Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 14, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | BLUE DOLPHIN ENERGY CO | |
Entity Central Index Key | 793,306 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 10,474,714 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 1,677,485 | $ 1,853,875 |
Restricted cash | 4,160,999 | 3,175,299 |
Accounts receivable, net | 7,412,697 | 5,457,245 |
Prepaid expenses and other current assets | 196,101 | 939,690 |
Deposits | 136,970 | 395,414 |
Inventory | 8,819,980 | 7,808,318 |
Total current assets | 22,404,232 | 19,629,841 |
Total property and equipment, net | 61,283,727 | 48,841,812 |
Restricted cash, noncurrent | 4,358,581 | 15,616,478 |
Surety bonds | 710,000 | 1,022,000 |
Trade name | 303,346 | 303,346 |
Deferred tax assets, net | 7,342,277 | 3,607,237 |
Total long-term assets | 73,997,931 | 69,390,873 |
TOTAL ASSETS | 96,402,163 | 89,020,714 |
CURRENT LIABILITIES | ||
Accounts payable | 23,886,185 | 14,882,714 |
Accounts payable, related party | 300,000 | |
Asset retirement obligations, current portion | 25,972 | 38,644 |
Accrued expenses and other current liabilities | 3,063,080 | 2,990,891 |
Interest payable, current portion | 158,706 | 81,467 |
Long-term debt less unamortized debt issue costs, current portion | 32,120,782 | 1,934,932 |
Long-term debt, related party, current portion | 500,000 | |
Total current liabilities | 59,754,725 | 20,228,648 |
Long-term liabilities: | ||
Asset retirement obligations, net of current portion | 1,983,042 | 1,947,220 |
Deferred revenues and expenses | 93,814 | 125,085 |
Long-term debt less unamortized debt issue costs, net of current portion | 1,342,363 | 32,846,254 |
Long-term debt, related party, net of current portion | 6,398,931 | |
Long-term interest payable, net of current portion | 1,638,952 | 1,482,801 |
Total long-term liabilities | 11,457,102 | 36,401,360 |
TOTAL LIABILITIES | 71,211,827 | 56,630,008 |
STOCKHOLDERS' EQUITY | ||
Common stock ($0.01 par value, 20,000,000 shares authorized; 10,614,715 and 10,603,802 shares issued at September 30, 2016 and December 31, 2015, respectively) | 106,148 | 106,038 |
Additional paid-in capital | 36,788,628 | 36,738,737 |
Accumulated deficit | (10,904,440) | (3,654,069) |
Treasury stock, 150,000 shares at cost | (800,000) | (800,000) |
Total stockholders' equity | 25,190,336 | 32,390,706 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 96,402,163 | $ 89,020,714 |
Consolidated Balance Sheets (U3
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2016 | Dec. 31, 2015 |
STOCKHOLDERS' EQUITY | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 10,614,715 | 10,603,802 |
Common stock, shares outstanding | 10,614,715 | 10,603,802 |
Treasury stock, shares | 150,000 | 150,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
REVENUE FROM OPERATIONS | ||||
Refined petroleum product sales | $ 53,951,293 | $ 54,924,070 | $ 126,546,716 | $ 174,830,292 |
Tank rental revenue | 717,487 | 286,892 | 1,624,461 | 860,676 |
Pipeline operations | 19,526 | 45,925 | 71,865 | 119,882 |
Total revenue from operations | 54,688,306 | 55,256,887 | 128,243,042 | 175,810,850 |
COST OF OPERATIONS | ||||
Cost of refined products sold | 51,689,474 | 48,415,627 | 125,316,249 | 151,604,774 |
Refinery operating expenses | 3,153,646 | 2,953,528 | 9,468,409 | 8,420,650 |
Joint Marketing Agreement profit share | 965,627 | 1,435,376 | 392,062 | 4,812,674 |
Pipeline operating expenses | 91,969 | 63,099 | 266,454 | 170,582 |
Lease operating expenses | 9,005 | (1,143) | 32,112 | 20,271 |
General and administrative expenses | 891,210 | 312,365 | 1,503,533 | 1,058,267 |
Depletion, depreciation and amortization | 504,719 | 414,837 | 1,415,519 | 1,217,005 |
Recovery of bad debt | (139,868) | |||
Accretion expense | 28,186 | 52,720 | 84,558 | 158,655 |
Total cost of operations | 57,333,836 | 53,646,409 | 138,339,028 | 167,462,878 |
Income (loss) from operations | (2,645,530) | 1,610,478 | (10,095,986) | 8,347,972 |
OTHER INCOME (EXPENSE) | ||||
Easement, interest and other income | 157,840 | 724,349 | 415,700 | 856,816 |
Interest and other expense | (485,659) | (382,191) | (1,305,125) | (1,322,562) |
Total other (expense) | (327,819) | 342,158 | (889,425) | (465,746) |
Income (loss) before income taxes | (2,973,349) | 1,952,636 | (10,985,411) | 7,882,226 |
Income tax benefit (expense) | 1,034,798 | (688,403) | 3,735,040 | (2,778,750) |
Net income (loss) | $ (1,938,551) | $ 1,264,233 | $ (7,250,371) | $ 5,103,476 |
Income (loss) per common share: | ||||
Basic | $ (0.19) | $ 0.12 | $ (0.69) | $ 0.49 |
Diluted | $ (0.19) | $ 0.12 | $ (0.69) | $ 0.49 |
Weighted average number of common shares outstanding: | ||||
Basic | 10,464,715 | 10,453,802 | 10,460,849 | 10,451,168 |
Diluted | 10,464,715 | 10,453,802 | 10,460,849 | 10,451,168 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
OPERATING ACTIVITIES | ||
Net income (loss) | $ (7,250,371) | $ 5,103,476 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depletion, depreciation and amortization | 1,415,519 | 1,217,005 |
Unrealized loss (gain) on derivatives | 1,143,490 | 362,750 |
Deferred tax expense (benefit) | (3,735,040) | 2,479,823 |
Amortization of debt issue costs | 96,364 | 517,652 |
Accretion expense | 84,558 | 158,655 |
Common stock issued for services | 50,000 | 19,999 |
Recovery of bad debt | (139,868) | |
Changes in operating assets and liabilities | ||
Accounts receivable | (1,815,584) | 506,784 |
Prepaid expenses and other current assets | 945,539 | (274,435) |
Deposits and other assets | 570,444 | (1,711,073) |
Inventory | (1,011,662) | (2,420,176) |
Accounts payable, accrued expenses and other liabilities | 5,269,224 | 1,172,976 |
Accounts payable, related party | (300,000) | (1,174,168) |
Net cash provided by (used in) operating activities | (4,677,387) | 5,959,268 |
INVESTING ACTIVITIES | ||
Capital expenditures | (11,255,725) | (8,156,298) |
Change in restricted cash for investing activities | 11,257,897 | (13,021,438) |
Net cash provide by (used in) investing activities | 2,172 | (21,177,736) |
FINANCING ACTIVITIES | ||
Proceeds from issuance of debt | 6,898,931 | 28,000,000 |
Payments on long-term debt | (1,414,406) | (9,474,720) |
Change in restricted cash for financing activities | (985,700) | (3,081,686) |
Net cash provided by financing activities | 4,498,825 | 15,443,594 |
Net increase (decrease) in cash and cash equivalents | (176,390) | 225,126 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 1,853,875 | 1,293,233 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 1,677,485 | 1,518,359 |
Non-cash investing and financing activities: | ||
Financing of capital expenditures via accounts payable | 2,601,709 | 1,743,997 |
Interest paid | 1,827,794 | 959,665 |
Income taxes paid | $ 139,500 |
1. Organization
1. Organization | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Nature of Operations Structure and Management Our operations are conducted through the following active subsidiaries: ● Lazarus Energy, LLC, a Delaware limited liability company (LE). ● Lazarus Refining & Marketing, LLC, a Delaware limited liability company (LRM). ● Blue Dolphin Pipe Line Company (BDPL), a Delaware corporation. ● Blue Dolphin Petroleum Company, a Delaware corporation. ● Blue Dolphin Services Co., a Texas corporation. See "Part I, Item 1. Business and Item 2. Properties in our Form 10-K for the fiscal year ended December 31, 2015 (the Annual Report) as filed with the Securities and Exchange Commission (the SEC) for additional information regarding our operating subsidiaries, principal facilities, and assets. References in this Quarterly Report to we, us, and our are to Blue Dolphin and its subsidiaries unless otherwise indicated or the context otherwise requires. Operating Risks For the three months ended September 30, 2016, we had a net loss of $1,938,551 compared to net income of $1,264,233 for the three months ended September 30, 2015. For the nine months ended September 30, 2016, we had a net loss of $7,250,371 compared to net income of $5,103,476 for the nine months ended September 30, 2015. As of September 30, 2016, we had cash and cash equivalents and restricted cash (current portion) of $1,677,485 and $4,160,999, respectively. As of September 30, 2016, we had current assets of $22,404,232 and current liabilities (including the current portion of long-term debt) of $59,754,725, reflecting a working capital deficit of $37,350,493. Excluding the current portion of long-term debt, we had a working capital deficit of $5,229,711 as of September 30, 2016. Non-payment of Operations Payments to us by GEL under the Joint Marketing Agreement resulting from a contract-related dispute between the parties contributed to the working capital deficit as of September 30, 2016. (See Note (19) Commitments and Contingencies Genesis Agreements and Legal Matters for a discussion related to Operations Payments and the Joint Marketing Agreement.) As of December 31, 2015, we had cash and cash equivalents and restricted cash (current portion) of $1,853,875 and $3,175,299, respectively. As of December 31, 2015, we had current assets of $19,629,841 and current liabilities (including the current portion of long-term debt) of $20,228,648, reflecting a working capital deficit of $598,807. In addition to the Joint Marketing Agreement, we are party to a variety of contracts and agreements with Genesis and its affiliates that enable the purchase of crude oil and condensate, transportation of crude oil and condensate, and other services. Certain of these agreements with Genesis and its affiliates have successive one-year renewals until August 2019 unless sooner terminated by Genesis or its affiliates with 180 days prior written notice. An adverse change in our relationship with Genesis could have a material adverse effect on our operations, liquidity, and financial condition. We are currently involved in a dispute with Genesis over certain contractual matters. (See Note (19) Commitments and Contingencies Genesis Agreements and Legal Matters, as well as Part II. Other Information, Item 1A. Risk Factors for a summary of the Joint Marketing Agreement and Crude Supply Agreement and information regarding the current contract-related dispute with Genesis.) As of September 30, 2016, we were in violation of certain financial covenants in secured loan agreements with Sovereign Bank (Sovereign). As a result of these covenant defaults, Sovereign could declare the amounts owed under these loan agreements immediately due and payable, exercise its rights with respect to collateral securing our obligations under these loan agreements, and/or exercise any other rights and remedies available. Sovereign waived the financial covenant defaults as of the quarter ended September 30, 2016. However, the debt associated with these loans was classified within the current portion of long-term debt on our consolidated balance sheets due to the uncertainty of our ability to meet the financial covenants in the future. There can be no assurance that Sovereign will provide future waivers, which may have an adverse impact on our financial position and results of operations. (See Note (9) Long-Term Debt, Net and Note (20) Subsequent Events for additional disclosures related to our long-term debt and financial covenant violations.) |
2. Basis of Presentation
2. Basis of Presentation | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying unaudited consolidated financial statements, which include Blue Dolphin and subsidiaries, have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim consolidated financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in our audited financial statements have been condensed or omitted pursuant to the SECs rules and regulations. Significant intercompany transactions have been eliminated in the consolidation. In managements opinion, all adjustments considered necessary for a fair presentation have been included, disclosures are adequate, and the presented information is not misleading. The consolidated balance sheet as of December 31, 2015 has been derived from the audited financial statements at that date. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016, or for any other period. |
3. Significant Accounting Polic
3. Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | The summary of significant accounting policies of Blue Dolphin is presented to assist in understanding our consolidated financial statements. Our consolidated financial statements and accompanying notes are representations of management who is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of our consolidated financial statements. Use of Estimates Cash and Cash Equivalents Restricted Cash Accounts Receivable and Allowance for Doubtful Accounts Inventory Derivatives Although these commodity futures contracts are not subject to hedge accounting treatment under Financial Accounting Standards Board (the FASB) Accounting Standards Codification (ASC) guidance, we record the fair value of these hedges in our consolidated balance sheet each financial reporting period because of contractual arrangements under which we are effectively exposed to the potential gains or losses. We recognize all commodity hedge positions as either current assets or current liabilities in our consolidated balance sheets, and those instruments are measured at fair value. Changes in the fair value from financial reporting period to financial reporting period are recognized in our consolidated statements of operations. Net gains or losses associated with these transactions are recognized within cost of refined products sold in our consolidated statements of operations using mark-to-market accounting. (See Note (17) Fair Value Measurement and Note (18) Inventory Risk Management for additional disclosures related to derivatives.) Property and Equipment Refinery and Facilities We record refinery and facilities at cost less any adjustments for depreciation or impairment. Adjustment of the asset and the related accumulated depreciation accounts are made for the refinery and facilities assets retirement and disposal, with the resulting gain or loss included in the consolidated statements of operations. For financial reporting purposes, depreciation of refinery and facilities assets is computed using the straight-line method using an estimated useful life of 25 years beginning when the refinery and facilities assets are placed in service. We did not record any impairment of our refinery and facilities assets for any period presented. Pipelines and Facilities Oil and Gas Properties Construction in Progress (See Note (7) Property, Plant and Equipment, Net for additional disclosures related to our refinery and facilities assets, oil and gas properties, pipelines and facilities assets, and construction in progress.) Intangibles Other Revenue Recognition Refined Petroleum Products Revenue Tank Rental Revenue Easement Revenue Pipeline Transportation Revenue Deferred Revenue Income Taxes As of each reporting date, management considers new evidence, both positive and negative, to determine the realizability of deferred tax assets. Management considers whether it is more likely than not that a portion or all of the deferred tax assets will be realized, which is dependent upon the generation of future taxable income prior to the expiration of any net operating loss (NOL) carryforwards. When management determines that it is more likely than not that a tax benefit will not be realized, a valuation allowance is recorded to reduce deferred tax assets. The guidance also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. (See Note (15) Income Taxes for further information related to income taxes.) Impairment or Disposal of Long-Lived Assets Asset Retirement Obligations Management has concluded that there is no legal or contractual obligation to dismantle or remove the refinery and facilities assets. Further, management believes that these assets have indeterminate lives under FASB ASC guidance for estimating AROs because dates or ranges of dates upon which we would retire these assets cannot reasonably be estimated at this time. When a legal or contractual obligation to dismantle or remove the refinery and facilities assets arises and a date or range of dates can reasonably be estimated for the retirement of these assets, we will estimate the cost of performing the retirement activities and record a liability for the fair value of that cost using present value techniques. We recorded an ARO liability related to future asset retirement costs associated with dismantling, relocating, or disposing of our offshore platform, pipeline systems, and related onshore facilities, as well as for plugging and abandoning wells and restoring land and sea beds. We developed these cost estimates for each of our assets based upon regulatory requirements, structural makeup, water depth, reservoir characteristics, reservoir depth, equipment demand, current retirement procedures, and construction and engineering consultations. Because these costs typically extend many years into the future, estimating future costs are difficult and require management to make judgments that are subject to future revisions based upon numerous factors, including changing technology, political, and regulatory environments. We review our assumptions and estimates of future abandonment costs on an annual basis. (See Note (11) Asset Retirement Obligations for additional information related to our AROs.) Computation of Earnings Per Share The number of shares related to options, warrants, restricted stock, and similar instruments included in diluted EPS is based on the Treasury Stock Method prescribed in FASB ASC guidance for computation of EPS. This method assumes theoretical repurchase of shares using proceeds of the respective stock option or warrant exercised, and, for restricted stock, the amount of compensation cost attributed to future services that has not yet been recognized and the amount of any current and deferred tax benefit that would be credited to additional paid-in-capital upon the vesting of the restricted stock, at a price equal to the issuers average stock price during the related earnings period. Accordingly, the number of shares includable in the calculation of EPS in respect of the stock options, warrants, restricted stock, and similar instruments is dependent on this average stock price and will increase as the average stock price increases. (See Note (16) Earnings Per Share for additional information related to EPS.) Stock-Based Compensation Treasury Stock New Pronouncements Adopted ASU 2015-17, Income Taxes (Topic 740) ASU 2015-03, Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs New Pronouncements Issued But Not Yet Effective ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments) ASU 2016-02, Leases (Topic 842) ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory ASU 2014-15, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (Subtopic 205-40). ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ● August 2015 ASU 2015-14, evenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ● March 2016 ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net), ● April 2016 ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing ● May 2016 ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update) Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity, and , ● May 2016 ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients We are evaluating the impact that adoption of ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, and ASU 2016-12, all of which relate to Revenue from Contracts with Customers (Topic 606), will have on our consolidated financial statements. Other new pronouncements issued but not effective until after September 30, 2016 are not expected to have a material impact on our financial position, results of operations, or liquidity. Reclassification |
4. Business Segment Information
4. Business Segment Information | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Business Segment Information | We have two reportable business segments: (i) Refinery Operations and (ii) Pipeline Transportation. Business activities related to our Refinery Operations business segment are conducted at the Nixon Facility. Business activities related to our Pipeline Transportation business segment are primarily conducted in the Gulf of Mexico through our Pipeline Assets and leasehold interests in oil and gas properties. Business segment information for the periods indicated (and as of the dates indicated), was as follows: Three Months Ended September 30, 2016 Three Months Ended September 30, 2015 Segment Segment Refinery Pipeline Corporate & Refinery Pipeline Corporate & Operations Transportation Other Total Operations Transportation Other Total Revenue from operations $ 54,668,780 $ 19,526 $ - $ 54,688,306 $ 55,210,962 $ 45,925 $ - $ 55,256,887 Less: cost of operations(1) (55,495,575 ) (129,160 ) (238,755 ) (55,863,490 ) (51,444,705 ) (114,675 ) (236,816 ) (51,796,196 ) Other non-interest income(2) - 156,396 - 156,396 - 62,500 660,000 722,500 Adjusted EBITDA(3) (826,795 ) 46,762 (238,755 ) (1,018,788 ) 3,766,257 (6,250 ) 423,184 4,183,191 Less: JMA Profit Share(4) (965,627 ) - - (965,627 ) (1,435,376 ) - - (1,435,376 ) EBITDA(3) $ (1,792,422 ) $ 46,762 $ (238,755 ) $ 2,330,881 $ (6,250 ) $ 423,184 Depletion, depreciation and amortization (504,719 ) (414,837 ) Interest expense, net (484,215 ) (380,342 ) Income (loss) before income taxes (2,973,349 ) 1,952,636 Income tax benefit (expense) 1,034,798 (688,403 ) Net income (loss) $ (1,938,551 ) $ 1,264,233 Capital expenditures(5) $ 4,182,747 $ - $ - $ 4,182,747 $ 2,355,811 $ - $ - $ 2,355,811 Identifiable assets(6) $ 85,585,499 $ 3,106,327 $ 7,710,337 $ 96,402,163 $ 78,145,626 $ 3,303,803 $ 3,405,977 $ 84,855,406 (1) Operation cost within the Refinery Operations and Pipeline Transportation segments includes related general, administrative, and accretion expenses. Operation cost within Corporate and Other includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees, and legal expense. (2) Other non-interest income reflects FLNG easement revenue. (See Note (19) Commitments and Contingencies FLNG Master Easement Agreement for further discussion related to FLNG.) (3) Adjusted EBITDA and EBITDA are non-GAAP financial measures. See Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Non-GAAP Financial Measures for additional information related to adjusted EBITDA and EBITDA. (4) The JMA Profit Share represents the GEL TEX Marketing, LLC Profit Share plus the Performance Fee for the period pursuant to the Joint Marketing Agreement. (See Note (19) Commitments and Contingencies Genesis Agreements for further discussion related to the Joint Marketing Agreement.) (5) Capital expenditures for the prior year period reflect reclassification of capital expenditures funded by credit facilities to conform to the 2016 presentation. (6) Identifiable assets for the prior year period reflect reclassification of debt issue costs as a reduction in long-term debt to conform to the 2016 presentation. Business segment information for the periods indicated (and as of the dates indicated), was as follows: Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015 Segment Segment Refinery Pipeline Corporate & Refinery Pipeline Corporate & Operations Transportation Other Total Operations Transportation Other Total Revenue from operations $ 128,171,177 $ 71,865 $ - $ 128,243,042 $ 175,690,968 $ 119,882 $ - $ 175,810,850 Less: cost of operations(1) (135,452,537 ) (383,124 ) (695,786 ) (136,531,447 ) (160,208,576 ) (296,291 ) (928,331 ) (161,433,198 ) Other non-interest income(2) - 412,061 - 412,061 - 187,500 660,000 847,500 Adjusted EBITDA(3) (7,281,360 ) 100,802 (695,786 ) (7,876,344 ) 15,482,392 11,091 (268,331 ) 15,225,152 Less: JMA Profit Share(4) (392,062 ) - - (392,062 ) (4,812,674 ) - - (4,812,674 ) EBITDA(3) $ (7,673,422 ) $ 100,802 $ (695,786 ) $ 10,669,718 $ 11,091 $ (268,331 ) Depletion, depreciation and amortization (1,415,519 ) (1,217,005 ) Interest expense, net (1,301,486 ) (1,313,247 ) Income (loss) before income taxes (10,985,411 ) 7,882,226 Income tax benefit (expense) 3,735,040 (2,778,750 ) Net income (loss) $ (7,250,371 ) $ 5,103,476 Capital expenditures(5) $ 11,255,725 $ - $ - $ 11,255,725 $ 8,156,298 $ - $ - $ 8,156,298 Identifiable assets(6) $ 85,585,499 $ 3,106,327 $ 7,710,337 $ 96,402,163 $ 78,145,626 $ 3,303,803 $ 3,405,977 $ 84,855,406 (1) Operation cost within the Refinery Operations and Pipeline Transportation segments includes related general, administrative, and accretion expenses. Operation cost within Corporate and Other includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees, and legal expense. (2) Other non-interest income reflects FLNG easement revenue. (See Note (19) Commitments and Contingencies FLNG Master Easement Agreement for further discussion related to FLNG.) (3) Adjusted EBITDA and EBITDA are non-GAAP financial measures. See Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Non-GAAP Financial Measures for additional information related to adjusted EBITDA and EBITDA. (4) The JMA Profit Share represents the GEL TEX Marketing, LLC Profit Share plus the Performance Fee for the period pursuant to the Joint Marketing Agreement. (See Note (19) Commitments and Contingencies Genesis Agreements for further discussion related to the Joint Marketing Agreement.) (5) Capital expenditures for the prior year period reflect reclassification of capital expenditures funded by credit facilities to conform to the 2016 presentation. (6) Identifiable assets for the prior year period reflect reclassification of debt issue costs as a reduction in long-term debt to conform to the 2016 presentation. |
5. Prepaid Expenses and Other C
5. Prepaid Expenses and Other Current Assets | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets as of the dates indicated consisted of the following: September 30, December 31, 2016 2015 Prepaid insurance $ 192,351 $ 315,120 Prepaid listing fees 3,750 - Prepaid related party operating expenses - 624,570 $ 196,101 $ 939,690 |
6. Inventory
6. Inventory | 9 Months Ended |
Sep. 30, 2016 | |
Inventory Disclosure [Abstract] | |
Inventory | Inventory as of the dates indicated consisted of the following: September 30, December 31, 2016 2015 HOBM $ 4,069,203 $ 5,007,576 Jet fuel 3,744,702 2,045,784 Naphtha 417,223 309,850 AGO 280,277 278,278 Chemicals 261,518 122,777 Propane 24,860 17,860 Crude oil and condensate 19,041 19,041 LPM mix 3,156 7,152 $ 8,819,980 $ 7,808,318 |
7. Property, Plant and Equipmen
7. Property, Plant and Equipment, Net | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment, Net | Property, plant and equipment, net, as of the dates indicated consisted of the following: September 30, December 31, 2016 2015 Refinery and facilities $ 50,516,486 $ 40,195,928 Pipelines and facilities 2,127,207 2,127,207 Onshore separation and handling facilities 325,435 325,435 Land 602,938 602,938 Other property and equipment 652,795 644,795 54,224,861 43,896,303 Less: Accumulated depletion, depreciation, and amortization (7,649,077 ) (6,234,161 ) 46,575,784 37,662,142 Construction in progress 14,707,943 11,179,670 $ 61,283,727 $ 48,841,812 We capitalize interest cost incurred on funds used to construct property, plant, and equipment. The capitalized interest is recorded as part of the asset to which it relates and is depreciated over the assets useful life. Interest cost capitalized was $1,776,863 and $556,032 as of September 30, 2016 and December 31, 2015, respectively. |
8. Related Party Transactions
