	%	$	12		5		7			58	%		-		(24	)		24		N/A
Total interest expense	$	1,302	$	968	$	334		26	%	$	4,417	$	3,996	$	421			10	%	$	1,333	$	964		$	369		28	%

The decrease in credit agreement interest is due to ~~lower floating Eurodollar Rates, lower average borrowings outstanding during the period, and~~ favorable changes to the applicable margin based on an improved leverage ~~ratio.~~ratio and lower average borrowings outstanding during the period.

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Distributions

The amount of distributions we pay and the decision to make any distribution is determined by the Board of Directors of our General Partner (the “Board”), which has broad discretion to establish cash reserves for the proper conduct of our business and for future distributions to our unitholders. In addition, our cash distribution policy is subject to restrictions on distributions under our credit agreement.

On ~~October~~April 26, ~~2021,~~2022, the Board approved a cash distribution of $0.17875 per outstanding preferred unit for the three months ended ~~September 30, 2021.~~March 31, 2022. We will pay this distribution on ~~November 12, 2021,~~May 13, 2022, to unitholders of record as of ~~November 5, 2021.~~May 6, 2022. The total distribution will be approximately $6.2 million, with approximately $6.2 million and $0.1 million to be paid to our preferred unitholders and general partner, respectively.

In addition, the Board approved a cash distribution of ~~$0.04~~$0.0425 per outstanding common unit for the three months ended ~~September 30, 2021.~~March 31, 2022. We will pay this distribution on ~~November 12, 2021,~~May 13, 2022, to unitholders of record as of ~~November 5, 2021.~~May 6, 2022. The total distribution will be approximately ~~$1.8~~$1.9 million, with approximately ~~$1.7~~$1.8 million to be paid to our common unitholders, less than $0.1 million to be paid to our general partner, and approximately $0.1 million to be paid to holders of phantom and restricted units pursuant to awards granted under our Long-Term Incentive Plan.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined by Item 303 of Regulation S-K.

Liquidity and Capital Resources

Cash Flows

The following table summarizes our sources and uses of cash, inclusive of both continuing and discontinued operations, for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021:~~2022:

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2021			2021			2022
	(in thousands)						(in thousands)
Net cash provided by operating activities	$	43,900		$	35,272		$	5,378		$	1,033
Net cash provided by (used in) investing activities	$	(22,193	)	$	149,838		$	153,272		$	(9,624	)
Net cash provided by (used in) financing activities	$	(21,293	)	$	(185,360	)	$	(159,442	)	$	8,471

Operating Activities. Net cash provided by operating activities ~~decreased to $35.3~~was $1.0 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$43.9~~$5.4 million for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, primarily due to changes in working capital.

Investing Activities. Net cash used in investing activities was $9.6 million for the three months ended March 31, 2022, compared to net cash provided by investing activities ~~was $149.8~~of $153.3 million for the ~~nine~~three months ended ~~September 30, 2021, compared to net cash used in investing activities of $22.2 million~~March 31, 2021. Capital expenditures for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2022, included expansion capital expenditures and acquisition costs of $8.0 million related to the growth projects announced in December 2021 and maintenance capital expenditures of $1.6 million. The ~~nine~~three months ended ~~September 30,~~March 31, 2021, included net proceeds from the sale of the crude oil businesses of ~~$155.2~~$155.3 million, which ~~excludes $1.4~~excluded $1.5 million of funds held in escrow for right of way renewals. Capital expenditures for the ~~nine~~three months ended ~~September 30,~~March 31, 2021, inclusive of both continuing and discontinued operations, included maintenance capital expenditures of ~~$5.1~~$1.5 million and expansion capital expenditures of $1.3 million. In addition, we received $1.1 million of insurance proceeds during the nine months ended September 30, 2021, from claims related to property damage repairs. The nine months ended September 30, 2020, included a $12.2 million payment to Ergon related to our purchase of Ergon’s DEVCO entity related to Cimarron Express. Capital expenditures for the nine months ended September 30, 2020, inclusive of both continuing and discontinued operations, included maintenance capital expenditures of $7.5 million and expansion capital expenditures of $4.9$0.5 million.

