Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 16, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | BLUE DOLPHIN ENERGY CO | |
Entity Central Index Key | 0000793306 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 10,975,514 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 29 | $ 14 |
Restricted cash | 49 | 49 |
Accounts receivable, net | 1,118 | 379 |
Accounts receivable, related party | 482 | 0 |
Prepaid expenses and other current assets | 876 | 1,786 |
Deposits | 194 | 194 |
Inventory | 1,843 | 1,510 |
Deferred tax assets, net | 166 | 108 |
Total current assets | 4,757 | 4,040 |
Total property and equipment, net | 64,256 | 64,697 |
Operating lease right-of-use assets | 754 | 0 |
Restricted cash, noncurrent | 1,602 | 1,602 |
Surety bonds | 230 | 230 |
Refundable federal income tax, net | 50 | 108 |
Total long-term assets | 66,892 | 66,637 |
TOTAL ASSETS | 71,649 | 70,677 |
CURRENT LIABILITIES | ||
Long-term debt less unamortized debt issue costs, current portion, in default | 34,645 | 34,863 |
Long-term debt, related party, current portion, in default | 7,459 | 7,041 |
Interest payable, in default | 3,324 | 2,939 |
Interest payable, related party, in default | 1,694 | 1,534 |
Accounts payable | 2,309 | 2,719 |
Accounts payable, related party | 1,680 | 1,529 |
Current portion of long-term operating leases | 164 | 0 |
Asset retirement obligations, current portion | 2,580 | 2,580 |
Accrued expenses and other current liabilities | 1,948 | 1,571 |
Accrued arbitration award payable | 19,628 | 21,128 |
Total current liabilities | 75,431 | 75,904 |
Long-term liabilities: | ||
Long-term operating leases, net of current portion | 698 | 0 |
Total long-term liabilities | 698 | 0 |
TOTAL LIABILITIES | 76,129 | 75,904 |
Commitments and contingencies (Note 17) | ||
STOCKHOLDERS' DEFICIT | ||
Common stock ($0.01 par value, 20,000,000 shares authorized; 10,975,514 shares issued at both March 31, 2019 and December 31, 2018) | 110 | 110 |
Additional paid-in capital | 36,936 | 36,936 |
Retained earnings (deficit) | (41,526) | (42,273) |
TOTAL STOCKHOLDERS' DEFICIT | (4,480) | (5,227) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 71,649 | $ 70,677 |
Consolidated Balance Sheets (_2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
STOCKHOLDERS' DEFICIT | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 10,975,514 | 10,975,514 |
Common stock, shares outstanding | 10,975,514 | 10,975,514 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
REVENUE FROM OPERATIONS | ||
Refinery operations | $ 67,858 | $ 71,512 |
Tolling and terminaling | 1,069 | 734 |
Total revenue from operations | 68,927 | 72,246 |
COST OF GOODS SOLD | ||
Crude oil, fuel use, and chemicals | 63,187 | 68,086 |
Other conversion costs | 2,329 | 2,406 |
Total cost of goods sold | 65,516 | 70,492 |
Gross Profit | 3,411 | 1,754 |
COST OF OPERATIONS | ||
Management fee | 150 | 154 |
Other operating expenses | 57 | 44 |
General and administrative expenses | 670 | 660 |
Depletion, depreciation and amortization | 590 | 455 |
Accretion of asset retirement obligations | 0 | 66 |
Total cost of operations | 1,467 | 1,379 |
Income from operations | 1,944 | 375 |
OTHER INCOME (EXPENSE) | ||
Easement, interest and other income | 0 | 1 |
Interest and other expense | (1,197) | (744) |
Total other income (expense) | (1,197) | (743) |
Income (loss) before income taxes | 747 | (368) |
Income tax benefit | 0 | 217 |
Net income (loss) | $ 747 | $ (151) |
Income (loss) per common share: | ||
Basic | $ 0.07 | $ (0.01) |
Diluted | $ 0.07 | $ (0.01) |
Weighted average number of common shares outstanding: | ||
Basic | 10,975,514 | 10,925,513 |
Diluted | 10,975,514 | 10,925,513 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
OPERATING ACTIVITIES | |||
Net income (loss) | $ 747 | $ (151) | |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||
Depletion, depreciation and amortization | 590 | 455 | |
Deferred income tax | 0 | (217) | |
Amortization of debt issue costs | 32 | 32 | |
Accretion of asset retirement obligations | 0 | 66 | $ 265 |
Changes in operating assets and liabilities | |||
Accounts receivable | (739) | 818 | |
Accounts receivable, related party | (482) | 307 | |
Prepaid expenses and other current assets | 910 | (223) | |
Deposits and other assets | 0 | (16) | |
Inventory | (333) | 766 | |
Accrued arbitration award | (1,500) | (1,500) | |
Accounts payable, accrued expenses and other liabilities | 593 | 312 | |
Accounts payable, related party | 151 | 152 | |
Net cash provided by (used in) operating activities | (31) | 801 | |
INVESTING ACTIVITIES | |||
Capital expenditures | (123) | (540) | |
Net cash used in investing activities | (123) | (540) | |
FINANCING ACTIVITIES | |||
Payments on debt | (250) | (240) | |
Net activity on related-party debt | 419 | 217 | |
Net cash provided by (used in) financing activities | 169 | (23) | |
Net change in cash, cash equivalents, and restricted cash | 15 | 238 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | 1,665 | 2,146 | 2,146 |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | 1,680 | 2,384 | $ 1,665 |
Non-cash investing and financing activities: | |||
Financing of capital expenditures via accounts payable and capital leases | 0 | 82 | |
Financing of guaranty fees via long-term debt, related party | 158 | 163 | |
Interest paid | 361 | 558 | |
Income taxes paid | $ 0 | $ 0 |
1. Organization
1. Organization | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Nature of Operations Structure and Management We have the following active subsidiaries: ● Blue Dolphin Pipe Line Company, a Delaware corporation (“BDPL”); ● Blue Dolphin Petroleum Company, a Delaware corporation; ● Blue Dolphin Services Co., a Texas corporation (“BDSC”); ● Lazarus Energy, LLC, a Delaware limited liability company (“LE”); ● Lazarus Refining & Marketing, LLC, a Delaware limited liability company (“LRM”); and ● Nixon Product Storage, LLC, a Delaware limited liability company (“NPS”). In June 2018, Blue Dolphin acquired 100% of the issued and outstanding membership interests of NPS from Lazarus Midstream Partners, L.P., an affiliate of LEH, pursuant to an Assignment Agreement. The assignment was accounted for as a combination of entities under common control. See “Note (5) NPS Assignment” of this Quarterly Report for further information related to the NPS assignment. See “Part I, Item 1. Business” and “Part I, Item 2. Properties” in our Annual Report for additional information regarding our operating subsidiaries, principal facilities, and assets. Going Concern ● Final Arbitration Award and Settlement Agreement A hearing on confirmation of the Final Arbitration Award was scheduled to occur on September 18, 2017 in state district court in Harris County, Texas. Prior to the scheduled hearing, LE and GEL jointly notified the court that the hearing would be continued for a period of no more than 90 days after September 18, 2017 (the “Continuance Period”), to facilitate settlement discussions between the parties. On September 26, 2017, LE and Blue Dolphin, together with LEH and Jonathan Carroll, entered into a Letter Agreement with GEL, effective September 18, 2017 (the “GEL Letter Agreement”), confirming the parties’ agreement to the continuation of the confirmation hearing during the Continuance Period, subject to the terms of the GEL Letter Agreement. The GEL Letter Agreement was subsequently amended nine times to extend the Continuance Period through July 2018. LE, NPS, and Blue Dolphin, together with LEH, Carroll & Company Financial Holdings, L.P. (“C&C”), and Jonathan Carroll (collectively referred to herein as the “Lazarus Parties”), entered into that certain Settlement Agreement with GEL, dated as of July 20, 2018 (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Settlement Agreement”), whereby GEL and the Lazarus Parties agreed to mutually release all claims against each other and to file a stipulation of dismissal with prejudice in connection with the GEL Arbitration (the “Settlement”), subject to the terms and conditions set forth in the Settlement Agreement. The Settlement is conditioned upon payment by the Lazarus Parties to GEL of $10.0 million in cash (the “Settlement Payment”). Until either the Settlement Payment is made or the Settlement Agreement is terminated, the Lazarus Parties must pay GEL $0.5 million in cash at the end of each calendar month (the “Interim Payments”). The Interim Payments will not be applied to reduce the amount of the Settlement Payment, but such payments will reduce the Final Arbitration Award. At the time of the Settlement, the difference between the Settlement Payment and the amount we have accrued on our consolidated balance sheet for arbitration award payable will be recognized as a gain on our consolidated statement of operations. At March 31, 2019 and December 31, 2018, accrued arbitration award payable on our consolidated balance sheet was $19.6 million and $21.1 million, respectively. The Settlement Agreement restricts the Lazarus Parties from taking certain actions without the prior written consent of GEL, including: (i) the incurrence of any debt not specifically excepted in the Settlement Agreement, (ii) the establishment of any liens not specifically excepted in the Settlement Agreement, (iii) the disposition