8. Related Party Transactions | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Accounts Payable, Related Party | We are party to several agreements with related parties. We believe these related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions. A summary of these agreements follows: LEH Operating Agreement ● Reimbursements ● Fees Product Sales Agreement Terminal Services Agreement Loan and Security Agreement The proceeds of the LEH Loan Agreement were used for working capital. There are no financial maintenance covenants associated with the LEH Loan Agreement. The LEH Loan Agreement is secured by: (i) the assignment of payments received by BDPL from FLNG under the Master Easement Agreement and (ii) certain real estate assets of BDPL. Outstanding principal and interest less associated debt issue costs owed to LEH under the LEH Loan Agreement are reflected in long-term debt, related party, current portion and long-term debt, related party, net of current portion in our consolidated balance sheets. Promissory Note Ingleside Crude, LLC (Ingleside) Amended and Restated Tank Lease Agreement. Promissory Note Jonathan Carroll Guaranty Fee Agreements Promissory Note As of September 30, 2016, accounts receivable related to LEH totaled $2,869,805. Unsettled reimbursements associated with the Operating Agreement and reflected within prepaid expenses and other current assets as of the dates indicated were as follows: September 30, December 31, 2016 2015 LEH $ - $ 624,570 $ - $ 624,570 Long-term debt, related party associated with the LEH Loan Agreement, LEH Note, Ingleside Note, and Carroll Note as of the dates indicated was as follows: September 30, December 31, 2016 2015 LEH $ 5,797,172 $ - Ingleside 679,385 Jonathan Carroll 422,374 6,898,931 - Less: Long-term debt, related party, current portion (500,000 ) - $ 6,398,931 $ - Accrued interest associated with the LEH Loan Agreement as of the dates indicated was as follows: September 30, December 31, 2016 2015 LEH $ 80,000 $ - 80,000 - Less: Interest payable, current portion (80,000 ) - $ - $ - Accounts payable, related party associated with the Amended and Restated Tank Lease Agreement as of the dates indicated was as follows: September 30, December 31, 2016 2015 Ingleside $ — $ 300,000 — $ 300,000 Refinery operating expenses associated with the Operating Agreement and Amended and Restated Tank Lease Agreement for the periods indicated were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Amount Per bbl Amount Per bbl Amount Per bbl Amount Per bbl LEH $ 3,028,646 $ 2.66 $ 2,953,528 $ 2.66 $ 8,618,409 $ 2.84 $ 8,420,650 $ 2.73 Ingleside 125,000 $ 0.11 - $ 0.00 850,000 $ 0.28 - $ 0.00 $ 3,153,646 $ 2.77 $ 2,953,528 $ 2.66 $ 9,468,409 $ 3.12 $ 8,420,650 $ 2.73 Revenue associated with the Product Sales Agreement and Terminal Services Agreement for the periods indicated was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Refined petroleum product sales LEH $ 14,536,997 $ - $ 23,449,071 $ - Other customers 39,414,296 54,924,070 103,097,645 174,830,292 Total refined petroleum product sales 53,951,293 54,924,070 126,546,716 174,830,292 Tank rental revenue LEH 426,000 - 750,000 - Other customers 291,487 286,892 874,461 860,676 Total tank rental revenue 717,487 286,892 1,624,461 860,676 Pipeline operations Other customers 19,526 45,925 71,865 119,882 Total revenue from operations $ 54,688,306 $ 55,256,887 $ 128,243,042 $ 175,810,850 As of September 30, 2016, accounts receivable related to LEH totaled $2,869,805. Interest expense associated with the LEH Loan Agreement and Guaranty Fee Agreements for the periods indicated were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Jonathan Carroll $ 172,300 $ 165,008 $ 522,931 $ 165,008 LEH 80,000 - 80,000 - $ 252,300 $ 165,008 $ 602,931 $ 165,008 |
9. Long-Term Debt, Net
9. Long-Term Debt, Net | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Long-Term Debt, Net | Effective January 1, 2016, we adopted the provisions of the FASB ASC guidance that requires debt issue costs to be presented as an offset to their related debt. Accordingly, our consolidated balance sheet as of December 31, 2015 has been changed to reclassify approximately $2.4 million previously reported debt issue costs as a direct deduction of long-term debt. Long-term debt, net, which represents the outstanding principal and interest of long-term debt less associated debt issue costs, as of the dates indicated consisted of the following: September 30, 2016 December 31, 2015 Debt Issue Long-Term Debt Issue Long-Term Principal Costs Debt, Net Principal Costs Debt, Net First Term Loan Due 2034 $ 24,111,986 $ (1,557,748 ) $ 22,554,238 $ 24,643,081 $ (1,623,810 ) $ 23,019,271 Second Term Loan Due 2034 9,797,549 (737,370 ) 9,060,179 10,000,000 (767,672 ) 9,232,328 Notre Dame Debt 1,300,000 - 1,300,000 1,300,000 - 1,300,000 Term Loan Due 2017 369,987 - 369,987 924,969 - 924,969 Capital Leases 178,741 - 178,741 304,618 - 304,618 $ 35,758,263 $ (2,295,118 ) $ 33,463,145 $ 37,172,668 $ (2,391,482 ) $ 34,781,186 Less: Long-term debt less unamortized debt issue costs, current portion (32,120,782 ) (1,934,932 ) $ 1,342,363 $ 32,846,254 Accrued interest related to our long-term debt, net (reflected as interest payable, current portion and long-term interest payable, net of current portion in our consolidated balance sheets) as of the dates indicated consisted of the following: September 30, December 31, 2016 2015 Notre Dame Debt $ 1,638,952 $ 1,482,801 LEH Loan Agreement 80,000 - Second Term Loan Due 2034 43,836 39,193 First Term Loan Due 2034 33,030 34,883 Capital Leases 1,531 2,612 Term Loan Due 2017 309 4,779 1,797,658 1,564,268 Less: Interest payable, current portion (158,706 ) (81,467 ) $ 1,638,952 $ 1,482,801 (See Note (8) Related Party Transactions for disclosures related to related party long-term debt.) First Term Loan Due 2034. providing for a term loan in the principal amount of $25.0 million As of September 30, 2016, LE was in violation of the debt service coverage ratio, the current ratio, and debt to net worth ratio financial covenants related to the First Term Loan Due 2034. As a result of these covenant defaults, Sovereign could declare the amounts owed under the First Term Loan Due 2034 immediately due and payable, exercise its rights with respect to collateral securing LEs obligations under the loan agreement, and/or exercise any other rights and remedies available. Sovereign waived the financial covenant defaults as of the quarter ended September 30, 2016. However, the debt associated with the loan was classified within the current portion of long-term debt on our consolidated balance sheets due to the uncertainty of our ability to meet the financial covenants in the future. There can be no assurance that Sovereign will provide future waivers, which may have an adverse impact on our financial position and results of operations. As a condition of the First Term Loan Due 2034, Jonathan Carroll was required to guarantee r epayment A portion of the proceeds of the First Term Loan Due 2034 were used to refinance approximately $8.5 million of debt owed under a previous debt facility with American First National Bank. Remaining proceeds are being used primarily to construct new petroleum storage tanks at the Nixon Facility. The First Term Loan Due 2034 is secured by: (i) a first lien on all Nixon Facility business assets (excluding accounts receivable and inventory), (ii) assignment of all Nixon Facility contracts, permits, and licenses, (iii) absolute assignment of Nixon Facility rents and leases, including tank rental income, (iv) a $1.0 million payment reserve account held by Sovereign, and (v) a pledge of $5.0 million of a life insurance policy on Jonathan Carroll. The First Term Loan Due 2034 contains representations and warranties, affirmative, restrictive, and financial covenants, as well as events of default which are customary for credit facilities of this type. Second Term Loan Due 2034 As of September 30, 2016, LRM was in violation of the debt service coverage ratio, the current ratio, and the debt to net worth ratio financial covenants related to the Second Term Loan Due 2034. As a result of these covenant defaults, Sovereign could declare the amounts owed under the Second Term Loan Due 2034 immediately due and payable, exercise its rights with respect to collateral securing LRMs obligations under the loan agreement, and/or exercise any other rights and remedies available. Accordingly, $8,775,050 in principal and interest under the Second Term Loan Due 2034 were classified within the current portion of long-term debt on our consolidated balance sheets. By letter dated November 10, 2016, Sovereign waived the financial covenant defaults as of the quarter ended June 30, 2016. (See Note (1) Organization Operating Risks and Note (20) Subsequent Events for additional disclosures related to the Second Term Loan Due 2034 and financial covenant violations.) As a condition of the Second Term Loan Due 2034, Jonathan Carroll was required to guarantee repayment of funds borrowed and interest accrued under the loan. For his personal guarantee, LRM entered into a Guaranty Fee Agreement with Jonathan Carroll whereby he receives a fee equal to 2.00% per annum, paid monthly, of the outstanding principal balance owed under the Second Term Loan Due 2034. For the three months ended September 30, 2016 and 2015, guaranty fees related to the Second Term Loan Due 2034 totaled $49,094 and $0, respectively. For the nine months ended September 30, 2016 and 2015, guaranty fees related to the Second Term Loan Due 2034 totaled $148,261 and $0, respectively. Guaranty fees are recognized monthly as incurred and are included in interest and other expense in our consolidated statements of operations. LEH, LE and Blue Dolphin also guaranteed the Second Term Loan Due 2034. (See Note (8) Related Party Transactions for additional disclosures related to LEH and Jonathan Carroll.) A portion of the proceeds of the Second Term Loan Due 2034 were used to refinance a previous bridge loan from Sovereign in the amount of $3.0 million. Remaining proceeds are being used primarily to construct additional new petroleum storage tanks at the Nixon Facility. The Second Term Loan Due 2034 is secured by: (i) a second priority lien on the rights of LE in the Nixon Facility and the other collateral of LE pursuant to a security agreement; (ii) a first priority lien on the real property interests of LRM; (iii) a first priority lien on all of LRMs fixtures, furniture, machinery and equipment; (iv) a first priority lien on all of LRMs contractual rights, general intangibles and instruments, except with respect to LRMs rights in its leases of certain specified tanks, with respect to which Sovereign has a second priority lien in such leases subordinate to a prior lien granted by LRM to Sovereign to secure obligations of LRM under the Term Loan Due 2017; and (v) all other collateral as described in the security documents. The Second Term Loan Due 2034 contains representations and warranties, affirmative, restrictive, and financial covenants, as well as events of default which are customary for credit facilities of this type. Notre Dame Debt The Notre Dame Debt is secured by a Deed of Trust, Security Agreement and Financing Statements (the Subordinated Deed of Trust), which encumbers the Nixon Facility and general assets of LE. There are no financial maintenance covenants associated with the Notre Dame Debt. Pursuant to a Subordination Agreement dated June 2015, the holder of the Notre Dame Debt agreed to subordinate any security interest and liens on the Nixon Facility, as well as its right to payments, in favor of Sovereign as holder of the First Term Loan Due 2034. Term Loan Due 2017 As of September 30, 2016, LRM was in violation of the debt service coverage ratio financial covenant related to the Term Loan Due 2017. As a result of this covenant default, Sovereign could declare the amounts owed under the Term Loan Due 2017 immediately due and payable, exercise its rights with respect to collateral securing LRM’s obligations under the loan agreement, and/or exercise any other rights and remedies available. The Term Loan Due 2017 was already classified within the current portion of longterm debt on our consolidated balance sheets due to the loan’s shortterm maturity date. Sovereign waived the financial covenant default as of the quarter ended September 30, 2016. There can be no assurance that Sovereign will provide future waivers, which may have an adverse impact on our financial position and results of operations. (See “Note (1) Organization – Operating Risks” and “Note (20) Subsequent Events” for additional disclosures related to the Second Term Loan Due 2034 and financial covenant violations.) As a condition of the Term Loan Due 2017, Jonathan Carroll was required to guarantee r epayment The proceeds of the Term Loan Due 2017 were used primarily to finance costs associated with refurbishment of the Nixon Facilitys naphtha stabilizer and depropanizer units. The Term Loan Due 2017 is: (i) subject to a financial maintenance covenant pertaining to debt service coverage ratio and (ii) secured by the assignment of certain leases of LRM and certain assets of LEH. (See Note (8) Related Party Transactions for additional disclosures related to LEH and Jonathan Carroll.) Capital Leases A summary of equipment held under long-term capital leases as of the dates indicated follows: September 30, December 31, 2016 2015 Boiler equipment $ 538,598 $ 538,598 Less: accumulated depreciation - - $ 538,598 $ 538,598 |
10. Accrued Expenses and Other
10. Accrued Expenses and Other Current Liabilities | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure Text Block Supplement [Abstract] | |
Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities as of the dates indicated consisted of the following: September 30, December 31, 2016 2015 Unrealized hedging loss $ 1,326,890 $ 183,400 Unearned revenue 597,162 781,859 Customer deposits 450,000 - Genesis JMA Profit Share payable 245,255 388,364 Other payable 166,314 157,714 Board of director fees payable 133,929 86,429 Property taxes 92,678 - Transportation and inspection 38,000 - Excise and income taxes payable 12,852 1,290,101 Insurance - 103,024 $ 3,063,080 $ 2,990,891 |