Financing Activities. Net cash provided by financing activities was $8.5 million for the three months ended March 31, 2022, compared to net cash used in financing activities ~~was $185.4~~of $159.4 million for the ~~nine~~three months ended ~~September 30, 2021, compared to $21.3 million for the nine months ended September 30, 2020.~~March 31, 2021. Cash ~~used in~~provided by financing activities for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, consisted primarily of net ~~payments~~borrowings on long-term debt of ~~$154.5~~$17.0 million, ~~$24.1~~partially offset by $8.1 million in distributions to our ~~unitholders, and the repurchase of preferred units of $5.4 million.~~unitholders. Net cash used in financing activities for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, consisted primarily of ~~$24.3~~$8.1 million in distributions to our ~~unitholders partially offset by~~unitholder, net ~~borrowings~~payments on long-term debt of ~~$5.0~~$146.0 million, and the repurchase of preferred units for $5.2 million.

Liquidity and Capital Resources

Cash flows from operations and availability under our revolving credit facility are our primary sources of liquidity. At ~~September 30, 2021,~~March 31, 2022, we had a working capital deficit of ~~$10.7~~$5.8 million. This is primarily a function of our approach to cash management. At ~~September 30, 2021,~~March 31, 2022, we had approximately ~~$101.0~~$115.0 million of revolver borrowings and approximately ~~$0.7~~$0.6 million of letters of credit outstanding under the credit agreement, leaving us with approximately ~~$198.3~~$184.4 million of availability under our revolving credit ~~agreement~~facility subject to covenant restrictions, which limited our availability to ~~$157.2~~$137.9 million. As of ~~November 4, 2021,~~April 29, 2022, we have approximately $~~96.0~~110.0 million of revolver borrowings and approximately $~~0.7~~0.6 million of letters of credit outstanding under the credit agreement, leaving us with aggregate unused commitments under our revolving credit facility of approximately $~~203.3~~189.4 million and cash on hand of approximately $~~0.1~~0.4 million. The credit agreement is scheduled to mature on May 26, 2025.

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Our credit agreement contains certain financial covenants which include a maximum permitted consolidated total leverage ratio, which may limit our availability to borrow funds thereunder. The consolidated total leverage ratio is assessed quarterly based on the trailing twelve months of EBITDA, as defined in the credit agreement. The maximum permitted consolidated total leverage ratio as of ~~September 30, 2021,~~March 31, 2022, and for each fiscal quarter thereafter, is ~~4.75.~~4.75 to 1.00. Our consolidated total leverage ratio was ~~1.87~~2.17 to 1.00 as of ~~September 30, 2021.~~March 31, 2022. Based on current operating plans and forecasts, we expect to remain in compliance with all covenants of the credit agreement for at least the next year.

Capital Requirements. Our capital requirements consist of the following:

	•	expansion capital expenditures, which are capital expenditures made to expand the operating capacity or revenue of existing or new assets, whether through construction, acquisition or modification; and
	•	maintenance capital expenditures, which are capital expenditures made to maintain the existing integrity and operating capacity of our assets and related cash flows, further extending the useful lives of the ~~assets; and~~

•

~~expansion capital expenditures, which are capital expenditures made to expand the operating capacity or revenue of existing or new assets, whether through construction, acquisition or modification.~~assets.

The following table breaks out capital expenditures from continuing operations for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022 (in thousands):

Nine Months Ended September 30,

2020

2021

Acquisitions
$ 12,221 $ -

Gross expansion capital expenditures
$ 836 $ 1,312
Reimbursable expenditures
(284 ) (154 )
Net expansion capital expenditures
$ 552 $ 1,158

Gross maintenance capital expenditures
$ 6,080 $ 4,946
Reimbursable expenditures
(1,114 ) (19 )
Net maintenance capital expenditures
$ 4,966 $ 4,927

~~________________~~

~~(1)~~

~~Related to the acquisition of DEVCO from Ergon as described in Note 8 to our unaudited condensed consolidated financial statements.~~

	Three Months Ended March 31,
	2021		2022
Net expansion capital expenditures	$	517	$	8,028