of any assets other than certain ordinary course sales to unaffiliated third parties, payments to unaffiliated third-party trade creditors and scheduled debt payments, (iv) the entrance into any transactions with affiliates not specifically excepted in the Settlement Agreement, (v) the failure to pay debts generally as they become due, and (vi) the entrance into a bankruptcy, reorganization or similar proceeding. A violation of any of the restrictions in the Settlement Agreement or failure of the Lazarus Parties to make Interim Payments as they become due, will constitute an event of default under the Settlement Agreement which, subject to certain cure periods, would allow GEL to terminate the Settlement Agreement and enforce its rights under the Final Arbitration Award. The Lazarus Parties are exploring the possibility of obtaining a commercial loan or other financing in an aggregate principal amount equal to the Settlement Payment (the “Settlement Financing”), subject to obtaining the consent of Veritex Community Bank (“Veritex”), as lender under certain loan agreements with the Lazarus Parties and their affiliates. Under the Settlement Agreement, the Lazarus Parties are required to work in good faith and take reasonable actions necessary to obtain the Settlement Financing in accordance with the terms of the Settlement Agreement. Prior to the consummation of the Settlement Financing, the Lazarus Parties are required to: (i) cause NPS to consummate the Settlement Financing and restrict its ability to commence a bankruptcy case, (ii) assign to NPS certain tank leases that will constitute collateral for the Settlement Financing, and (iii) cause NPS to assume joint and several liability for all or a portion of the Final Arbitration Award. The failure to achieve certain milestones in connection with obtaining the Settlement Financing will constitute an event of default under the Settlement Agreement, which would allow GEL to terminate the Settlement Agreement and enforce its rights under the Final Arbitration Award. Simultaneously with the execution of the Settlement Agreement, Jonathan Carroll and C&C entered into a Security Agreement pursuant to which Jonathan Carroll and C&C agreed to secure up to $10.0 million of LE’s obligations under the Final Arbitration Award with a security interest in their equity in LEH. Unless extended in writing by GEL, the Settlement Agreement will terminate on July 31, 2019 if the Settlement Payment is not made on or before such date, and the Settlement Agreement may be terminated by GEL following the occurrence of an event of default under the Settlement Agreement, as described above. Pursuant to the Settlement Agreement, the parties agreed to terminate the GEL Letter Agreement, and GEL agreed not to take any action to execute or collect on the Final Arbitration Award and to take all action necessary to continue the District Court Action until the earlier of: (i) the date on which the Settlement Payment is paid or (ii) the termination of the Settlement Agreement. On February 1, 2019, GEL filed a proposed order granting a joint motion to continue the District Court Action. (See “Note (18) Subsequent Events” for additional disclosures related to the Settlement Agreement.) Blue Dolphin can provide no assurance that the conditions necessary to consummation of the Settlement will be met. If certain conditions are not met or the Settlement Agreement is terminated, GEL may seek to enforce the Final Award against the Lazarus Parties, in which case, Blue Dolphin and its affiliates would likely be required to seek protection under bankruptcy laws. ● Defaults Under Veritex Secured Loan Agreements Events of Default Veritex has not accelerated or called due the secured loan agreements considering the Settlement Agreement, which Veritex must ultimately approve. Instead, Veritex has expressly reserved all of its rights, privileges and remedies related to events of default under the secured loan agreements and informed obligors that it would consider a final confirmation of the Final Arbitration Award to be a material event of default under the loan agreements. The debt associated with these loans was classified within the current portion of long-term debt on our consolidated balance sheets at March 31, 2019 and December 31, 2018 due to existing events of default related to the Final Arbitration Award as well as the uncertainty of LE and LRM’s ability to meet financial covenants in the secured loan agreements in the future. Financial Covenant Defaults Veritex has been working with LE and LRM and continues to be aware and party to all discussions and arrangements with GEL surrounding the executed settlement agreement and all amendments and extensions with GEL. We can provide no assurance that the conditions necessary for consummation of the Settlement will be met. If certain conditions are not met or the Settlement Agreement is terminated, GEL may seek to enforce the Final Arbitration Award against the Lazarus Parties. Further, we can provide no assurance as to whether Veritex, as first lienholder, will approve the Settlement. If Veritex does not approve the Settlement, Veritex may exercise its rights and remedies under the secured loan agreements. In either case: (i) our business operations, including crude oil and condensate procurement and our customer relationships; financial condition; and results of operations will be materially affected, (ii) Blue Dolphin and its affiliates would likely be required to seek protection under bankruptcy laws, and (iii) the trading prices of our common stock and the value of an investment in our common stock could significantly decrease, which could lead to holders of our common stock losing their investment in our common stock in its entirety. (See “Note (18) Subsequent Events” for additional disclosures related to the Veritex secured loan agreements.) ● Consecutive Quarterly Net Losses and Working Capital Deficits At March 31, 2019, we had a working capital deficit of $70.7 million. Excluding the current portion of long-term debt, we had a working capital deficit of $28.6 million at March 31, 2019. At December 31, 2018, we had a working capital deficit of $71.9 million. Excluding the current portion of long-term debt, we had a working capital deficit of $30.0 million at December 31, 2018. Operating Risks For additional disclosures related to the Final Arbitration Award, the Settlement Agreement, defaults under secured loan agreements, our business strategy, and risk factors that could materially affect our future business, financial condition and results of operations, refer to the following section in this Quarterly Report: ● Item 1. Financial Statements: – Note (9) Related-Party Transactions – Note (11) Long-Term Debt, Net – Note (17) Commitments and Contingencies – Legal Matters – Note (18) Subsequent Events ● Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations: – Final Arbitration Award and Settlement Agreement – Results of Operations – Liquidity and Capital Resources Refer to the following sections in our Annual Report on Form 10-K for the period ended December 31, 2018 (the “Annual Report”): ● Part I, Item 1. Business – Business Strategy ● Part I, Item 1A. Risk Factors ● Part I, Item 3. Legal Proceedings |
2. Basis of Presentation
2. Basis of Presentation | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying unaudited consolidated financial statements, which include Blue Dolphin and its subsidiaries, have been prepared in accordance with GAAP for interim consolidated financial information pursuant to the rules and regulations of the SEC under Article 10 of Regulation S-X and the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in our audited financial statements have been condensed or omitted pursuant to the SEC’s rules and regulations. Significant intercompany transactions have been eliminated in the consolidation. In management’s 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, 2018 was 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 months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019, or for any other period. |
3. Significant Accounting Polic
3. Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2019 | |