11. Asset Retirement Obligation
11. Asset Retirement Obligations | 9 Months Ended |
Sep. 30, 2016 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset Retirement Obligations | Refinery and Facilities Pipelines and Facilities and Oil and Gas Properties Changes to our ARO liability for the periods indicated were as follows: September 30, December 31, 2016 2015 Asset retirement obligations, at the beginning of the period $ 1,985,864 $ 1,866,770 New asset retirement obligations and adjustments - 49 Liabilities settled (61,408 ) (92,330 ) Accretion expense 84,558 211,375 2,009,014 1,985,864 Less: asset retirement obligations, current portion (25,972 ) (38,644 ) Long-term asset retirement obligations, at the end of the period $ 1,983,042 $ 1,947,220 Liabilities settled represents amounts paid for plugging and abandonment costs against the assets ARO liability and are reflected in our consolidated balance sheets. As of September 30, 2016 and December 31, 2015, we recognized $61,408 and $92,330, respectively, in liabilities settled. Abandonment expense represents amounts paid for plugging and abandonment costs that exceed the assets ARO liability and are reflected in our consolidated statements of operations. For the three months ended September 30, 2016 and 2015, we recognized $0 in abandonment expense. For the nine months ended September 30, 2016 and 2015, we recognized $0 in abandonment expense. |
12. Treasury Stock
12. Treasury Stock | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Treasury Stock | As of September 30, 2016 and December 31, 2015, we had 150,000 shares of treasury stock. |
13. Concentration of Risk
13. Concentration of Risk | 9 Months Ended |
Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Concentration of Risk | Bank Accounts Key Supplier (See Note (19) Commitments and Contingencies Genesis Agreements and Legal Matters, as well as Part II. Other Information, Item 1A. Risk Factors for a summary of the Crude Supply Agreement and a discussion of the current contract-related dispute with Genesis.) Significant Customers For the three months ended September 30, 2016, we had 4 customers that accounted for approximately 70% of our refined petroleum products sales. These 4 customers represented approximately $6.7 million in accounts receivable as of September 30, 2016. For the three months ended September 30, 2015, we had 5 customers that accounted for approximately 81% of our refined petroleum products sales. These 5 customers represented approximately $5.7 million in accounts receivable as of September 30, 2015. For the nine months ended September 30, 2016, we had 4 customers that accounted for approximately 64% of our refined petroleum products sales. These 4 customers represented approximately $5.5 million in accounts receivable as of September 30, 2016. For the nine months ended September 30, 2015, we had 3 customers that accounted for approximately 55% of our refined petroleum products sales. These 3 customers represented approximately $4.4 million in accounts receivable as of September 30, 2015. For the three months ended September 30, 2016, 1 of our 4 significant customers was LEH, a related party. LEH accounted for approximately 27% of our refined petroleum product sales. For the nine months ended September 30, 2016, LEH accounted for approximately 19% of our refined petroleum product sales. As of September 30, 2016, LEH represented approximately $2.9 million in accounts receivable. LEH was not a customer during 2015. (See Note (8) Related Party Transactions for additional disclosures with respect to related parties.) Refined Petroleum Product Sales Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 LPG mix $ 237,009 0.4 % $ 617,715 1.1 % $ 621,313 0.5 % $ 909,207 0.5 % Naphtha 11,870,484 22.0 % 11,218,381 20.4 % 28,183,809 22.3 % 38,048,064 21.8 % Jet fuel 15,104,900 28.0 % 17,782,534 32.4 % 41,150,686 32.5 % 51,713,507 29.6 % HOBM 14,206,759 26.4 % 9,609,536 17.5 % 25,259,753 20.0 % 40,640,975 23.2 % Reduced Crude 0.0 % 50,407 0.1 % 3,791,919 3.0 % 50,407 0.0 % AGO 12,532,141 23.2 % 15,645,497 28.5 % 27,539,236 21.7 % 43,468,132 24.9 % $ 53,951,293 100.0 % $ 54,924,070 100.0 % $ 126,546,716 100.0 % $ 174,830,292 100.0 % |
14. Leases
14. Leases | 9 Months Ended |
Sep. 30, 2016 | |
Leases, Operating [Abstract] | |
Leases | Our company headquarters is located in downtown Houston, Texas. We lease 13,878 square feet of office space, 7,389 square feet of which is used and paid for by LEH. The office lease has a 10-year term that expires in September 2017. The lease included a free rent period, has escalating rent payment provisions, and requires payment of a portion of operating expenses. Rent expense is recognized on a straight-line basis. For the three months ended September 30, 2016 and 2015, rent expense totaled $33,251 and $29,857, respectively. For the nine months ended September 30, 2016 and 2015, rent expense totaled $92,966 and $112,746, respectively. |
15. Income Taxes
15. Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Tax Benefit (Expense) Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Current: Federal $ - $ (37,620 ) $ - $ (122,863 ) State - (36,102 ) - (148,656 ) Deferred: Federal 1,034,798 (614,681 ) 3,735,040 (2,507,231 ) $ 1,034,798 $ (688,403 ) $ 3,735,040 $ (2,778,750 ) The state of Texas has a Texas margins tax (TMT), which is a form of business tax imposed on gross margin. Although TMT is imposed on an entitys gross margin rather than on its net income, certain aspects of TMT make it similar to an income tax. Accordingly, TMT is treated as an income tax for financial reporting purposes. Deferred Income Taxes NOL Carryforwards NOL carryforwards that remained available for future use for the periods indicated were as follow (amounts shown are net of NOLs that will expire unused as a result of the IRC Section 382 limitation): Net Operating Loss Carryforward Pre-Ownership Change Post-Ownership Change Total Balance at December 31, 2014 $ 10,766,912 $ 12,145,789 $ 22,912,701 Net operating loss carryforwards utilized (1,152,463 ) (2,528,848 ) (3,681,311 ) - Balance at December 31, 2015 9,614,449 9,616,941 19,231,390 Net operating losses - 5,871,350 5,871,350 Balance at March 31, 2016 9,614,449 15,488,291 25,102,740 Net operating losses - 4,230,763 4,230,763 Balance at June 30, 2016 9,614,449 19,719,054 29,333,503 Net operating losses - 2,487,642 2,487,642 Balance at September 30, 2016 $ 9,614,449 $ 22,206,696 $ 31,821,145 Deferred Tax Assets and Liabilities September 30, December 31, 2016 2015 Deferred tax assets: Net operating loss and capital loss carryforwards $ 13,089,512 $ 8,815,794 Start-up costs (Nixon Facility) 1,407,697 1,510,699 Asset retirement obligations liability/deferred revenue 714,961 717,723 Unrealized hedges 451,141 62,356 AMT credit and other 257,323 302,086 Total deferred tax assets 15,920,634 11,408,658 Deferred tax liabilities: Fair market value adjustments (46,116 ) (46,116 ) Unrealized hedges - - Basis differences in property and equipment (6,261,919 ) (5,484,983 ) Total deferred tax liabilities (6,308,035 ) (5,531,099 ) 9,612,599 5,877,559 Valuation allowance (2,270,322 ) (2,270,322 ) Deferred tax assets, net $ 7,342,277 $ 3,607,237 Valuation Allowance Current Versus Long-Term Uncertain Tax Positions As part of this guidance, we record income tax related interest and penalties, if applicable, as a component of the provision for income tax benefit (expense). However, there were no amounts recognized relating to interest and penalties in the consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015. Our federal income tax returns are subject to examination by the Internal Revenue Service for tax years ending December 31, 2012, or after and by the state of Texas for tax years ending December 31, 2011, or after. We believe there are no uncertain tax positions for both federal and state income taxes. |
16. Earnings Per Share
16. Earnings Per Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | A reconciliation between basic and diluted income per share for the periods indicated was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Net income (loss) $ (1,938,551) $ 1,264,233 $ (7,250,371) $ 5,103,476 Basic and diluted income per share $ (0.19) $ 0.12 $ (0.69) $ 0.49 Basic and Diluted Weighted average number of shares of common stock outstanding and potential dilutive shares of common stock 10,464,715 10,453,802 10,460,849 10,451,168 Diluted EPS is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding. Diluted EPS for the three and nine months ended September 30, 2016 and 2015 was the same as basic EPS as there were no stock options or other dilutive instruments outstanding. |
17. Fair Value Measurement
17. Fair Value Measurement | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | The purchase and sale of financial instruments may be executed for the purpose of economically hedging commodity price risks associated with our refined petroleum products and the purchase of crude oil and condensate. When executed these financial instruments are direct contractual obligations of our crude supplier and not us. However, we financially benefit from any gains and financially bear any losses associated with the purchase and/or sale of such financial instruments. Because such instruments represent embedded derivatives for the purpose of financial reporting, we account for such embedded derivatives in our financial records by utilizing the market approach when measuring fair value of our financial instruments (typically in current assets and/or liabilities, as discussed below). The market approach uses prices and other relevant information generated by such market transactions executed on our behalf involving identical or comparable assets or liabilities. Generally accepted accounting principles establish a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The fair value hierarchy consists of the following three levels: Level 1 Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data. Level 3 Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable and cannot be corroborated by market data or other entity-specific inputs. The carrying amounts of accounts receivable, accounts payable, and accrued liabilities approximated their fair values as of September 30, 2016 and December 31, 2015 due to their short-term maturities. The fair value of our long-term debt, net including the current portion as of September 30, 2016 and December 31, 2015 was $39,758,263 and $37,172,668, respectively. The fair value of our debt was determined using a Level 3 hierarchy. The following table represents our assets and liabilities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015 and the basis for the measurement: Fair Value Measurement at September 30, 2016 Using Financial assets (liabilities): Carrying Value at September 30, 2016 Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Commodity contracts $ (1,326,890) $ (1,326,890) $ - $ - Fair Value Measurement at December 31, 215 Using Financial assets (liabilities): Carrying Value at December 31, 2015 Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Commodity contracts $ (183,400) $ (183,400) $ - $ - Carrying amounts of commodity contracts are reflected as other current assets or other current liabilities in our consolidated balance sheets. |
18. Inventory Risk Management
18. Inventory Risk Management | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Inventory Risk Management | Management periodically determines whether to maintain, increase, or decrease inventory levels based on various factors, including the crude pricing market in the U.S. Gulf Coast region, the refined petroleum products market in the same region, the relationship between these two markets, fulfilling contract demands, and other factors that may impact our operations, financial condition, and cash flows. Under our inventory risk management policy, commodity futures contracts may be used to mitigate the change in value for certain of our refined petroleum product inventories subject to market price fluctuations in our inventory. The physical inventory volumes are not exchanged, and these contracts are net settled with cash. The fair value of commodity futures contracts is reflected in our consolidated balance sheets and the related net gain or loss is recorded within cost of refined products sold in our consolidated statements of operations. Quoted prices for identical assets or liabilities in active markets (Level 1) are considered to determine the fair values for the purpose of marking to market the financial instruments at each period end. Commodity transactions are executed to minimize transaction costs, monitor consolidated net exposures, and allow for increased responsiveness to changes in market factors. Due to mark-to-market accounting during the term of the commodity futures contracts, significant unrealized non-cash net gains and losses could be recorded in our results of operations. As of September 30, 2016, we had the following obligations based on futures contracts of refined petroleum products and crude oil and condensate that were entered into as economic hedges. The information presents the notional volume of open commodity instruments by type and year of maturity (volumes in bbls): Notional Contract Volumes by Year of Maturity Inventory positions (futures): 2016 2017 2018 Refined petroleum products and crude oil - net short positions 290,000 - - The following table provides the location and fair value amounts of derivative instruments that are reported in our consolidated balance sheets as of September 30, 2016 and December 31, 2015: Fair Value Asset Derivatives Balance Sheets Location September 30, 2016 December 31, 2015 Prepaid expenses and other current assets (accrued expenses and other Commodity contracts current liabilities) $ (1,326,890) $ (183,400) The following table provides the effect of derivative instruments in our consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015: Gain (Loss) Recognized Three Months Ended September 30, Nine Months Ended September 30, Derivatives Statements of Operations Location 2016 2015 2016 2015 Commodity contracts Cost of refined products sold $ 770,838 $ 2,205,291 $ (2,588,734) $ 1,762,582 |