Net maintenance capital expenditures	$	1,389	$	1,572

We currently expect our ~~2021~~2022 expansion capital expenditures for organic growth projects to be approximately ~~$1.0 million to $1.5~~$15.0 million and our maintenance capital expenditures to be ~~approximately $6.0~~between $5.5 million to $6.5 million, each net of reimbursable expenditures. Our expansion capital expenditures include an asphalt terminal and industrial park acquired in January 2022 and costs related to an expansion project at one of our current terminals. Management is evaluating other expansion opportunities for 2022 and beyond that could increase this range of capital expenditures. These projects will have potential future expansion opportunities that are not currently part of our 2022 expansion capital forecast. Our sources of liquidity for expansion and maintenance capital expenditures will be a combination of cash flows from operations and borrowings under our revolving credit facility.

Our Ability to Grow Depends on Our Ability to Access External Expansion Capital. Our partnership agreement requires that we distribute all of our available cash to our unitholders. Available cash is reduced by cash reserves established by our General Partner to provide for the proper conduct of our business (including for future capital expenditures) and to comply with the provisions of our credit agreement. We may not grow as quickly as businesses that reinvest their available cash to expand ongoing operations because we distribute all of our available cash.

Recent Accounting Pronouncements

~~For information regarding recent~~There have been no new accounting ~~developments~~pronouncements that ~~may affect our future financial statements, see Note 12~~have become effective or have been issued during the three months ended March 31, 2022, that are of significance or potential significance to ~~our unaudited condensed consolidated financial statements.~~us.

~~Item 3.~~ ~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Partnership is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

~~Item 4. Controls and Procedures~~

Item 4.

Controls and Procedures.

Evaluation of disclosure controls and procedures. Our General Partner’s management, including the Chief Executive Officer and Chief Financial Officer of our General Partner, evaluated, as of the end of the period covered by this report, the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of our General Partner concluded that our disclosure controls and procedures, as of ~~September 30, 2021,~~March 31, 2022, were effective.

Changes in internal control over financial reporting. There were no changes to our internal control over financial reporting that occurred during the three months ended ~~September 30, 2021,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

~~Item 1. Legal Proceedings.~~

Item 1.

Legal Proceedings.

The information required by this item is included under the caption “Commitments and Contingencies” in Note 1112 to our unaudited condensed consolidated financial statements and is incorporated herein by reference thereto.

~~Item 1A. Risk Factors.~~

Item 1A.

Risk Factors.

See the risk factors set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~Item 2. Unregistered Sales of Equity Securities~~

The following table sets forth a summary of our purchases during the three months ended September 30, 2021, of equity securities that are registered by Blueknight pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

Period

Total Number of Series A Preferred Units Purchased(1)

Average Price Paid per Series A Preferred Unit(1)

Total Number of Series A Preferred Units Purchased as Part of Publicly Announced Plans or Programs

Maximum Dollar Value of Series A Preferred Units that May Yet Be Purchased Under the Plans or Programs

09/01/2021-09/30/2021
102 $ 8.10 - $ -
08/01/2021-08/31/2021
30,000 $ 8.11 - $ -
07/01/2021-07/31/2021
- $ - - $ -

~~___________________~~

~~(1)~~Item 2.

~~The August repurchase was made pursuant to a single privately negotiated transaction. The September repurchase consisted~~Unregistered Sales of ~~multiple open-market transactions.~~Equity Securities.

None.

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~~Item 6. Exhibits.~~

Item 6.

Exhibits.

The information required by this Item 6 is set forth in the Index to Exhibits accompanying this quarterly report and is incorporated herein by reference.