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 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 asset’s 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 the periods presented. Pipelines and Facilities Oil and Gas Properties Construction in Progress (See “Note (8) 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.) Revenue Recognition We adopted the provisions of FASB ASU (defined below) 2014-09, Revenue from Contracts with Customers (ASC 606) Refinery Operations Revenue We consider a variety of facts and circumstances in assessing the point of control transfer, including but not limited to: whether the purchaser can direct the use of the refined petroleum product, the transfer of significant risks and rewards, our rights to payment, and transfer of legal title. In each case, the term between sale and when payment is due is not significant. Transportation, shipping, and handling costs incurred are included in cost of goods sold. Excise and other taxes that are collected from customers and remitted to governmental authorities are not included in revenue. Tolling and Terminaling Revenue We typically satisfy performance obligations for tolling and terminaling operations with the passage of time. We determine the transaction price at agreement inception based on the guaranteed minimum amount of revenue over the term of the agreement. We allocate the transaction price to the single performance obligation that exists under the agreement, and we recognize revenue in the amount for which we have a right to invoice. Generally, payment terms do not exceed 30 days. Revenue from tank storage customers may, from time to time, include fees for ancillary services, such as in-tank and tank-to-tank blending. These services are considered optional to the customer, and the price we charge for such services is not included in the fixed cost under the customer’s tank storage agreement. Ancillary services are considered a separate performance obligation by us under the tank storage agreement. The performance obligation is satisfied when the requested service has been performed in the applicable period. Income Taxes We account for income taxes under FASB ASC guidance related to income taxes, which requires recognition of income taxes based on amounts payable with respect to the current reporting period and the effects of deferred taxes for the expected future tax consequences of events that have been included in our financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial accounting and tax basis of assets and liabilities, as well as for operating losses and tax credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. 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. A significant piece of objective negative evidence evaluated was cumulative losses incurred over the three-year period ended December 31, 2018. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. Based on this evaluation, we recorded a valuation allowance against the deferred tax assets for which realization was not deemed more likely than not as of March 31, 2019 and December 31, 2018. We expect to recover deferred tax assets related to the Alternative Minimum Tax (“AMT”) credit carryforwards. In addition, we have NOL carryforwards that remain available for future use. The benefit of an uncertain tax position is recognized in the financial statements if it meets a minimum recognition threshold. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more-likely-than-not criteria, the benefit recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. At March 31, 2019 and December 31, 2018, there were no uncertain tax positions for which a reserve or liability was necessary. (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 (12) 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 issuer’s 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.) New Pronouncements Adopted ASUs 2019-01, 2018-20, 2018-11, 2018-10, and 2016-02, Leases (Topic 842) ASU 2018-09, Codification Improvements ASU 2014-09, Revenue from Contracts with Customers (ASC 606) Collaborative Arrangements (Topic 808) New Pronouncements Issued, Not Yet Effective ASU 2018-17, Consolidation (Topic 810) ASU 2018-05, Income Taxes (Topic 740) Other new pronouncements issued but not yet effective are not expected to have a material impact on our financial position, results of operations, or liquidity. |
4. Revenue and Segment Informat
4. Revenue and Segment Information | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting [Abstract] | |
Revenue and Segment Information | We have two reportable business segments: (i) Refinery Operations and (ii) Tolling and Terminaling. Refinery operations relate to the refining and marketing of petroleum products at our 15,000-bpd crude distillation tower. Tolling and terminaling operations relate to tolling and storage terminaling services under related-party and third-party lease agreements. Both operations are conducted at the Nixon Facility. Revenue from Contracts with Customers ● Disaggregation of Revenue ● Receivables from Contracts with Customers ● Remaining Performance Obligations Segment Information Business segment information for the periods indicated (and as of the dates indicated) was as follows: Three Months Ended March 31, 2019 2018 (in thousands) Segments Segment Refinery Tolling and Corporate Refinery Tolling and Corporate Operations Terminaling & Other Total Operations Terminaling & Other Total Net revenues (excluding intercompany fees and sales) $ 67,858 $ 1,069 $ - $ 68,927 $ 71,512 $ 734 $ - $ 72,246 Intercompany fees and sales (606 ) 606 - - (671 ) 671 - - Operation costs and expenses(1) (65,152 ) (364 ) (57 ) (65,573 ) (70,151 ) (341 ) (110 ) (70,602 ) Segment contribution margin $ 2,100 $ 1,311 $ (57 ) $ 3,354 $ 690 $ 1,064 $ (110 ) $ 1,644 General and administrative expenses (332 ) (43 ) (445 ) (820 ) (394 ) (42 ) (378 ) (814 ) Depreciation and amortization (465 ) (99 ) (26 ) (590 ) (409 ) (46 ) - (455 ) Interest and other non-operating expenses, net (1,197 ) (743 ) Income (loss) before income taxes 747 (368 ) Income tax benefit - 217 Net income (loss) $ 747 $ (151 ) Capital expenditures $ 40 $ 83 $ - $ 123 $ 336 $ 204 $ - $ 540 Identifiable assets $ 50,340 $ 18,880 $ 2,429 $ 71,649 $ 52,460 $ 18,912 $ 1,006 $ 72,378 (1) Operation costs within Refinery Operations includes the arbitration award and associated fees. Operation cost within Tolling and Terminaling includes terminal operating expenses, an allocation of other costs (e.g. insurance and maintenance), and associated refinery fuel use costs. Operation cost within Corporate and Other includes expenses associated with our pipeline assets and oil and gas leasehold interests (such as accretion). |
5. NPS Assignment
5. NPS Assignment | 3 Months Ended |
Mar. 31, 2019 | |
Nps Assignment | |
NPS Assignment | In June 2018, Blue Dolphin obtained 100% of the issued and outstanding membership interest of NPS, a Delaware limited liability company, from Lazarus Midstream Partners, L.P. (“Lazarus Midstream”), an affiliate of LEH, pursuant to an Assignment Agreement. The transaction represents transfer of a vacant shell entity owned by Lazarus Midstream to Blue Dolphin for the nominal fee of $10.00. The assignment of interest facilitates the Lazarus Parties exploring the possibility of obtaining the Settlement Financing under the Settlement Agreement. The assignment was accounted for as a combination of entities under common control. Accordingly, the recognized assets and liabilities of NPS were transferred at their carrying amounts at the date of transfer and the results of operations are included for the three months ended March 31, 2019. NPS did not have significant assets, liabilities or results of operations for the three months ended March 31, 2018. NPS holds a leasehold interest in petroleum storage tanks at the Nixon Facility. NPS’ revenues and expenses are included in our Tolling and Terminaling business segment. |
6. Prepaid Expenses and Other C
6. Prepaid Expenses and Other Current Assets | 3 Months Ended |
Mar. 31, 2019 | |
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: March 31, December 31, 2019 2018 (in thousands) Prepaid insurance $ 791 $ 437 Other prepaids 85 183 Prepaid crude oil and condensate - 1,166 $ 876 $ 1,786 |
7. Inventory
7. Inventory | 3 Months Ended |
Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Inventory | Inventory as of the dates indicated consisted of the following: March 31, December 31, 2019 2018 (in thousands) Crude oil and condensate $ 1,365 $ 861 AGO 206 276 Chemicals 107 106 Naphtha 138 143 Propane 20 17 LPG mix 7 5 HOBM - 102 $ 1,843 $ 1,510 |
8. Property, Plant and Equipmen
8. Property, Plant and Equipment, Net | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment, Net | Property, plant and equipment, net, as of the dates indicated consisted of the following: March 31, December 31, 2019 2018 (in thousands) Refinery and facilities $ 66,308 $ 63,058 Land 566 566 Other property and equipment 747 747 67,621 64,371 Less: Accumulated depletion, depreciation, and amortization (10,993 ) (10,429 ) 56,628 53,942 Construction in progress 7,628 10,755 $ 64,256 $ 64,697 We capitalize interest cost incurred on funds used to construct property, plant, and equipment. Capitalized interest, which is recorded as part of the asset to which it relates, is depreciated over the asset’s useful life. Interest cost capitalized, which is currently included in construction in progress, was $0.7 million and $1.3 million at March 31, 2019 and December 31, 2018, respectively. Capital expenditures at the Nixon Facility are being funded by working capital derived from revenue from operations and LEH and its affiliates (including Jonathan Carroll), as well as from long-term debt from Veritex that was secured in 2015 for expansion of the Nixon Facility. Unused amounts under the Veritex loans are reflected in restricted cash (current and non-current portions) on our consolidated balance sheets and will be available for use once events of default associated with the Final Arbitration Award are remedied. See “Note (11) Long-Term Debt, Net” for additional disclosures related to borrowings for capital spending. |
9. Related Party Transactions