19. Commitments and Contingenci
19. Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Operating Agreement Genesis Agreements Crude Supply Agreement Joint Marketing Agreement We are entitled to receive weekly payments to cover direct expenses in operating the Nixon Facility (the Operations Payments) in an amount not to exceed $750,000 per month. In addition, we are entitled to receive reimbursement for accounting fees, if incurred, not to exceed $50,000 per month. We assigned our rights to the Operations Payments and reimbursement of accounting fees under the Joint Marketing Agreement to LEH pursuant to the Operating Agreement. If Gross Profits are insufficient to cover Operations Payments, then GEL may: (i) reduce Operations Payments by an amount representing the difference between the Operations Payments and the Gross Profits for such monthly period, or (ii) provide the Operations Payments with such Operations Payments being considered deficit amounts owing to GEL. If Gross Profits are negative, then we are not entitled to receive Operations Payments and GEL may recoup any losses sustained by a special allocation of 80% of Gross Profits until such losses are covered in full, after which the prevailing Gross Profits allocation shall be reinstated; and GEL is entitled to receive an administrative fee in the amount of $150,000 per month relating to the performance of its obligations under the Joint Marketing Agreement (the Performance Fee). GEL is entitled to receive 30% of the remaining Gross Profit up to $600,000 (the Threshold Amount) as the GEL Profit Share, and we are entitled to receive 70% of the remaining Gross Profit as our Profit Share. Any amount of remaining Gross Profit that exceeds the Threshold Amount for a calendar month is payable to GEL and us in the following manner: (i) GEL is entitled to receive 20% of the remaining Gross Profits over the Threshold Amount as the GEL Profit Share and (ii) we are entitled to receive 80% of the remaining Gross Profits over the Threshold Amount as our Profit Share. The GEL Profit Share plus the Performance Fee are collectively referred to as the Joint Marketing Agreement Profit Share or the JMA Profit Share. The Joint Marketing Agreement contains negative covenants that restrict our actions under certain circumstances. The Joint Marketing Agreement had an initial term of three years expiring in August 2014. In accordance with the terms of the October 2013 Letter Agreement, we agreed not to terminate the Joint Marketing Agreement and GEL agreed to automatically renew the Joint Marketing Agreement at the end of the initial term for successive one year periods until August 2019, unless sooner terminated by GEL with 180 days prior written notice. Pursuant to a Letter Agreement Regarding Subordination of GEL Transaction Documents dated in June 2015, we, among other things, assigned our rights to payments under the Crude Supply Agreement and Joint Marketing Agreement as collateral in favor of Sovereign Bank, as lender and lienholder pursuant to the First Term Loan Due 2034. (See Note (9) Long-Term Debt, Net for further discussion related to the First Term Loan Due 2034.) Genesis Contract-Related Dispute FLNG Master Easement Agreement Supplemental Pipeline Bonds In October 2016, we received a letter from the BOEM summarizing the amount required as additional security on our existing pipeline rights-of-way. The letter, which is a courtesy and does not constitute a formal order by the BOEM, requested that we provide additional supplemental pipeline bonds or acceptable financial reassurance of approximately $4.6 million. As of September 30, 2016 and December 31, 2015, we maintained approximately $0.9 million in credit and cash-backed rights-of-way bonds issued to the BOEM. Of the 5 rights-of-ways reflected in the BOEMs October 2016 letter, one right-of-way was abandoned-in-place in May 1997. We requested permits from the Bureau of Safety and Environmental Enforcement (the BSEE) to decommission and abandon-in-place 3 of the rights-of-way in April 2016, one of which also requires approval from the U.S. Army Corps of Engineers. There can be no assurance that the BOEM will accept a reduced amount of supplemental financial assurance or not require additional supplemental pipeline bonds related to our existing pipeline rights-of-way. If we are required by the BOEM to provide significant additional supplemental bonds or acceptable financial assurance, we may experience a significant and material adverse effect on our operations, liquidity, and financial condition. Financing Agreements Nixon Facility Expansion e Legal Matters Genesis Contract-Related Dispute. In May 2016, GEL filed, in state district court in Harris County, Texas, a petition and application for a temporary restraining order, temporary injunction, and permanent injunction (the Petition) against LE and LEH. The Petition alleges that LE breached the Joint Marketing Agreement, and that LEH tortiously interfered with the Joint Marketing Agreement, in connection with an agreement by LEH to supply jet fuel acquired from LE to a customer. The Petition primarily sought temporary and permanent injunctions related to sales of product from the Nixon Facility to this customer. In June 2016, the court issued a temporary injunction against LE and LEH as requested by GEL. LE believes that GELs claims in the Petition are without merit and intends to defend the matter vigorously. In a matter separate from the above referenced Petition, LE filed a demand for arbitration in June 2016, pursuant to the terms of a Dispute Resolution Agreement between the parties (the Arbitration). The Arbitration alleges that GEL breached the Crude Supply Agreement related to: (i) failure to provide crude oil and condensate at cost as defined in the Crude Supply Agreement, and (ii) significant under delivery of crude oil and condensate, resulting in significant refinery downtime and a significant decrease in refinery throughput, refinery production, and refined petroleum product sales for the nine months ended September 30, 2016. With regard to the Petition, a trial date has been set for December 5, 2016, although the parties may elect arbitration prior to that date. With respect to the Arbitration, an initial hearing was held on November 9, 2016 at which the parties presented evidence supporting their position. The next hearing date related to Arbitration is November 16, 2016. We do not expect the temporary injunction issued by the court related to the Litigation to have a material effect on our results of operations or financial condition. However, although GEL resumed normal delivery of crude oil and condensate to the Nixon Facility in July 2016, the adverse change in our relationship with Genesis has had a material adverse effect on our operations, liquidity, and financial condition. In addition, the contract-related dispute has disrupted our normal business operations and diverted managements focus away from operations. We are unable to predict the outcome of the current proceedings with Genesis and GEL or their ultimate impact, if any, on our business, financial condition or results of operations. Accordingly, we have not recorded an asset or a liability on our consolidated balance sheet as of September 30, 2016. Other Legal Matters Health, Safety and Environmental Matters |
20. Subsequent Events
20. Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Financial Covenant Defaults By letter dated November 10, 2016, Sovereign waived the financial covenant defaults as of the quarter ended September 30, 2016. However, the debt associated with these loans was classified within the current portion of long-term debt on our consolidated balance sheets due to the uncertainty of our ability to meet the financial covenants in the future. There can be no assurance that Sovereign will provide future waivers, which may have an adverse impact on our financial position and results of operations. |
3. Significant Accounting Pol26
3. Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates |
Cash and Cash Equivalents | Cash and Cash Equivalents |
Restricted Cash | Restricted Cash . |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts |
Inventory | Inventory |
Derivatives | Derivatives Although these commodity futures contracts are not subject to hedge accounting treatment under Financial Accounting Standards Board (the FASB) Accounting Standards Codification (ASC) guidance, we record the fair value of these hedges in our consolidated balance sheet each financial reporting period because of contractual arrangements under which we are effectively exposed to the potential gains or losses. We recognize all commodity hedge positions as either current assets or current liabilities in our consolidated balance sheets, and those instruments are measured at fair value. Changes in the fair value from financial reporting period to financial reporting period are recognized in our consolidated statements of operations. Net gains or losses associated with these transactions are recognized within cost of refined products sold in our consolidated statements of operations using mark-to-market accounting. (See Note (17) Fair Value Measurement and Note (18) Inventory Risk Management for additional disclosures related to derivatives.) |
Property and Equipment | Property and Equipment Refinery and Facilities We record refinery and facilities at cost less any adjustments for depreciation or impairment. Adjustment of the asset and the related accumulated depreciation accounts are made for the refinery and facilities assets retirement and disposal, with the resulting gain or loss included in the consolidated statements of operations. For financial reporting purposes, depreciation of refinery and facilities assets is computed using the straight-line method using an estimated useful life of 25 years beginning when the refinery and facilities assets are placed in service. We did not record any impairment of our refinery and facilities assets for any period presented. Pipelines and Facilities Oil and Gas Properties Construction in Progress (See Note (7) Property, Plant and Equipment, Net for additional disclosures related to our refinery and facilities assets, oil and gas properties, pipelines and facilities assets, and construction in progress.) |
Intangibles - Other | Intangibles Other |
Revenue Recognition | Revenue Recognition Refined Petroleum Products Revenue Tank Rental Revenue Easement Revenue Pipeline Transportation Revenue Deferred Revenue |
Income Taxes | Income Taxes As of each reporting date, management considers new evidence, both positive and negative, to determine the realizability of deferred tax assets. Management considers whether it is more likely than not that a portion or all of the deferred tax assets will be realized, which is dependent upon the generation of future taxable income prior to the expiration of any net operating loss (NOL) carryforwards. When management determines that it is more likely than not that a tax benefit will not be realized, a valuation allowance is recorded to reduce deferred tax assets. The guidance also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. (See Note (15) Income Taxes for further information related to income taxes.) |
Impairment or Disposal of Long-Lived Assets | Impairment or Disposal of Long-Lived Assets |
Asset Retirement Obligations | Asset Retirement Obligations Management has concluded that there is no legal or contractual obligation to dismantle or remove the refinery and facilities assets. Further, management believes that these assets have indeterminate lives under FASB ASC guidance for estimating AROs because dates or ranges of dates upon which we would retire these assets cannot reasonably be estimated at this time. When a legal or contractual obligation to dismantle or remove the refinery and facilities assets arises and a date or range of dates can reasonably be estimated for the retirement of these assets, we will estimate the cost of performing the retirement activities and record a liability for the fair value of that cost using present value techniques. We recorded an ARO liability related to future asset retirement costs associated with dismantling, relocating, or disposing of our offshore platform, pipeline systems, and related onshore facilities, as well as for plugging and abandoning wells and restoring land and sea beds. We developed these cost estimates for each of our assets based upon regulatory requirements, structural makeup, water depth, reservoir characteristics, reservoir depth, equipment demand, current retirement procedures, and construction and engineering consultations. Because these costs typically extend many years into the future, estimating future costs are difficult and require management to make judgments that are subject to future revisions based upon numerous factors, including changing technology, political, and regulatory environments. We review our assumptions and estimates of future abandonment costs on an annual basis. (See Note (11) Asset Retirement Obligations for additional information related to our AROs.) |