INDEX TO EXHIBITS

Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated April 21, 2022, by and among Ergon Asphalt & Emulsions, Inc., Merle, LLC, Blueknight Energy Partners G.P., L.L.C. and Blueknight Energy Partners, L.P. (filed as Exhibit 2.1 to the Partnership ’s Current Report on Form 8-K, filed April 22, 2022, and incorporated herein by reference).
3.1		Amended and Restated Certificate of Limited Partnership of the Partnership, dated November 19, 2009, but effective as of December 1, 2009 (filed as Exhibit 3.1 to the Partnership’s Current Report on Form 8-K, filed November 25, 2009 (Commission File No. 001-33503), and incorporated herein by reference).
3.2		First Amendment to the Amended and Restated Certificate of Limited Partnership of Blueknight Energy Partners L.P., dated July 18, 2019 (filed as Exhibit 3.2 to the Partnership’s Current Report on Form 8-K, filed on July 22, 2019, and incorporated herein by reference).
3.3		Fourth Amended and Restated Agreement of Limited Partnership of the Partnership, dated September 14, 2011 (filed as Exhibit 3.1 to the Partnership’s Current Report on Form 8-K, filed September 14, 2011, and incorporated herein by reference).
3.4		Amended and Restated Certificate of Formation of the General Partner, dated November 20, 2009 but effective as of December 1, 2009 (filed as Exhibit 3.2 to the Partnership’s Current Report on Form 8-K, filed November 25, 2009 (Commission File No. 001-33503), and incorporated herein by reference).
3.5		First Amendment to the Amended and Restated Certificate of Formation of Blueknight Energy Partners G.P., L.L.C., dated July 18, 2019 (filed as Exhibit 3.1 to the Partnership’s Current Report on Form 8-K, filed on July 22, 2019, and incorporated herein by reference).
3.6		Second Amended and Restated Limited Liability Company Agreement of the General Partner, dated December 1, 2009 (filed as Exhibit 3.2 to the Partnership’s Current Report on Form 8-K, filed December 7, 2009 (Commission File No. 001-33503), and incorporated herein by reference).
4.1		Registration Rights Agreement, dated October 5, 2016, by and among the Partnership, Ergon Asphalt & Emulsions, Inc., Ergon Terminaling, Inc. and Ergon Asphalt Holdings, LLC (filed as Exhibit 4.1 to the Partnership’s Current Report on Form 8-K, filed October 5, 2016, and incorporated herein by reference).
10.1		Support Agreement, dated April 21, 2022, by and between Blueknight Energy Partners, L.P. and Ergon Asphalt & Emulsions, Inc. (filed as Exhibit 10.1 to the Partnership’s Current Report on Form 8-K, filed April 22, 2022, and incorporated herein by reference).
31.1*		Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1#		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551, this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definitions Document.
101.LAB		Inline XBRL Taxonomy Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Presentation Linkbase Document.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

Attached as Exhibit 101 to this Quarterly Report are the following Inline XBRL-related documents: (i) Document and Entity Information; (ii) Unaudited Condensed Consolidated Balance Sheets as of December 31, ~~2020~~2021 and ~~September 30, 2021;~~March 31, 2022; (iii) Unaudited Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021;~~2022; (iv) Unaudited Condensed Consolidated Statement of Changes in Partners’ Capital (Deficit) for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021;~~2022; (v) Unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021;~~2022; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.

____________________

* Filed herewith.

# Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		BLUEKNIGHT ENERGY PARTNERS, L.P.

		By:	Blueknight Energy Partners, G.P., L.L.C.
			its General Partner

Date:	~~November 12, 2021~~May 5, 2022	By:	/s/ Matthew R. Lewis
			Matthew R. Lewis
			Chief Financial Officer

Date:	~~November 12, 2021~~May 5, 2022	By:	/s/ Michael G. McLanahan
			Michael G. McLanahan
			Chief Accounting Officer

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	$	0	$	0	$	299	$	299
Total assets of discontinued operations	$	0	$	0	$	299	$	299

LIABILITIES
Current liabilities	$	12	$	232	$	104	$	348
Total liabilities of discontinued operations	$	12	$	232	$	104	$	348

	*Number of Units*		*Weighted Average Grant Date Fair Value*
Nonvested at December 31, 2020		1,350,366	$	1.81
Granted		530,435	$	2.71
Vested		335,444	$	4.15
Forfeited		0	$	0
Nonvested at September 30, 2021		1,545,357	$	1.61

Period	Total Number of Series A Preferred Units Purchased(1)		Average Price Paid per Series A Preferred Unit(1)		Total Number of Series A Preferred Units Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Value of Series A Preferred Units that May Yet Be Purchased Under the Plans or Programs
09/01/2021-09/30/2021		102	$	8.10		-	$	-
08/01/2021-08/31/2021		30,000	$	8.11		-	$	-
07/01/2021-07/31/2021		-	$	-		-	$	-