9. Related Party Transactions | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Blue Dolphin and certain of its subsidiaries are party to several agreements with LEH and its affiliates. Management believes that these related-party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions. Related Parties LEH Ingleside Crude, LLC (“Ingleside”) Lazarus Marine Terminal I, LLC (“LMT”) Jonathan Carroll Currently, we depend on LEH and its affiliates (including Jonathan Carroll and Ingleside) for financing when revenue from operations and borrowings under bank facilities are insufficient to meet our liquidity needs. Such borrowings are reflected in our consolidated balance sheets in accounts payable, related party, and/or long-term debt, related party. Operations Related Agreements . Amended and Restated Operating Agreement Jet Fuel Sales Agreement Dock Tolling Agreement Office Sub-Lease Agreement Financial Agreements . We currently rely on LEH and its affiliates (including Jonathan Carroll) to fund our working capital requirements. LEH and its affiliates (Ingleside and Jonathan Carroll) have provided working capital to Blue Dolphin in the form of a term loan and non-cash advances (such as conversion of accounts payable to debt under promissory notes). Our long-term debt, related party is currently in default. There can be no assurance that LEH and its affiliates will continue to fund our working capital requirements. Outstanding principal and accrued interest owed under these financial agreements are reflected in long-term debt, related party, current portion in our consolidated balance sheets. BDPL Loan Agreement ( ) Principal Amount: $4.0 million Maturity Date: August 2018 Principal and Interest Payment: $500,000 annually Interest Rate: 16.00% The proceeds of the BDPL Loan Agreement were used for working capital. There are no financial maintenance covenants associated with the BDPL Loan Agreement. The BDPL Loan Agreement is secured by certain property owned by BDPL. Outstanding principal owed to LEH under the BDPL Loan Agreement is reflected in long-term debt, related party, current portion in our consolidated balance sheets. Accrued interest under the BDPL Loan Agreement is reflected in interest payable, related party, current portion in our consolidated balance sheets. Promissory Notes ( ) ● June LEH Note ● March Ingleside Note ● March Carroll Note Amended and Restated Guaranty Fee Agreements Financial Statements Impact Consolidated Balance Sheets Long-term debt, related party as of the dates indicated was as follows: March 31, December 31, 2019 2018 (in thousands) LEH June LEH Note $ 821 $ 611 BDPL Loan Agreement 5,694 5,534 LEH total 6,515 6,145 Ingleside March Ingleside Note 1,308 1,283 Jonathan Carroll March Carroll Note 1,330 1,147 9,153 8,575 Less: Long-term debt, related party, current portion, in default (7,459 ) (7,041 ) Less: Interest payable, related party, in default (1,694 ) (1,534 ) $ - $ - Consolidated Statements of Operations Three Months Ended March 31, 2019 2018 (in thousands, except percent amounts) Refinery operations LEH $ 20,809 30.2 % $ 20,567 28.5 % Other customers 47,049 68.3 % 50,945 70.5 % Tolling and terminaling Other customers 1,069 1.5 % 734 1.0 % $ 68,927 100.0 % $ 72,246 100.0 % Fees associated with the Dock Tolling Agreement with LMT totaled $0.2 million for both three-month periods ended March 31, 2019 and 2018. Lease payments received under the office sub-lease agreement with LEH totaled $0.01 million for the three months ended March 31, 2019 and 2018. The management fee was flat, totaling approximately $0.2 million in both three-month periods ended March 31, 2019 and 2018. Interest expense associated with the BDPL Loan Agreement, the Amended and Restated Guaranty Fee Agreements, and the related-party promissory notes (the June LEH Note, the March Ingleside Note, and the March Carroll Note) for the periods indicated was as follows: Three Months Ended March 31, 2019 2018 (in thousands) Jonathan Carroll Guaranty Fee Agreements $ 158 $ 163 March Carroll Note 25 - LEH BDPL Loan Agreement 160 160 June LEH Note 6 - Ingleside March Ingleside Note 26 47 $ 375 $ 370 |
10. Accrued Expenses and Other
10. Accrued Expenses and Other Current Liabilities | 3 Months Ended |
Mar. 31, 2019 | |
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: March 31, December 31, 2019 2018 (in thousands) Insurance $ 539 $ 61 Board of director fees payable 435 273 Unearned revenue 343 434 Easement payable 205 223 Excise and income taxes payable 185 47 Customer deposits 109 109 Property taxes 82 48 Other payable 50 265 Accrued rent - 111 $ 1,948 $ 1,571 |
11. Long-Term Debt, Net
11. Long-Term Debt, Net | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Long-Term Debt, Net | USDA Guaranteed Loans Amended and Restated Guaranty Fee Agreements epayment Three Months Ended March 31, 2019 2018 (in thousands) First Term Loan Due 2034 $ 112 $ 116 Second Term Loan Due 2034 46 47 $ 158 $ 163 Defaults in USDA-Guaranteed Loan Agreements Long-Term Debt, Net Outstanding Balances March 31, December 31, 2019 2018 (in thousands) First Term Loan Due 2034 (in default) $ 22,376 $ 22,550 Second Term Loan Due 2034 (in default) 9,234 9,300 Notre Dame Debt (in default) 4,978 4,978 Capital leases 31 41 $ 36,619 $ 36,869 Less: Current portion of long-term debt, net (34,645 ) (34,863 ) Less: Unamortized debt issue costs (1,974 ) (2,006 ) $ - $ - Unamortized debt issue costs, which relate to secured loan agreements with Veritex, as of the dates indicated consisted of the following: March 31, December 31, 2019 2018 (in thousands) First Term Loan Due 2034 (in default) $ 1,674 $ 1,674 Second Term Loan Due 2034 (in default) 768 768 Less: Accumulated amortization (468 ) (436 ) $ 1,974 $ 2,006 Amortization expense was $0.03 million for the three months ended March 31, 2019 and 2018. Accrued interest associated with long-term debt, net is reflected as interest payable, in our consolidated balance sheets. Accrued interest as of the dates indicated consisted of the following: March 31, December 31, 2019 2018 (in thousands) Notre Dame Debt (in default) $ 3,041 $ 2,843 Second Term Loan Due 2034 (in default) 108 53 First Term Loan Due 2034 (in default) 175 43 3,324 2,939 Less: Interest payable, in default (3,324 ) (2,939 ) Long-term interest payable, net of current portion $ - $ - First Term Loan Due 2034 (In Default) Principal Amount: $25.0 million Maturity Date: June 2034 Principal and Interest Payment: $0.2 million monthly Interest Rate: Wall Street Journal Prime Rate plus 2.75% 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, which is 100% USDA-guaranteed, is secured by: (i) a first lien on the Nixon Facility’s 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 payment reserve account held by Veritex, 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 bank facilities of this type. Pursuant to a construction rider in the First Term Loan Due 2034, proceeds available for use were placed in a disbursement account whereby Veritex makes payments for construction related expenses. Amounts held in the disbursement account are reflected as restricted cash (current portion) and restricted cash, noncurrent in our consolidated balance sheets. (See “Note (18) Subsequent Events” for additional disclosures related to the Veritex secured loan agreements.) Second Term Loan Due 2034 (In Default) Principal Amount: $10.0 million Maturity Date: December 2034 Principal and Interest Payment: $0.1 million monthly Interest Rate: Wall Street Journal Prime Rate plus 2.75% A portion of the proceeds of the Second Term Loan Due 2034 were used to refinance a previous bridge loan from Veritex in the amount of $3.0 million, the funds of which were used to purchase idle refinery equipment for refurbishment and use at the Nixon Facility. Remaining proceeds are being used primarily to construct additional new petroleum storage tanks at the Nixon Facility. The Second Term Loan Due 2034, which is 100% USDA-guaranteed, is secured by: (i) a second priority lien on the rights of LE in the crude distillation tower 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 LRM’s fixtures, furniture, machinery and equipment; (iv) a first priority lien on all of LRM’s contractual rights, general intangibles and instruments, except with respect to LRM’s rights in its leases of certain specified tanks, with respect to which Veritex has a second priority lien in such leases subordinate to a prior lien granted by LRM to Veritex to secure obligations of LRM under a term loan that matured in 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 bank facilities of this type. Pursuant to a construction rider in the Second Term Loan Due 2034, proceeds available for use were placed in a disbursement account whereby Veritex makes payments for construction related expenses. Amounts held in the disbursement account are reflected as restricted cash (current portion) and restricted cash, noncurrent in our consolidated balance sheets. (See “Note (18) Subsequent Events” for additional disclosures related to the Veritex secured loan agreements.) Notre Dame Debt (In Default) Original Principal Amount: $8.0 million Additional Principal: $3.7 million Maturity Date: January 2018 Principal and Interest Payment: None; payment rights subordinated to senior lender Default Interest Rate: 16.00% Pursuant to a Sixth Amendment to the Notre Dame Debt, entered on November 14, 2017 and made effective September 18, 2017, the Notre Dame Debt was amended to increase the principal amount by $3.7 million (the “Additional Principal”). The Additional Principal was used to make payments to GEL to reduce the balance of the Final Arbitration Award in the amount of $3.6 million in accordance with the GEL Letter Agreement. Pursuant to a Subordination Agreement dated June 2015, the holder of the Notre Dame Debt agreed to subordinate its right to payments, as well as any security interest and liens on the Nixon Facility’s business assets, in favor of Veritex as holder of the First Term Loan Due 2034. To date, no payments have been made to Notre Dame Investors, Inc. under the 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 crude distillation tower and general assets of LE. There are no financial maintenance covenants associated with the Notre Dame Debt. Capital Leases A summary of equipment held under long-term capital leases as of the dates indicated follows: March 31, December 31, 2019 2018 (in thousands) Crane $ 94 $ 94 Less: accumulated depreciation (17 ) (14 ) $ 77 $ 80 |