Computation of Earnings Per Share | Computation of Earnings Per Share The number of shares related to options, warrants, restricted stock, and similar instruments included in diluted EPS is based on the Treasury Stock Method prescribed in FASB ASC guidance for computation of EPS. This method assumes theoretical repurchase of shares using proceeds of the respective stock option or warrant exercised, and, for restricted stock, the amount of compensation cost attributed to future services that has not yet been recognized and the amount of any current and deferred tax benefit that would be credited to additional paid-in-capital upon the vesting of the restricted stock, at a price equal to the issuers average stock price during the related earnings period. Accordingly, the number of shares includable in the calculation of EPS in respect of the stock options, warrants, restricted stock, and similar instruments is dependent on this average stock price and will increase as the average stock price increases. (See Note (16) Earnings Per Share for additional information related to EPS.) |
Stock-Based Compensation | Stock-Based Compensation |
Treasury Stock | Treasury Stock |
New Pronouncements Adopted | New Pronouncements Adopted ASU 2015-17, Income Taxes (Topic 740) ASU 2015-03, Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs |
New Pronouncements Issued but Not Yet Effective | New Pronouncements Issued But Not Yet Effective ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments) ASU 2016-02, Leases (Topic 842) ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory ASU 2014-15, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (Subtopic 205-40). ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ● August 2015 ASU 2015-14, evenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ● March 2016 ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net), ● April 2016 ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing ● May 2016 ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update) Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity, and , ● May 2016 ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients We are evaluating the impact that adoption of ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, and ASU 2016-12, all of which relate to Revenue from Contracts with Customers (Topic 606), will have on our consolidated financial statements. Other new pronouncements issued but not effective until after September 30, 2016 are not expected to have a material impact on our financial position, results of operations, or liquidity. |
Reclassification | Reclassification . We have reclassified certain prior year amounts to conform to our 2016 presentation. |
4. Business Segment Informati27
4. Business Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Business segment reporting | Business segment information for the periods indicated (and as of the dates indicated), was as follows: Three Months Ended September 30, 2016 Three Months Ended September 30, 2015 Segment Segment Refinery Pipeline Corporate & Refinery Pipeline Corporate & Operations Transportation Other Total Operations Transportation Other Total Revenue from operations $ 54,668,780 $ 19,526 $ - $ 54,688,306 $ 55,210,962 $ 45,925 $ - $ 55,256,887 Less: cost of operations(1) (55,495,575 ) (129,160 ) (238,755 ) (55,863,490 ) (51,444,705 ) (114,675 ) (236,816 ) (51,796,196 ) Other non-interest income(2) - 156,396 - 156,396 - 62,500 660,000 722,500 Adjusted EBITDA(3) (826,795 ) 46,762 (238,755 ) (1,018,788 ) 3,766,257 (6,250 ) 423,184 4,183,191 Less: JMA Profit Share(4) (965,627 ) - - (965,627 ) (1,435,376 ) - - (1,435,376 ) EBITDA(3) $ (1,792,422 ) $ 46,762 $ (238,755 ) $ 2,330,881 $ (6,250 ) $ 423,184 Depletion, depreciation and amortization (504,719 ) (414,837 ) Interest expense, net (484,215 ) (380,342 ) Income (loss) before income taxes (2,973,349 ) 1,952,636 Income tax benefit (expense) 1,034,798 (688,403 ) Net income (loss) $ (1,938,551 ) $ 1,264,233 Capital expenditures(5) $ 4,182,747 $ - $ - $ 4,182,747 $ 2,355,811 $ - $ - $ 2,355,811 Identifiable assets(6) $ 85,585,499 $ 3,106,327 $ 7,710,337 $ 96,402,163 $ 78,145,626 $ 3,303,803 $ 3,405,977 $ 84,855,406 (1) Operation cost within the Refinery Operations and Pipeline Transportation segments includes related general, administrative, and accretion expenses. Operation cost within Corporate and Other includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees, and legal expense. (2) Other non-interest income reflects FLNG easement revenue. (See Note (19) Commitments and Contingencies FLNG Master Easement Agreement for further discussion related to FLNG.) (3) Adjusted EBITDA and EBITDA are non-GAAP financial measures. See Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Non-GAAP Financial Measures for additional information related to adjusted EBITDA and EBITDA. (4) The JMA Profit Share represents the GEL TEX Marketing, LLC Profit Share plus the Performance Fee for the period pursuant to the Joint Marketing Agreement. (See Note (19) Commitments and Contingencies Genesis Agreements for further discussion related to the Joint Marketing Agreement.) (5) Capital expenditures for the prior year period reflect reclassification of capital expenditures funded by credit facilities to conform to the 2016 presentation. (6) Identifiable assets for the prior year period reflect reclassification of debt issue costs as a reduction in long-term debt to conform to the 2016 presentation. Business segment information for the periods indicated (and as of the dates indicated), was as follows: Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015 Segment Segment Refinery Pipeline Corporate & Refinery Pipeline Corporate & Operations Transportation Other Total Operations Transportation Other Total Revenue from operations $ 128,171,177 $ 71,865 $ - $ 128,243,042 $ 175,690,968 $ 119,882 $ - $ 175,810,850 Less: cost of operations(1) (135,452,537 ) (383,124 ) (695,786 ) (136,531,447 ) (160,208,576 ) (296,291 ) (928,331 ) (161,433,198 ) Other non-interest income(2) - 412,061 - 412,061 - 187,500 660,000 847,500 Adjusted EBITDA(3) (7,281,360 ) 100,802 (695,786 ) (7,876,344 ) 15,482,392 11,091 (268,331 ) 15,225,152 Less: JMA Profit Share(4) (392,062 ) - - (392,062 ) (4,812,674 ) - - (4,812,674 ) EBITDA(3) $ (7,673,422 ) $ 100,802 $ (695,786 ) $ 10,669,718 $ 11,091 $ (268,331 ) Depletion, depreciation and amortization (1,415,519 ) (1,217,005 ) Interest expense, net (1,301,486 ) (1,313,247 ) Income (loss) before income taxes (10,985,411 ) 7,882,226 Income tax benefit (expense) 3,735,040 (2,778,750 ) Net income (loss) $ (7,250,371 ) $ 5,103,476 Capital expenditures(5) $ 11,255,725 $ - $ - $ 11,255,725 $ 8,156,298 $ - $ - $ 8,156,298 Identifiable assets(6) $ 85,585,499 $ 3,106,327 $ 7,710,337 $ 96,402,163 $ 78,145,626 $ 3,303,803 $ 3,405,977 $ 84,855,406 (1) Operation cost within the Refinery Operations and Pipeline Transportation segments includes related general, administrative, and accretion expenses. Operation cost within Corporate and Other includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees, and legal expense. (2) Other non-interest income reflects FLNG easement revenue. (See Note (19) Commitments and Contingencies FLNG Master Easement Agreement for further discussion related to FLNG.) (3) Adjusted EBITDA and EBITDA are non-GAAP financial measures. See Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Non-GAAP Financial Measures for additional information related to adjusted EBITDA and EBITDA. (4) The JMA Profit Share represents the GEL TEX Marketing, LLC Profit Share plus the Performance Fee for the period pursuant to the Joint Marketing Agreement. (See Note (19) Commitments and Contingencies Genesis Agreements for further discussion related to the Joint Marketing Agreement.) (5) Capital expenditures for the prior year period reflect reclassification of capital expenditures funded by credit facilities to conform to the 2016 presentation. (6) Identifiable assets for the prior year period reflect reclassification of debt issue costs as a reduction in long-term debt to conform to the 2016 presentation. |
5. Prepaid Expenses and Other28
5. Prepaid Expenses and Other Current Assets (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid balances | Prepaid expenses and other current assets as of the dates indicated consisted of the following: September 30, December 31, 2016 2015 Prepaid insurance $ 192,351 $ 315,120 Prepaid listing fees 3,750 - Prepaid related party operating expenses - 624,570 $ 196,101 $ 939,690 |
6. Inventory (Tables)
6. Inventory (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Inventory Disclosure [Abstract] | |
Inventory | Inventory as of the dates indicated consisted of the following: September 30, December 31, 2016 2015 HOBM $ 4,069,203 $ 5,007,576 Jet fuel 3,744,702 2,045,784 Naphtha 417,223 309,850 AGO 280,277 278,278 Chemicals 261,518 122,777 Propane 24,860 17,860 Crude oil and condensate 19,041 19,041 LPM mix 3,156 7,152 $ 8,819,980 $ 7,808,318 |
7. Property, Plant and Equipm30
7. Property, Plant and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | Property, plant and equipment, net, as of the dates indicated consisted of the following: September 30, December 31, 2016 2015 Refinery and facilities $ 50,516,486 $ 40,195,928 Pipelines and facilities 2,127,207 2,127,207 Onshore separation and handling facilities 325,435 325,435 Land 602,938 602,938 Other property and equipment 652,795 644,795 54,224,861 43,896,303 Less: Accumulated depletion, depreciation, and amortization (7,649,077 ) (6,234,161 ) 46,575,784 37,662,142 Construction in progress 14,707,943 11,179,670 $ 61,283,727 $ 48,841,812 |
8. Related Party Transactions (
8. Related Party Transactions (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Accounts Payable, Related Party | Accounts payable, related party associated with the Amended and Restated Tank Lease Agreement as of the dates indicated was as follows: September 30, December 31, 2016 2015 Ingleside $ — $ 300,000 — $ 300,000 |
Prepaid operating expenses, related party | Unsettled reimbursements associated with the Operating Agreement and reflected within prepaid expenses and other current assets as of the dates indicated were as follows: September 30, December 31, 2016 2015 LEH $ - $ 624,570 $ - $ 624,570 Long-term debt, related party associated with the LEH Loan Agreement, LEH Note, Ingleside Note, and Carroll Note as of the dates indicated was as follows: September 30, December 31, 2016 2015 LEH $ 5,797,172 $ - Ingleside 679,385 Jonathan Carroll 422,374 6,898,931 - Less: Long-term debt, related party, current portion (500,000 ) - $ 6,398,931 $ - Accrued interest associated with the LEH Loan Agreement as of the dates indicated was as follows: September 30, December 31, 2016 2015 LEH $ 80,000 $ - 80,000 - Less: Interest payable, current portion (80,000 ) - $ - $ - |
Refinery operating expenses | Refinery operating expenses associated with the Operating Agreement and Amended and Restated Tank Lease Agreement for the periods indicated were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Amount Per bbl Amount Per bbl Amount Per bbl Amount Per bbl LEH $ 3,028,646 $ 2.66 $ 2,953,528 $ 2.66 $ 8,618,409 $ 2.84 $ 8,420,650 $ 2.73 Ingleside 125,000 $ 0.11 - $ 0.00 850,000 $ 0.28 - $ 0.00 $ 3,153,646 $ 2.77 $ 2,953,528 $ 2.66 $ 9,468,409 $ 3.12 $ 8,420,650 $ 2.73 |
Product Sales Agreement | Revenue rassociated with the Product Sales Agreement and Terminal Services Agreement for the periods indicated were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Refined petroleum product sales LEH $ 14,536,997 $ - $ 23,449,071 $ - Other customers 39,414,296 54,924,070 103,097,645 174,830,292 Total refined petroleum product sales 53,951,293 54,924,070 126,546,716 174,830,292 Tank rental revenue LEH 426,000 - 750,000 - Other customers 291,487 286,892 874,461 860,676 Total tank rental revenue 717,487 286,892 1,624,461 860,676 Pipeline operations Other customers 19,526 45,925 71,865 119,882 Total revenue from operations $ 54,688,306 $ 55,256,887 $ 128,243,042 $ 175,810,850 |
Interest Expenses | Interest expense associated with the LEH Loan Agreement and Guaranty Fee Agreements for the periods indicated were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Jonathan Carroll $ 172,300 $ 165,008 $ 522,931 $ 165,008 LEH 80,000 - 80,000 - $ 252,300 $ 165,008 $ 602,931 $ 165,008 |
9. Long-Term Debt, Net (Tables)
9. Long-Term Debt, Net (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Long Term Debt | Long-term debt, net, which represents the outstanding principal and interest of long-term debt less associated debt issue costs, as of the dates indicated consisted of the following: September 30, 2016 December 31, 2015 Debt Issue Long-Term Debt Issue Long-Term Principal Costs Debt, Net Principal Costs Debt, Net First Term Loan Due 2034 $ 24,111,986 $ (1,557,748 ) $ 22,554,238 $ 24,643,081 $ (1,623,810 ) $ 23,019,271 Second Term Loan Due 2034 9,797,549 (737,370 ) 9,060,179 10,000,000 (767,672 ) 9,232,328 Notre Dame Debt 1,300,000 - 1,300,000 1,300,000 - 1,300,000 Term Loan Due 2017 369,987 - 369,987 924,969 - 924,969 Capital Leases 178,741 - 178,741 304,618 - 304,618 $ 35,758,263 $ (2,295,118 ) $ 33,463,145 $ 37,172,668 $ (2,391,482 ) $ 34,781,186 Less: Long-term debt less unamortized debt issue costs, current portion (32,120,782 ) (1,934,932 ) $ 1,342,363 $ 32,846,254 |
Accrued interest related to our long-term debt, net | Accrued interest related to our long-term debt, net (reflected as interest payable, current portion and long-term interest payable, net of current portion in our consolidated balance sheets) as of the dates indicated consisted of the following: September 30, December 31, 2016 2015 Notre Dame Debt $ 1,638,952 $ 1,482,801 LEH Loan Agreement 80,000 - Second Term Loan Due 2034 43,836 39,193 First Term Loan Due 2034 33,030 34,883 Capital Leases 1,531 2,612 Term Loan Due 2017 309 4,779 1,797,658 1,564,268 Less: Interest payable, current portion (158,706 ) (81,467 ) $ 1,638,952 $ 1,482,801 |
Schedule of summary of equipment held under long-term capital leases | A summary of equipment held under long-term capital leases as of the dates indicated follows: September 30, December 31, 2016 2015 Boiler equipment $ 538,598 $ 538,598 Less: accumulated depreciation - - $ 538,598 $ 538,598 |
10. Accrued Expenses and Othe33
10. Accrued Expenses and Other Current Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure Text Block Supplement [Abstract] | |
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities as of the dates indicated consisted of the following: September 30, December 31, 2016 2015 Unrealized hedging loss $ 1,326,890 $ 183,400 Unearned revenue 597,162 781,859 Customer deposits 450,000 - Genesis JMA Profit Share payable 245,255 388,364 Other payable 166,314 157,714 Board of director fees payable 133,929 86,429 Property taxes 92,678 - Transportation and inspection 38,000 - Excise and income taxes payable 12,852 1,290,101 Insurance - 103,024 $ 3,063,080 $ 2,990,891 |
11. Asset Retirement Obligati34
11. Asset Retirement Obligations (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset retirement obligations | Changes to our ARO liability for the periods indicated were as follows: September 30, December 31, 2016 2015 Asset retirement obligations, at the beginning of the period $ 1,985,864 $ 1,866,770 New asset retirement obligations and adjustments - 49 Liabilities settled (61,408 ) (92,330 ) Accretion expense 84,558 211,375 2,009,014 1,985,864 Less: asset retirement obligations, current portion (25,972 ) (38,644 ) Long-term asset retirement obligations, at the end of the period $ 1,983,042 $ 1,947,220 |
13. Concentration of Risk (Tabl
13. Concentration of Risk (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Percentages of all refined petroleum products sales to total sales | Total refined petroleum product sales by distillation (from light to heavy) for the periods indicated consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 LPG mix $ 237,009 0.4 % $ 617,715 1.1 % $ 621,313 0.5 % $ 909,207 0.5 % Naphtha 11,870,484 22.0 % 11,218,381 20.4 % 28,183,809 22.3 % 38,048,064 21.8 % Jet fuel 15,104,900 28.0 % 17,782,534 32.4 % 41,150,686 32.5 % 51,713,507 29.6 % HOBM 14,206,759 26.4 % 9,609,536 17.5 % 25,259,753 20.0 % 40,640,975 23.2 % Reduced Crude 0.0 % 50,407 0.1 % 3,791,919 3.0 % 50,407 0.0 % AGO 12,532,141 23.2 % 15,645,497 28.5 % 27,539,236 21.7 % 43,468,132 24.9 % $ 53,951,293 100.0 % $ 54,924,070 100.0 % $ 126,546,716 100.0 % $ 174,830,292 100.0 % |
15. Income Taxes (Tables)
15. Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income tax benefit (expense) | Income Tax Benefit (Expense) Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Current: Federal $ - $ (37,620 ) $ - $ (122,863 ) State - (36,102 ) - (148,656 ) Deferred: Federal 1,034,798 (614,681 ) 3,735,040 (2,507,231 ) $ 1,034,798 $ (688,403 ) $ 3,735,040 $ (2,778,750 ) |
NOL carryforwards | NOL carryforwards that remained available for future use for the periods indicated were as follow (amounts shown are net of NOLs that will expire unused as a result of the IRC Section 382 limitation): Net Operating Loss Carryforward Pre-Ownership Change Post-Ownership Change Total Balance at December 31, 2014 $ 10,766,912 $ 12,145,789 $ 22,912,701 Net operating loss carryforwards utilized (1,152,463 ) (2,528,848 ) (3,681,311 ) - Balance at December 31, 2015 9,614,449 9,616,941 19,231,390 Net operating losses - 5,871,350 5,871,350 Balance at March 31, 2016 9,614,449 15,488,291 25,102,740 Net operating losses - 4,230,763 4,230,763 Balance at June 30, 2016 9,614,449 19,719,054 29,333,503 Net operating losses - 2,487,642 2,487,642 Balance at September 30, 2016 $ 9,614,449 $ 22,206,696 $ 31,821,145 |
Deferred tax assets and deferred tax liabilities | Significant components of deferred tax assets and liabilities as of the dates indicated were as follow: September 30, December 31, 2016 2015 Deferred tax assets: Net operating loss and capital loss carryforwards $ 13,089,512 $ 8,815,794 Start-up costs (Nixon Facility) 1,407,697 1,510,699 Asset retirement obligations liability/deferred revenue 714,961 717,723 Unrealized hedges 451,141 62,356 AMT credit and other 257,323 302,086 Total deferred tax assets 15,920,634 11,408,658 Deferred tax liabilities: Fair market value adjustments (46,116 ) (46,116 ) Unrealized hedges - - Basis differences in property and equipment (6,261,919 ) (5,484,983 ) Total deferred tax liabilities (6,308,035 ) (5,531,099 ) 9,612,599 5,877,559 Valuation allowance (2,270,322 ) (2,270,322 ) Deferred tax assets, net $ 7,342,277 $ 3,607,237 |
16. Earnings Per Share (Tables)
16. Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per share | A reconciliation between basic and diluted income per share for the periods indicated was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Net income (loss) $ (1,938,551) $ 1,264,233 $ (7,250,371) $ 5,103,476 Basic and diluted income per share $ (0.19) $ 0.12 $ (0.69) $ 0.49 Basic and Diluted Weighted average number of shares of common stock outstanding and potential dilutive shares of common stock 10,464,715 10,453,802 10,460,849 10,451,168 |
17. Fair Value Measurement (Tab
17. Fair Value Measurement (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | The following table represents our assets and liabilities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015 and the basis for the measurement: Fair Value Measurement at September 30, 2016 Using Financial assets (liabilities): Carrying Value at September 30, 2016 Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Commodity contracts $ (1,326,890) $ (1,326,890) $ - $ - Fair Value Measurement at December 31, 215 Using Financial assets (liabilities): Carrying Value at December 31, 2015 Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Commodity contracts $ (183,400) $ (183,400) $ - $ - |
18. Inventory Risk Management (
18. Inventory Risk Management (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Notional volume of outstanding contracts by type of instrument | As of September 30, 2016, we had the following obligations based on futures contracts of refined petroleum products and crude oil and condensate that were entered into as economic hedges. The information presents the notional volume of open commodity instruments by type and year of maturity (volumes in bbls): Notional Contract Volumes by Year of Maturity Inventory positions (futures): 2016 2017 2018 Refined petroleum products and crude oil - net short positions 290,000 - - |
Fair value amounts of derivative instruments | The following table provides the location and fair value amounts of derivative instruments that are reported in our consolidated balance sheets as of September 30, 2016 and December 31, 2015: Fair Value Asset Derivatives Balance Sheets Location September 30, 2016 December 31, 2015 Prepaid expenses and other current assets (accrued expenses and other Commodity contracts current liabilities) $ (1,326,890) $ (183,400) |
Effect of derivative instruments | The following table provides the effect of derivative instruments in our consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015: Gain (Loss) Recognized Three Months Ended September 30, Nine Months Ended September 30, Derivatives Statements of Operations Location 2016 2015 2016 2015 Commodity contracts Cost of refined products sold $ 770,838 $ 2,205,291 $ (2,588,734) $ 1,762,582 |
1. Organization (Details Narrat
1. Organization (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||
Net income (loss) | $ (1,938,551) | $ 1,264,233 | $ (7,250,371) | $ 5,103,476 | ||
Cash and cash equivalents | 1,677,485 | $ 1,518,359 | 1,677,485 | $ 1,518,359 | $ 1,853,875 | $ 1,293,233 |
Restricted cash (current portion) | 4,160,999 | 4,160,999 | 3,175,299 | |||
Current assets | 22,404,232 | 22,404,232 | 19,629,841 | |||
Current liabilities | 59,754,725 | 59,754,725 | 20,228,648 | |||
Working capital deficit current portion | $ 598,807 | $ 598,807 | $ 1,336,125 |
3. Significant Accounting Pol41
3. Significant Accounting Policies (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Dec. 31, 2014 |
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 1,677,485 | $ 1,853,875 | $ 1,518,359 | $ 1,293,233 |
Restricted cash | 8,519,580 | 18,791,777 | ||
Restricted cash (current portion) | 4,160,999 | 3,175,299 | ||
Restricted cash, noncurrent | 4,358,581 | 15,616,478 | ||
Allowance for doubtful accounts | 0 | 139,868 | ||
Trade name | $ 303,346 | 303,346 | ||
Deferred tax assets | 3,500,000 | |||
Debt issue costs | $ 2,400,000 |
4. Business Segment Informati42
4. Business Segment Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenue from operations | $ 54,688,306 | $ 55,256,887 | $ 128,243,042 | $ 175,810,850 |
Income tax benefit (expense) | (1,034,798) | 688,403 | (3,735,040) | 2,778,750 |
Net income (loss) | (1,938,551) | 1,264,233 | (7,250,371) | 5,103,476 |
Refinery Operations [Member] | ||||
Revenue from operations | 54,668,780 | 55,210,962 | 128,171,177 | 175,690,968 |
Less: cost of operations | (55,495,575) | (51,444,705) | (135,452,537) | (160,208,576) |
Other non-interest income | ||||
Adjusted EBITDA | (826,795) | 3,766,257 | (7,281,360) | 15,482,392 |
Less: JMA Profit Share | (965,627) | (1,435,376) | (392,062) | (4,812,674) |
EBITDA | (1,792,422) | 2,330,881 | (7,673,422) | 10,669,718 |
Capital expenditures | 4,182,747 | 2,355,811 | 8,156,298 | |
Identifiable assets | 85,585,499 | 78,145,626 | 78,145,626 | |
Pipeline Transportation [Member] | ||||
Revenue from operations | 19,526 | 45,925 | 71,865 | 119,882 |
Less: cost of operations | (129,160) | (114,675) | (383,124) | (296,291) |
Other non-interest income | 156,396 | 62,500 | 412,061 | 187,500 |
Adjusted EBITDA | 46,762 | (6,250) | 100,802 | 11,091 |
Less: JMA Profit Share | ||||
EBITDA | 46,762 | (6,250) | 100,802 | 11,091 |
Capital expenditures | ||||
Identifiable assets | 3,106,327 | 3,303,803 | 3,303,803 | |
Corporate and Other [Member] | ||||
Revenue from operations | ||||
Less: cost of operations | (238,755) | (236,816) | (695,786) | (928,331) |
Other non-interest income | 660,000 | 660,000 | ||
Adjusted EBITDA | (238,755) | 423,184 | (695,786) | (268,331) |
Less: JMA Profit Share | ||||
EBITDA | (238,755) | 423,184 | (695,786) | (268,331) |
Capital expenditures | ||||
Identifiable assets | 7,710,337 | 3,405,977 | 3,405,977 | |
Total | ||||
Revenue from operations | 54,688,306 | 55,256,887 | 128,243,042 | 175,810,850 |
Less: cost of operations | (55,863,490) | (51,796,196) | (136,531,447) | (161,433,198) |
Other non-interest income | 156,396 | 722,500 | 412,061 | 847,500 |
Adjusted EBITDA | (1,018,788) | 4,183,191 | (7,876,344) | 15,225,152 |
Less: JMA Profit Share | (965,627) | (1,435,376) | (392,062) | (4,812,674) |
EBITDA | ||||
Depletion, depreciation and amortization | 504,719 | 414,837 | (1,415,519) | 1,217,005 |
Interest expense, net | (484,215) | (380,342) | (1,301,486) | (1,313,247) |
Income (loss) before income taxes | (2,973,349) | 1,952,636 | (10,985,411) | 7,882,226 |
Income tax benefit (expense) | 1,034,798 | (688,403) | 3,735,040 | (2,778,750) |
Net income (loss) | (1,938,551) | 1,264,233 | (7,250,371) | 5,103,476 |
Capital expenditures | 4,182,747 | 2,355,811 | 11,255,725 | 8,156,298 |
Identifiable assets | $ 96,402,163 | $ 84,855,406 | $ 96,402,163 | $ 84,855,406 |
5. Prepaid Expenses and Other43
5. Prepaid Expenses and Other Current Assets (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid insurance | $ 192,351 | $ 315,120 |
Prepaid listing fees | 3,750 | |
Prepaid related party operating expenses | 624,570 | |
Prepaid expenses, net | $ 196,101 | $ 939,690 |
6. Inventory (Details)
6. Inventory (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
HOBM | $ 4,069,203 | $ 5,007,576 |
Jet fuel | 3,744,702 | 2,045,784 |
Naphtha | 417,223 | 309,850 |
AGO | 280,277 | 278,278 |
Chemicals | 261,518 | 122,777 |
Propane | 24,860 | 17,860 |
Crude oil and condensate | 19,041 | 19,041 |
LPG mix | 3,156 | 7,152 |
Inventories, net | $ 8,819,980 | $ 7,808,318 |
7. Property, Plant and Equipm45
7. Property, Plant and Equipment, Net (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Property, Plant and Equipment [Abstract] | ||
Refinery and facilities | $ 50,516,486 | $ 40,195,928 |
Pipelines and facilities | 2,127,207 | 2,127,207 |
Onshore separation and handling facilities | 325,435 | 325,435 |
Land | 602,938 | 602,938 |
Other property and equipment | 652,795 | 644,795 |
Property, Plant and Equipment, Gross | 54,224,861 | 43,896,303 |
Less: Accumulated depletion, depreciation and amortization | (7,649,077) | (6,234,161) |
Property, plant and equipment, gross | 46,575,784 | 37,662,142 |
Construction in progress | 14,707,943 | 11,179,670 |
Property, plant and equipment, net | $ 61,283,727 | $ 48,841,812 |
8. Property, Plant and Equipmen
8. Property, Plant and Equipment, Net (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | ||
Interest cost capitalized | $ 1,776,863 | $ 556,032 |
8. Related Party Transactions47
8. Related Party Transactions (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 30, 2015 |
Prepaid operating expenses, related party | $ 624,570 | ||
Long-term debt, related party | $ 6,898,391 | ||
Less: Long-term debt - current portion, related party | 500,000 | ||
Long-term debt - net of current portion, related party | 6,398,931 | ||
Accrued interest, related party | 80,000 | ||
Less: Interest payble current portion | (80,000) | ||
Accrued interest - net of interest payable current portion, related party | |||
LEH [Member] | |||
Prepaid operating expenses, related party | $ 624,570 | ||
Long-term debt, related party | 5,797,172 | ||
Accrued interest, related party | 80,000 | ||
Ingleside [Member] | |||
Long-term debt, related party | 679,385 | ||
Jonathan Carroll [Member] | |||
Long-term debt, related party | $ 422,374 | ||
Accrued interest - net of interest payable current portion, related party | $ 6,398,931 |
8. Related Party Transactions48
8. Related Party Transactions (Details 1) | Dec. 31, 2015USD ($) |