12. Asset Retirement Obligation
12. Asset Retirement Obligations | 3 Months Ended |
Mar. 31, 2019 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset Retirement Obligations | Refinery and Facilities Pipelines and Facilities and Oil and Gas Properties Due to the length of inactivity of our pipelines and facilities assets, BDPL is required by the Bureau of Ocean Energy Management (“BOEM”) to abandon-in-place certain pipelines and remove an anchor platform in federal waters. BDPL has been in communications with BOEM and the Bureau of Safety and Environmental Enforcement (“BSEE”) related to abandonment operations and associated pipeline financial assurance requirements. Management anticipates performing abandonment operations during 2019, however, timing depends several factors, including resource availability and weather. As of the date of this Quarterly Report, decommissioning work has not yet commenced. Plugging and abandonment costs are recorded during the period incurred or as information becomes available to substantiate actual and/or probable costs. Changes to our ARO liability for the periods indicated were as follows: March 31, December 31, 2019 2018 (in thousands) Asset retirement obligations, at the beginning of the period $ 2,580 $ 2,315 Accretion expense - 265 2,580 2,580 Less: asset retirement obligations, current portion (2,580 ) (2,580 ) Long-term asset retirement obligations, at the end of the period $ - $ - |
13. Concentration of Risk
13. Concentration of Risk | 3 Months Ended |
Mar. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Concentration of Risk | Bank Accounts Key Supplier Operation of the Nixon refinery depends on our ability to purchase adequate amounts of crude oil and condensate, which is primarily dependent on our liquidity and access to capital. We currently have in place a month-to-month evergreen crude supply contract with a major integrated oil and gas company. This supplier currently provides us with adequate amounts of crude oil and condensate on favorable terms, and we expect the supplier to continue to do so for the foreseeable future. Our ability to purchase adequate amounts of crude oil and condensate could be adversely affected if the Settlement Agreement is terminated and GEL seeks to confirm and enforce the Final Arbitration Award, as well as other factors, including as net losses, working capital deficits, and financial covenant defaults in secured loan agreements. Significant Customers For the three months ended March 31, 2019, we had 4 customers that accounted for approximately 97% of our refined petroleum product sales. LEH was 1 of these 4 significant customers and accounted for approximately 31% of our refined petroleum product sales. At March 31, 2019, these 4 customers represented approximately $0.8 million in accounts receivable. LEH represented approximately $0 in accounts receivable. LEH purchases our jet fuel and resells the jet fuel to a government agency. LEH bids for jet fuel contracts are evaluated under preferential pricing terms due to its HUBZone certification. (See “Note (9) Related-Party Transactions,” “Note (11) Long-Term Debt, Net,” and “Note (17) Commitments and Contingencies – Financing Agreements” for additional disclosures related to LEH.) For the three months ended March 31, 2018, we had 3 customers that accounted for approximately 77% of our refined petroleum product sales. LEH was 1 of these 3 significant customers and accounted for approximately 29% of our refined petroleum product sales. At March 31, 2018, these 3 customers represented approximately $0.3 million in accounts receivable. LEH represented approximately $0.3 million in accounts receivable. Refined Petroleum Product Sales Three Months Ended March 31, 2019 2018 LPG mix $ 8 0.0 % $ 3 0.0 % Naphtha 13,795 20.3 % 16,318 22.8 % Jet fuel 20,809 30.7 % 20,567 28.8 % HOBM 16,160 23.8 % 16,429 23.0 % AGO 17,086 25.2 % 18,195 25.4 % $ 67,858 100.0 % $ 71,512 100.0 % |
14. Leases
14. Leases | 3 Months Ended |
Mar. 31, 2019 | |
Leases, Operating [Abstract] | |
Leases | We adopted the new lease accounting guidance using the modified retrospective method and applied it to all leases based on the contract terms in effect as of January 1, 2019. For existing contracts, we carried forward our historical assessment of: (i) whether contracts are or contain leases, (ii) lease classification, and (iii) initial direct costs. As of March 31, 2019, BDSC had a single operating lease related to our principal office space in Houston, Texas. The operating lease expires in 2023. We have the option to extend the lease term for one additional five (5) year period if notice of intent to extend is provided to the lessor at least twelve (12) months before the end of the current term. LEH subleases a portion of our leased office space (see “Note (9) Related-Party Transactions” related to the LEH office sub-lease agreement). Sublease income received from LEH totaled $0.01 million for both three-month periods ended March 31, 2019 and 2018. We recorded the related right-of-use asset and lease liability as the present value of the fixed lease payments over the lease term. Since the operating lease does not provide a readily-determinable discount rate, we use our incremental borrowing rate to discount lease payments to present value. The following table presents the lease-related assets and liabilities recorded on the consolidated balance sheet: Classification on Three Months Ended Operating Lease Consolidated Balance Sheet March 31, 2019 (in thousands) Assets Right-of-use assets Operating lease right-of-use assets $ 754 Total lease assets 754 Liabilities Current Current portion of long-term operating leases 164 Noncurrent Long-term operating leases, net of current portion 698 Total lease liabilities $ 862 Operating Lease Weighted average remaining lease term in years 4.42 Weighted average discount rate 8.25 % Lease costs for operating leases, which is recognized as part of depreciation and amortization expense, totaled $0.05 million for the three months ended March 31, 2019. Cash paid for amounts included in the measurement of operating lease liabilities totaled $0.05 million for the three months ended March 31, 2019. As of March 31, 2019, maturities of operating lease liabilities for the periods indicated were as follows: Operating Leases (in thousands) 2019 $ 171 2020 230 2021 234 2022 237 2023 161 Total minimum rental payments 1,032 Less: imputed interest (171 ) $ 862 |
15. Income Taxes
15. Income Taxes | 3 Months Ended |
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The provision for income tax benefit (expense) as of the dates indicated consisted of the following: March 31, December 31, 2019 2018 (in thousands) Current Federal $ - $ 108 State - 43 Deferred Impact of change in enacted tax rates - - Change in valuation allowance - 109 Total provision for income taxes $ - $ 260 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 entity’s gross profit rather than on its net income, certain aspects of TMT make it like an income tax. Accordingly, TMT is treated as an income tax for financial reporting purposes. Effective Tax Rate Deferred income taxes as of the dates indicated consisted of the following: March 31, December 31, 2019 2018 (in thousands) Deferred tax assets: Net operating loss and capital loss carryforwards $ 11,479 $ 11,260 Accrued arbitration award payable 2,586 2,850 Business interest expense 833 704 Start-up costs (crude oil and condensate processing facility) 657 678 Asset retirement obligations liability/deferred revenue 541 542 AMT credit and other 50 108 Total deferred tax assets 16,146 16,142 Deferred tax liabilities: Basis differences in property and equipment (5,409 ) (5,153 ) Total deferred tax liabilities (5,409 ) (5,153 ) 10,737 10,989 Valuation allowance (10,687 ) (10,881 ) Deferred tax assets, net $ 50 $ 108 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 because of the IRC Section 382 limitation): Net Operating Loss Carryforward Pre-Ownership Change Post-Ownership Change Total (in thousands) Balance at December 31, 2017 $ 9,614 $ 30,219 $ 39,833 Net operating losses - 7,106 7,106 Balance at December 31, 2018 $ 9,614 $ 37,325 $ 46,939 Net operating losses - 1,036 1,036 Balance at March 31, 2019 $ 9,614 $ 38,361 $ 47,975 Valuation Allowance |