Accounts payable, related party | $ 300,000 |
Ingleside [Member] | |
Accounts payable, related party | 300,000 |
Jonathan Carroll [Member] | |
Accounts payable, related party |
8. Related Party Transactions49
8. Related Party Transactions (Details 2) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016USD ($)$ / bbl | Sep. 30, 2015USD ($)$ / bbl | Sep. 30, 2016USD ($)$ / bbl | Sep. 30, 2015USD ($)$ / bbl | |
Refinery operating expenses, Amount | $ | $ 3,153,646 | $ 2,953,528 | $ 9,468,409 | $ 8,420,650 |
Refinery operating expenses, Per bbl | $ / bbl | 2.77 | 2.66 | 3.12 | 2.73 |
LEH [Member] | ||||
Refinery operating expenses, Amount | $ | $ 3,028,646 | $ 2,953,528 | $ 8,618,409 | $ 8,420,650 |
Refinery operating expenses, Per bbl | $ / bbl | 2.66 | 2.66 | 2.84 | 2.73 |
Ingleside [Member] | ||||
Refinery operating expenses, Amount | $ | $ 125,000 | $ 850,000 | ||
Refinery operating expenses, Per bbl | $ / bbl | 0.11 | 0 | 0.28 | 0 |
8. Related Party Transactions50
8. Related Party Transactions (Details 3) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Refined petroleum product sales | $ 53,951,293 | $ 54,924,070 | $ 126,546,716 | $ 174,830,292 |
Tank rental revenue | 717,487 | 286,892 | 1,624,461 | 860,676 |
Total revenue from operations | 54,688,306 | 55,256,887 | 128,243,042 | 175,810,850 |
LEH [Member] | ||||
Refined petroleum product sales | 14,536,997 | 23,449,071 | ||
Tank rental revenue | 426,000 | 750,000 | ||
Other Customer [Member] | ||||
Refined petroleum product sales | 39,414,296 | 54,924,070 | 103,097,645 | 174,830,292 |
Tank rental revenue | 291,487 | 286,892 | 874,461 | 860,676 |
Pipeline operations | $ 19,526 | $ 45,925 | $ 71,865 | $ 119,882 |
8. Related Party Transactions51
8. Related Party Transactions (Details 4) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Interest expenses under loan and guarantee, related party | $ 252,300 | $ 165,008 | $ 602,931 | $ 165,008 |
LEH [Member] | ||||
Interest expenses under loan and guarantee, related party | 80,000 | 80,000 | ||
Jonathan Carroll [Member] | ||||
Interest expenses under loan and guarantee, related party | $ 172,300 | $ 165,008 | $ 522,931 | $ 165,008 |
8. Related Party Transactions52
8. Related Party Transactions (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Related Party Transactions [Abstract] | ||
Prepaid related party operating expenses | $ 624,570 | |
Accounts payable, related party | $ 300,000 | |
Accounts receivable related to LEH | $ 2,869,805 |
9. Long-Term Debt, Net (Details
9. Long-Term Debt, Net (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Principal balance outstanding | $ 35,758,263 | $ 37,172,668 |
Debt Issue Costs | (2,295,118) | (2,391,482) |
Long-Term Debt, Net | 33,463,145 | 34,781,186 |
Less: Long-term debt less unamortized debt issue costs, current portion | (32,120,782) | (1,934,932) |
Long term debt | 1,342,363 | 32,846,254 |
First Term Loan Due 2034 [Member] | ||
Principal balance outstanding | 24,111,986 | 24,643,081 |
Debt Issue Costs | (1,557,748) | (1,623,810) |
Long-Term Debt, Net | 22,554,238 | 23,019,271 |
Less: Long-term debt less unamortized debt issue costs, current portion | ||
Second Term Loan Due 2034 [Member] | ||
Principal balance outstanding | 9,797,549 | 10,000,000 |
Debt Issue Costs | (737,370) | (767,672) |
Long-Term Debt, Net | 9,060,179 | 9,232,328 |
Notre Dame Debt [Member] | ||
Principal balance outstanding | 1,300,000 | 1,300,000 |
Debt Issue Costs | ||
Long-Term Debt, Net | 1,300,000 | 1,300,000 |
Term Loan Due 2017 [Member] | ||
Principal balance outstanding | 369,987 | 924,969 |
Debt Issue Costs | ||
Long-Term Debt, Net | 178,741 | 924,969 |
Capital Leases [Member] | ||
Principal balance outstanding | 178,741 | 304,618 |
Debt Issue Costs | ||
Long-Term Debt, Net | $ 178,741 | $ 304,618 |
9. Long-Term Debt, Net (Detai54
9. Long-Term Debt, Net (Details 1) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Debt Disclosure [Abstract] | ||
Notre Dame Debt | $ 1,638,952 | $ 1,482,801 |
LEH Loan Agreement | 80,000 | |
Second Term Loan Due 2034 | 43,836 | 39,193 |
First Term Loan Due 2034 | 33,030 | 34,883 |
Capital leases | 1,531 | 2,612 |
Term Loan Due 2017 | 309 | 4,779 |
Total | 1,797,658 | 1,564,268 |
Less: Interest payable, current portion | (158,706) | (81,467) |
Long term debt | $ 1,638,952 | $ 1,482,801 |
9. Long-Term Debt, Net (Detai55
9. Long-Term Debt, Net (Details 2) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Debt Disclosure [Abstract] | ||
Boiler equipment | $ 538,598 | $ 538,598 |
Less: accumulated depreciation | ||
Capital lease obligation | $ 538,598 | $ 538,598 |
9. Long-Term Debt, Net (Detai56
9. Long-Term Debt, Net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Principal balance outstanding | $ 1,342,363 | $ 1,342,363 | $ 32,846,254 | ||
Term Loan Due 2017 [Member] | |||||
Guaranty fees | 2,158 | $ 6,506 | 9,250 | $ 6,506 | |
Second Term Loan Due 2034 [Member] | |||||
Interest accrued | 74,111 | 74,111 | |||
Guaranty fees | 49,094 | 0 | 148,261 | 0 | |
First Term Loan Due 2034 [Member] | |||||
Guaranty fees | $ 121,048 | $ 142,002 | $ 365,420 | $ 142,002 |
10. Accrued Expenses and Othe57
10. Accrued Expenses and Other Current Liabilities (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Disclosure Text Block Supplement [Abstract] | ||
Unearned revenue | $ 597,162 | $ 781,859 |
Excise and income taxes payable | 12,852 | 1,290,101 |
Other payable | 166,314 | 157,714 |
Transportation and inspection | 38,000 | |
Board of director fees payable | 133,929 | 86,429 |
Property taxes | 92,678 | |
Insurance | 103,024 | |
Genesis JMA Profit Share payable | 245,255 | 388,364 |
Unrealized hedging loss | 1,326,890 | 183,400 |
Accrued Expenses and Other Current Liabilities, Net | $ 3,063,080 | $ 2,990,891 |
11. Asset Retirement Obligati58
11. Asset Retirement Obligations (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Asset Retirement Obligation Disclosure [Abstract] | |||||
Asset retirement obligations, at the beginning of the period | $ 1,985,864 | $ 1,866,770 | $ 1,866,770 | ||
New asset retirement obligations and adjustments | 49 | ||||
Liabilities settled | (61,408) | (92,330) | |||
Accretion expense | $ 28,186 | $ 52,720 | 84,558 | $ 158,655 | 211,375 |
Asset retirement obligations | 2,009,014 | 2,009,014 | 1,985,864 | ||
Less: asset retirement obligations, current portion | (25,972) | (25,972) | (38,644) | ||
Long-term asset retirement obligations, at the end of the period | $ 1,983,042 | $ 1,983,042 | $ 1,947,220 |
11. Asset Retirement Obligati59
11. Asset Retirement Obligations (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2015 | Dec. 31, 2015 | |
Asset Retirement Obligation Disclosure [Abstract] | ||||
Liabilities settled recognized | $ 0 | $ 0 | $ 61,408 | $ 92,330 |
Abandonment expense | $ 0 | $ 0 |
12. Treasury Stock (Details Nar
12. Treasury Stock (Details Narrative) - shares | Sep. 30, 2016 | Dec. 31, 2015 |
Equity [Abstract] | ||
Treasury stock | 150,000 | 150,000 |
13. Concentration of Risk (Deta
13. Concentration of Risk (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Total refined petroleum product sales | $ 53,951,293 | $ 54,924,070 | $ 126,546,716 | $ 174,830,292 |
Concentration Risk | 100.00% | 100.00% | 100.00% | 100.00% |
LPG mix | ||||
Total refined petroleum product sales | $ 237,009 | $ 617,715 | $ 621,313 | $ 909,207 |
Concentration Risk | 0.40% | 1.10% | 0.50% | 0.50% |
Naphtha | ||||
Total refined petroleum product sales | $ 11,870,484 | $ 11,218,381 | $ 28,183,809 | $ 38,048,064 |
Concentration Risk | 22.00% | 20.40% | 22.30% | 21.80% |
Jet Fuel | ||||
Total refined petroleum product sales | $ 15,104,900 | $ 17,782,534 | $ 41,150,686 | $ 51,713,507 |
Concentration Risk | 28.00% | 32.40% | 32.50% | 29.60% |
HOBM | ||||
Total refined petroleum product sales | $ 14,206,759 | $ 9,609,536 | $ 25,259,753 | $ 40,640,975 |
Concentration Risk | 26.40% | 17.50% | 20.00% | 23.20% |
Reduced crude | ||||
Total refined petroleum product sales | $ 50,407 | $ 3,791,919 | $ 50,407 | |
Concentration Risk | 0.00% | 0.10% | 3.00% | 0.00% |
AGO | ||||
Total refined petroleum product sales | $ 12,532,141 | $ 15,645,497 | $ 27,539,236 | $ 43,468,132 |
Concentration Risk | 23.20% | 28.50% | 21.70% | 24.90% |
13. Concentration of Risk (De62
13. Concentration of Risk (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Concentration Risk | 100.00% | 100.00% | 100.00% | 100.00% | |
FDIC insurance limit | $ 250,000 | ||||
Excess of the FDIC insurance limit | $ 9,345,560 | $ 9,345,560 | $ 19,594,883 | ||
LEH [Member] | |||||
Concentration Risk | 27.00% | 19.00% | |||
Concentration risk accounts receivable | $ 2,900,000 | $ 2,900,000 | |||
Sales Revenue [Member] | Four customers [Member] | |||||
Concentration Risk | 70.00% | 64.00% | |||
Concentration risk accounts receivable | $ 6,700,000 | $ 6,700,000 | |||
Account Receivable | $ 5,500,000 | ||||
Sales Revenue [Member] | Three customers [Member] | |||||
Concentration Risk | 55.00% | ||||
Concentration risk accounts receivable | $ 4,400,000 | $ 4,400,000 | |||
Sales Revenue [Member] | Five customers [Member] | |||||
Concentration Risk | 81.00% | ||||
Account receivable [Member] | Five customers [Member] | |||||
Concentration risk accounts receivable | $ 5,700,000 | $ 5,700,000 |
14. Leases (Details Narrative)
14. Leases (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Leases, Operating [Abstract] | ||||
Rent expense | $ 33,251 | $ 29,857 | $ 92,966 | $ 112,746 |
15. Income Taxes (Details)
15. Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Current: | ||||
Federal | $ (37,620) | $ (122,863) | ||
State | (36,102) | (148,656) | ||
Deferred: | ||||
Federal | 1,034,798 | (614,681) | 3,735,040 | (2,507,231) |
Income tax benefit (expense) | $ 1,034,798 | $ (688,403) | $ 3,735,040 | $ (2,778,750) |
15. Income Taxes (Details 1)
15. Income Taxes (Details 1) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | |
Balance | $ 29,333,503 | $ 19,231,390 | $ 22,912,701 | |
Net operating loss carryforwards utilized | 2,487,642 | $ 4,230,763 | 5,871,350 | (3,681,311) |
Balance | 31,821,145 | 29,333,503 | 19,231,390 | |
Pre-Ownership Change [Member] | ||||
Balance | 9,614,449 | 9,614,449 | 10,766,912 | |
Net operating loss carryforwards utilized | (1,152,463) | |||
Net operating losses | ||||
Balance | 9,614,449 | 9,614,449 | 9,614,449 | |
Post-Ownership Change [Member] | ||||
Balance | 19,719,054 | 9,616,941 | 12,145,789 | |
Net operating loss carryforwards utilized | 2,487,642 | 4,230,763 | $ 5,871,350 | (2,528,848) |
Balance | $ 22,206,696 | $ 19,719,054 | $ 9,616,941 |
15. Income Taxes (Details 2)
15. Income Taxes (Details 2) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Deferred tax assets: | ||
Net operating loss and capital loss carryforwards | $ 13,089,512 | $ 8,815,794 |
Start-up costs (Nixon Facility) | 1,407,697 | 1,510,699 |
Asset retirement obligations liability/deferred revenue | 714,961 | 717,723 |
Unrealized hedges | 451,141 | 62,356 |
AMT credit and other | 257,323 | 302,086 |
Total deferred tax assets | 15,920,634 | 11,408,658 |
Deferred tax liabilities: | ||
Fair market value adjustments | (46,116) | (46,116) |
Unrealized hedges | ||
Basis differences in property and equipment | (6,261,919) | (5,484,983) |
Total deferred tax liabilities | (6,308,035) | (5,531,099) |
Deferred tax assets, net | 9,612,599 | 5,877,559 |
Valuation allowance | (2,270,322) | (2,270,322) |
Deferred tax assets, net | $ 7,342,277 | $ 3,607,237 |
15. Income Taxes (Details Narra
15. Income Taxes (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |||
Deferred Tax Assets | $ 7,300,000 | $ 3,600,000 | |
Valuation allowance | $ 2,300,000 | $ 2,300,000 |
16. Earnings per share (Details
16. Earnings per share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Earnings Per Share [Abstract] | ||||
Net income (loss) | $ (1,938,551) | $ 1,264,233 | $ (7,250,371) | $ 5,103,476 |
Basic and diluted income per share | $ (0.19) | $ 0.12 | $ (0.69) | $ 0.49 |
Basic and diluted | ||||
Weighted average number of shares of common stock outstanding and potential dilutive shares of common stock | 10,464,715 | 10,453,802 | 10,460,849 | 10,451,168 |
17. Fair Value Measurement (Det
17. Fair Value Measurement (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Financial assets (liabilties): | ||
Commodity contracts | $ (1,326,890) | $ (183,400) |
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member] | ||
Financial assets (liabilties): | ||
Commodity contracts | (1,326,890) | (183,400) |
Significant Other Observable Inputs (Level 2) [Member] | ||
Financial assets (liabilties): | ||
Commodity contracts | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | ||
Financial assets (liabilties): | ||
Commodity contracts | $ 0 | $ 0 |
17. Fair Value Measurement (D70
17. Fair Value Measurement (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Fair Value Disclosures [Abstract] | ||
Fair value of long term debt and short-term notes payable | $ 39,758,263 | $ 37,172,668 |
18. Inventory Risk Management71
18. Inventory Risk Management (Details) - Refined products - net short (long) positions | Sep. 30, 2016shares |
Volume in Thousands of barrels | |
Notional Contract Volumes 2016 | 290,000 |
Notional Contract Volumes 2017 | 0 |
Notional Contract Volumes 2018 | 0 |
18. Inventory Risk Management72
18. Inventory Risk Management (Details 1) - Commodity Contracts [Member] - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Prepaid expenses and other current assets (accrued expenses and other current liabilities) | $ (1,326,890) | $ (1,326,890) | $ (183,400) | ||
Cost of refined products sold | $ 770,838 | $ 2,205,291 | $ (2,588,734) | $ 1,762,582 |
19. Commitments and Contingen73
19. Commitments and Contingencies (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Commitments and Contingencies Disclosure [Abstract] | ||
Credit and cash backed rights of way bonds issued to the BOEM | $ 900,000 | $ 900,000 |