16. Earnings Per Share
16. Earnings Per Share | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | The provision for income tax benefit (expense) as of the dates indicated consisted of the following: March 31, December 31, 2019 2018 (in thousands) Current Federal $ - $ 108 State - 43 Deferred Impact of change in enacted tax rates - - Change in valuation allowance - 109 Total provision for income taxes $ - $ 260 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 entity’s gross profit rather than on its net income, certain aspects of TMT make it like an income tax. Accordingly, TMT is treated as an income tax for financial reporting purposes. Effective Tax Rate Deferred income taxes as of the dates indicated consisted of the following: March 31, December 31, 2019 2018 (in thousands) Deferred tax assets: Net operating loss and capital loss carryforwards $ 11,479 $ 11,260 Accrued arbitration award payable 2,586 2,850 Business interest expense 833 704 Start-up costs (crude oil and condensate processing facility) 657 678 Asset retirement obligations liability/deferred revenue 541 542 AMT credit and other 50 108 Total deferred tax assets 16,146 16,142 Deferred tax liabilities: Basis differences in property and equipment (5,409 ) (5,153 ) Total deferred tax liabilities (5,409 ) (5,153 ) 10,737 10,989 Valuation allowance (10,687 ) (10,881 ) Deferred tax assets, net $ 50 $ 108 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 because of the IRC Section 382 limitation): Net Operating Loss Carryforward Pre-Ownership Change Post-Ownership Change Total (in thousands) Balance at December 31, 2017 $ 9,614 $ 30,219 $ 39,833 Net operating losses - 7,106 7,106 Balance at December 31, 2018 $ 9,614 $ 37,325 $ 46,939 Net operating losses - 1,036 1,036 Balance at March 31, 2019 $ 9,614 $ 38,361 $ 47,975 Valuation Allowance |
17. Commitments and Contingenci
17. Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Legal Matters Final Arbitration Award and Settlement Agreement Veritex Secured Loan Agreement Events of Default Other Legal Matters Amended and Restated Operating Agreement Financing Agreements Guarantees Health, Safety and Environmental Matters Nixon Facility Expansion Supplemental Pipeline Bonds BDPL has initiated settlement discussions with BOEM to resolve the Separate Orders and the INCs. There can be no assurance that BOEM will: (i) accept a proposal for a reduced amount of supplemental financial assurance, (ii) not require additional supplemental pipeline bonds related to BDPL’s existing pipeline rights-of-way, and/or (iii) not impose penalties under the INCs. As a result, we are unable to predict the outcome of the Separate Orders, the settlement discussions with BOEM or their ultimate impact, if any, on our business, financial condition or results of operations. Accordingly, we have not recorded a liability on our consolidated balance sheet as of March 31, 2019. As of March 31, 2019 and December 31, 2018, BDPL maintained approximately $0.9 million in credit and cash-backed pipeline rights-of-way bonds issued to the BOEM. If BDPL is required by BOEM to provide significant additional supplemental bonds or acceptable financial assurance or is assessed significant penalties under the INCs, we will experience a significant and material adverse effect on our operations, liquidity, and financial condition. |
18. Subsequent Events
18. Subsequent Events | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Line of Credit Agreement On May 3, 2019, NPS and Pilot Travel Centers LLC (“Pilot”) entered into a Line of Credit, Guarantee and Security Agreement (the “Line of Credit”), whereby Pilot agreed to extend a line of credit to NPS in an aggregate principal amount of up to $12.8 million. The Line of Credit will primarily be used to finance NPS' purchase of crude oil from Pilot pursuant to certain purchase and supply agreements (the "Pilot Supply Agreements") and to provide working capital. The Line of Credit is secured by (i) NPS receivables, (ii) NPS assets, including a tank lease (the “Tank Lease”), and (iii) LRM receivables. On May 3, 2019, as an inducement to Pilot’s entry into the Line of Credit, Blue Dolphin and Pilot entered into a Pledge Agreement (the “Pledge Agreement”) whereby Blue Dolphin pledged its equity interests in NPS to Pilot to secure NPS’ obligations under the Line of Credit. On May 10, 2019, LE, NPS, Pilot and Veritex entered into a Subordination and Attornment Agreement (the “Subordination Agreement”), providing that, if Veritex in its capacity as a secured lender of LE and LRM were to foreclose on LE property that NPS was leasing from LE pursuant to the Tank Lease, Veritex would permit the continued performance of obligations under the Tank Lease so long as certain conditions are met. The effectiveness of the Subordination Agreement is subject to certain conditions, including the agreement and concurrence of the USDA. Veritex Consent In a notice to obligors dated April 30, 2019 (the "Veritex Consent'), Veritex agreed, subject to the agreement and concurrence of the USDA and the replenishment of a payment reserve account required by the loan agreements on or before August 31, 2019, to waive certain covenant defaults and forbear from enforcing its remedies under the secured loan agreements. Any exercise by Veritex of its rights and remedies under such secured loan agreements would have a material adverse effect on our business, financial condition, and results of operations and would likely require Blue Dolphin to seek protection under bankruptcy laws. See “Note (1) Organization – Going Concern” and “–Operating Risks” and “Note (11) Long-Term Debt, Net” for additional disclosures related to the First Term Loan Due 2034 and Second Term Loan Due 2034 and financial covenant violations. Fifth Amendment to Settlement Agreement As previously reported, pursuant to the Settlement Agreement, GEL and the Lazarus Parties agreed to mutually release all claims against each other and to file a stipulation of dismissal with prejudice in connection with the Final Arbitration Award, subject to the terms and conditions set forth in the Settlement Agreement, including payment by the Lazarus Parties to GEL of the Settlement Payment. On May 6, 2019, the Lazarus Parties and GEL entered into a Fifth Amendment to the Settlement Agreement (the “Fifth Amendment”). The Fifth Amendment provides for, among other things, GEL’s consent to the Lazarus Parties entering into the Line of Credit and an extension to October 31, 2019 of the date on which the Settlement Agreement will terminate if the Settlement Payment and a $0.5 million deferred interim installment payment (the "Deferred Interim Installment Payment") are not made on or before such date. As of the filing date of this Quarterly Report, the Lazarus Parties had paid GEL the Settlement Payment. The Deferred Interim Installment Payment must therefore be paid no later than October 31, 2019. Under the Fifth Amendment, GEL has the right to terminate the Settlement Agreement earlier following the occurence of an event of default. See “Note (1) Organization–Going Concern–Final Arbitration Award and Settlement Agreement” for further information regarding the Settlement Agreement. The foregoing description of the Line of Credit, the Pilot Supply Agreements, the Pledge Agreement, the Subordination Agreement, the Veritex Consent and the Fifth Amendment does not purport to be complete. As promptly as reasonably practicable after the filing of this Quarterly Report, Blue Dolphin intends to file a Current Report on Form 8-K providing additional information regarding the material terms of these documents, and the foregoing description is qualified in its entirety by reference to that Current Report on Form 8-K. |
3. Significant Accounting Pol_2
3. Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
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 |
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 asset’s 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 the periods presented. Pipelines and Facilities Oil and Gas Properties Construction in Progress (See “Note (8) 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.) |
Revenue Recognition | Revenue Recognition We adopted the provisions of FASB ASU (defined below) 2014-09, Revenue from Contracts with Customers (ASC 606) Refinery Operations Revenue We consider a variety of facts and circumstances in assessing the point of control transfer, including but not limited to: whether the purchaser can direct the use of the refined petroleum product, the transfer of significant risks and rewards, our rights to payment, and transfer of legal title. In each case, the term between sale and when payment is due is not significant. Transportation, shipping, and handling costs incurred are included in cost of goods sold. Excise and other taxes that are collected from customers and remitted to governmental authorities are not included in revenue. Tolling and Terminaling Revenue We typically satisfy performance obligations for tolling and terminaling operations with the passage of time. We determine the transaction price at agreement inception based on the guaranteed minimum amount of revenue over the term of the agreement. We allocate the transaction price to the single performance obligation that exists under the agreement, and we recognize revenue in the amount for which we have a right to invoice. Generally, payment terms do not exceed 30 days. Revenue from tank storage customers may, from time to time, include fees for ancillary services, such as in-tank and tank-to-tank blending. These services are considered optional to the customer, and the price we charge for such services is not included in the fixed cost under the customer’s tank storage agreement. Ancillary services are considered a separate performance obligation by us under the tank storage agreement. The performance obligation is satisfied when the requested service has been performed in the applicable period. |
Income Taxes | Income Taxes We account for income taxes under FASB ASC guidance related to income taxes, which requires recognition of income taxes based on amounts payable with respect to the current reporting period and the effects of deferred taxes for the expected future tax consequences of events that have been included in our financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial accounting and tax basis of assets and liabilities, as well as for operating losses and tax credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. 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. A significant piece of objective negative evidence evaluated was cumulative losses incurred over the three-year period ended December 31, 2018. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. Based on this evaluation, we recorded a valuation allowance against the deferred tax assets for which realization was not deemed more likely than not as of March 31, 2019 and December 31, 2018. We expect to recover deferred tax assets related to the Alternative Minimum Tax (“AMT”) credit carryforwards. In addition, we have NOL carryforwards that remain available for future use. The benefit of an uncertain tax position is recognized in the financial statements if it meets a minimum recognition threshold. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more-likely-than-not criteria, the benefit recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. At March 31, 2019 and December 31, 2018, there were no uncertain tax positions for which a reserve or liability was necessary. (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 (12) 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 issuer’s 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.) |
New Pronouncements Adopted | New Pronouncements Adopted ASUs 2019-01, 2018-20, 2018-11, 2018-10, and 2016-02, Leases (Topic 842) ASU 2018-09, Codification Improvements ASU 2014-09, Revenue from Contracts with Customers (ASC 606) Collaborative Arrangements (Topic 808) |
New Pronouncements Issued but Not Yet Effective | New Pronouncements Issued, Not Yet Effective ASU 2018-17, Consolidation (Topic 810) ASU 2018-05, Income Taxes (Topic 740) Other new pronouncements issued but not yet effective are not expected to have a material impact on our financial position, results of operations, or liquidity. |
4. Revenue and Segment Inform_2
4. Revenue and Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting [Abstract] | |
Business segment reporting | Three Months Ended March 31, 2019 2018 (in thousands) Segments Segment Refinery Tolling and Corporate Refinery Tolling and Corporate Operations Terminaling & Other Total Operations Terminaling & Other Total Net revenues (excluding intercompany fees and sales) $ 67,858 $ 1,069 $ - $ 68,927 $ 71,512 $ 734 $ - $ 72,246 Intercompany fees and sales (606 ) 606 - - (671 ) 671 - - Operation costs and expenses(1) (65,152 ) (364 ) (57 ) (65,573 ) (70,151 ) (341 ) (110 ) (70,602 ) Segment contribution margin $ 2,100 $ 1,311 $ (57 ) $ 3,354 $ 690 $ 1,064 $ (110 ) $ 1,644 General and administrative expenses (332 ) (43 ) (445 ) (820 ) (394 ) (42 ) (378 ) (814 ) Depreciation and amortization (465 ) (99 ) (26 ) (590 ) (409 ) (46 ) - (455 ) Interest and other non-operating expenses, net (1,197 ) (743 ) Income (loss) before income taxes 747 (368 ) Income tax benefit - 217 Net income (loss) $ 747 $ (151 ) Capital expenditures $ 40 $ 83 $ - $ 123 $ 336 $ 204 $ - $ 540 Identifiable assets $ 50,340 $ 18,880 $ 2,429 $ 71,649 $ 52,460 $ 18,912 $ 1,006 $ 72,378 (1) Operation costs within Refinery Operations includes the arbitration award and associated fees. Operation cost within Tolling and Terminaling includes terminal operating expenses, an allocation of other costs (e.g. insurance and maintenance), and associated refinery fuel use costs. Operation cost within Corporate and Other includes expenses associated with our pipeline assets and oil and gas leasehold interests (such as accretion). |
6. Prepaid Expenses and Other_2
6. Prepaid Expenses and Other Current Assets (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid balances | March 31, December 31, 2019 2018 (in thousands) Prepaid insurance $ 791 $ 437 Other prepaids 85 183 Prepaid crude oil and condensate - 1,166 $ 876 $ 1,786 |
7. Inventory (Tables)
7. Inventory (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Inventory | March 31, December 31, 2019 2018 (in thousands) Crude oil and condensate $ 1,365 $ 861 AGO 206 276 Chemicals 107 106 Naphtha 138 143 Propane 20 17 LPG mix 7 5 HOBM - 102 $ 1,843 $ 1,510 |
8. Property, Plant and Equipm_2
8. Property, Plant and Equipment, Net (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | March 31, December 31, 2019 2018 (in thousands) Refinery and facilities $ 66,308 $ 63,058 Land 566 566 Other property and equipment 747 747 67,621 64,371 Less: Accumulated depletion, depreciation, and amortization (10,993 ) (10,429 ) 56,628 53,942 Construction in progress 7,628 10,755 $ 64,256 $ 64,697 |
9. Related Party Transactions (
9. Related Party Transactions (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Accounts Payable, Related Party | March 31, December 31, 2019 2018 (in thousands) LEH June LEH Note $ 821 $ 611 BDPL Loan Agreement 5,694 5,534 LEH total 6,515 6,145 Ingleside March Ingleside Note 1,308 1,283 Jonathan Carroll March Carroll Note 1,330 1,147 9,153 8,575 Less: Long-term debt, related party, current portion, in default (7,459 ) (7,041 ) Less: Interest payable, related party, in default (1,694 ) (1,534 ) $ - $ - |
Accrued interest Expenses | Three Months Ended March 31, 2019 2018 (in thousands, except percent amounts) Refinery operations LEH $ 20,809 30.2 % $ 20,567 28.5 % Other customers 47,049 68.3 % 50,945 70.5 % Tolling and terminaling Other customers 1,069 1.5 % 734 1.0 % $ 68,927 100.0 % $ 72,246 100.0 % |
Refinery operating expenses | Three Months Ended March 31, 2019 2018 (in thousands) Jonathan Carroll Guaranty Fee Agreements $ 158 $ 163 March Carroll Note 25 - LEH BDPL Loan Agreement 160 160 June LEH Note 6 - Ingleside March Ingleside Note 26 47 $ 375 $ 370 |
10. Accrued Expenses and Othe_2
10. Accrued Expenses and Other Current Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Disclosure Text Block Supplement [Abstract] | |
Accrued expenses and other current liabilities | March 31, December 31, 2019 2018 (in thousands) Insurance $ 539 $ 61 Board of director fees payable 435 273 Unearned revenue 343 434 Easement payable 205 223 Excise and income taxes payable 185 47 Customer deposits 109 109 Property taxes 82 48 Other payable 50 265 Accrued rent - 111 $ 1,948 $ 1,571 |
11. Long-Term Debt, Net (Tables
11. Long-Term Debt, Net (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Guaranty fees | Three Months Ended March 31, 2019 2018 (in thousands) First Term Loan Due 2034 $ 112 $ 116 Second Term Loan Due 2034 46 47 $ 158 $ 163 |
Schedule of Long Term Debt | March 31, December 31, 2019 2018 (in thousands) First Term Loan Due 2034 (in default) $ 22,376 $ 22,550 Second Term Loan Due 2034 (in default) 9,234 9,300 Notre Dame Debt (in default) 4,978 4,978 Capital leases 31 41 $ 36,619 $ 36,869 Less: Current portion of long-term debt, net (34,645 ) (34,863 ) Less: Unamortized debt issue costs (1,974 ) (2,006 ) $ - $ - |
Schedule of Debt issue costs | March 31, December 31, 2019 2018 (in thousands) First Term Loan Due 2034 (in default) $ 1,674 $ 1,674 Second Term Loan Due 2034 (in default) 768 768 Less: Accumulated amortization (468 ) (436 ) $ 1,974 $ 2,006 |
Accrued interest related to our long-term debt, net | March 31, December 31, 2019 2018 (in thousands) Notre Dame Debt (in default) $ 3,041 $ 2,843 Second Term Loan Due 2034 (in default) 108 53 First Term Loan Due 2034 (in default) 175 43 3,324 2,939 Less: Interest payable, in default (3,324 ) (2,939 ) Long-term interest payable, net of current portion $ - $ - |
Schedule of summary of equipment held under long-term capital leases | March 31, December 31, 2019 2018 (in thousands) Crane $ 94 $ 94 Less: accumulated depreciation (17 ) (14 ) $ 77 $ 80 |
12. Asset Retirement Obligati_2
12. Asset Retirement Obligations (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset retirement obligations | March 31, December 31, 2019 2018 (in thousands) Asset retirement obligations, at the beginning of the period $ 2,580 $ 2,315 Accretion expense - 265 2,580 2,580 Less: asset retirement obligations, current portion (2,580 ) (2,580 ) Long-term asset retirement obligations, at the end of the period $ - $ - |
13. Concentration of Risk (Tabl
13. Concentration of Risk (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Percentages of all refined petroleum products sales to total sales | Three Months Ended March 31, 2019 2018 LPG mix $ 8 0.0 % $ 3 0.0 % Naphtha 13,795 20.3 % 16,318 22.8 % Jet fuel 20,809 30.7 % 20,567 28.8 % HOBM 16,160 23.8 % 16,429 23.0 % AGO 17,086 25.2 % 18,195 25.4 % $ 67,858 100.0 % $ 71,512 100.0 % |
14. Leases (Tables)
14. Leases (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Leases Tables Abstract | |
Schedule of operating leases | Classification on Three Months Ended Operating Lease Consolidated Balance Sheet March 31, 2019 (in thousands) Assets Right-of-use assets Operating lease right-of-use assets $ 754 Total lease assets 754 Liabilities Current Current portion of long-term operating leases 164 Noncurrent Long-term operating leases, net of current portion 698 Total lease liabilities $ 862 Operating Lease Weighted average remaining lease term in years 4.42 Weighted average discount rate 8.25 % |
Maturities of operating lease liabilities | Operating Leases (in thousands) 2019 $ 171 2020 230 2021 234 2022 237 2023 161 Total minimum rental payments 1,032 Less: imputed interest (171 ) $ 862 |
15. Income Taxes (Tables)
15. Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income tax benefit (expense) | March 31, December 31, 2019 2018 (in thousands) Current Federal $ - $ 108 State - 43 Deferred Impact of change in enacted tax rates - - Change in valuation allowance - 109 Total provision for income taxes $ - $ 260 |
Deferred tax assets and deferred tax liabilities | March 31, December 31, 2019 2018 (in thousands) Deferred tax assets: Net operating loss and capital loss carryforwards $ 11,479 $ 11,260 Accrued arbitration award payable 2,586 2,850 Business interest expense 833 704 Start-up costs (crude oil and condensate processing facility) 657 678 Asset retirement obligations liability/deferred revenue 541 542 AMT credit and other 50 108 Total deferred tax assets 16,146 16,142 Deferred tax liabilities: Basis differences in property and equipment (5,409 ) (5,153 ) Total deferred tax liabilities (5,409 ) (5,153 ) 10,737 10,989 Valuation allowance (10,687 ) (10,881 ) Deferred tax assets, net $ 50 $ 108 |
NOL carryforwards | Net Operating Loss Carryforward Pre-Ownership Change Post-Ownership Change Total (in thousands) Balance at December 31, 2017 $ 9,614 $ 30,219 $ 39,833 Net operating losses - 7,106 7,106 Balance at December 31, 2018 $ 9,614 $ 37,325 $ 46,939 Net operating losses - 1,036 1,036 Balance at March 31, 2019 $ 9,614 $ 38,361 $ 47,975 |
16. Earnings Per Share (Tables)
16. Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share [Abstract] | |
Earnings per share | Three Months Ended March 31, 2019 2018 (in thousands, except share and per share amounts) Net income (loss) $ 747 $ (151 ) Basic and diluted loss per share $ 0.07 $ (0.01 ) Basic and Diluted Weighted average number of shares of common stock outstanding and potential dilutive shares of common stock 10,975,514 10,925,513 |
1. Organization (Details Narrat
1. Organization (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net income (loss) | $ 747 | $ (151) |
Net Loss per common share | $ 0.07 | $ (0.01) |
3. Significant Accounting Pol_3
3. Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Accounting Policies [Abstract] | ||
Restricted cash (current portion) | $ 49 | $ 49 |
Restricted cash, noncurrent | $ 1,602 | $ 1,602 |
4. Business Segment Information
4. Business Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Net revenues (excluding intercompany fees and sales) | $ 68,927 | $ 72,246 |
General and administrative expenses | 670 | 660 |
Net income (loss) | 747 | (151) |
Refinery Operations [Member] | ||
Net revenues (excluding intercompany fees and sales) | 67,858 | 71,512 |
Intercompany fees and sales | (606) | (671) |
Operating expenses (excluding depreciation and amortization and general and administrative expenses presented below) | (65,152) | (70,151) |
Segment contribution margin | 2,100 | 690 |
General and administrative expenses | (332) | (394) |
Depreciation and amortization | (465) | (409) |
Capital expenditures | 40 | 336 |
Identifiable assets | 50,340 | 52,460 |
Tolling and Terminaling [Member] | ||
Net revenues (excluding intercompany fees and sales) | 1,069 | 734 |
Intercompany fees and sales | 606 | 671 |
Operating expenses (excluding depreciation and amortization and general and administrative expenses presented below) | (364) | (341) |
Segment contribution margin | 1,311 | 1,064 |
General and administrative expenses | (43) | (42) |
Depreciation and amortization | (99) | (46) |
Capital expenditures | 83 | 204 |
Identifiable assets | 18,880 | 18,912 |
Corporate & Other [Member] | ||
Net revenues (excluding intercompany fees and sales) | 0 | 0 |
Intercompany fees and sales | 0 | 0 |
Operating expenses (excluding depreciation and amortization and general and administrative expenses presented below) | (57) | (110) |
Segment contribution margin | (57) | (110) |
General and administrative expenses | (445) | (378) |
Depreciation and amortization | (26) | 0 |
Capital expenditures | 0 | 0 |
Identifiable assets | 2,429 | 1,006 |
Total | ||
Net revenues (excluding intercompany fees and sales) | 68,927 | 72,246 |
Intercompany fees and sales | 0 | 0 |
Operating expenses (excluding depreciation and amortization and general and administrative expenses presented below) | (65,573) | (70,602) |
Segment contribution margin | 3,354 | 1,644 |
General and administrative expenses | (820) | (814) |
Depreciation and amortization | (590) | (455) |
Interest and other non-operating income (expenses) | (1,197) | (743) |
Income (loss) before income taxes | 747 | (368) |
Income tax benefit | 0 | 217 |
Net income (loss) | 747 | (151) |
Capital expenditures | 123 | 540 |
Identifiable assets | $ 71,649 | $ 72,378 |
6. Prepaid Expenses and Other_3
6. Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid insurance | $ 791 | $ 437 |
Other prepaids | 85 | 183 |
Prepaid crude oil and condensate | 0 | 1,166 |
Prepaid expenses, net | $ 876 | $ 1,786 |
7. Inventory (Details)
7. Inventory (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Crude oil and condensate | $ 1,365 | $ 861 |
AGO | 206 | 276 |
Chemicals | 107 | 106 |
Naphtha | 138 | 143 |
Propane | 20 | 17 |
LPG mix | 7 | 5 |
HOBM | 0 | 102 |
Inventories, net | $ 1,843 | $ 1,510 |
8. Property, Plant and Equipm_3
8. Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Abstract] | ||
Refinery and facilities | $ 66,308 | $ 63,058 |
Land | 566 | 566 |
Other property and equipment | 747 | 747 |
Property, Plant and Equipment, Gross | 67,621 | 64,371 |
Less: Accumulated depletion, depreciation and amortization | (10,993) | (10,429) |
Property, plant and equipment, gross | 56,628 | 53,942 |
Construction in progress | 7,628 | 10,755 |
Property, plant and equipment, net | $ 64,256 | $ 64,697 |
8. Property, Plant and Equipm_4
8. Property, Plant and Equipment, Net (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Interest cost capitalized | $ 700 | $ 1,300 |
9. Related Party Transactions_2
9. Related Party Transactions (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Prepaid operating expenses, related party | $ 9,153 | $ 8,575 |
Less: Long-term debt, related party, current portion, in default | (7,459) | (7,041) |
Less: Interest payable, related party, in default | (1,694) | (1,534) |
Long-term debt - net of current portion, related party | 0 | 0 |
LEH [Member] | ||
Prepaid operating expenses, related party | 6,515 | 6,145 |
LEH [Member] | June LEH Note [Member] | ||
Prepaid operating expenses, related party | 821 | 611 |
LEH [Member] | BDPL Loan Agreement [Member] | ||
Prepaid operating expenses, related party | 5,694 | 5,534 |
Ingleside [Member] | ||
Prepaid operating expenses, related party | 1,308 | 1,283 |
Ingleside [Member] | March Ingleside Note [Member] | ||
Prepaid operating expenses, related party | 1,308 | 1,283 |
Jonathan Carroll [Member] | ||
Prepaid operating expenses, related party | 1,330 | 1,147 |
Jonathan Carroll [Member] | March Carroll Note [Member] | ||
Prepaid operating expenses, related party | $ 1,330 | $ 1,147 |
9. Related Party Transactions_3
9. Related Party Transactions (Details 1) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Total revenues | $ 68,927 | $ 72,246 |
Total revenues, percent | 100.00% | 100.00% |
LEH [Member] | ||
Refinery operations revenues | $ 20,809 | $ 20,567 |
Refinery operations revenues, percent | 30.20% | 28.50% |
Other Customers [Member] | ||
Refinery operations revenues | $ 47,049 | $ 50,945 |
Tolling and terminaling revenues | $ 1,069 | $ 734 |
Refinery operations revenues, percent | 68.30% | 70.50% |
Tolling and terminaling revenues, percent | 1.50% | 1.00% |
9. Related Party Transactions_4
9. Related Party Transactions (Details 2) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Interest expenses under loan and guarantee, related party | $ 375 | $ 370 |
Jonathan Carroll [Member] | Guaranty Fee Agreements [Member] | ||
Interest expenses under loan and guarantee, related party | 158 | 163 |
Jonathan Carroll [Member] | March Carroll Note [Member] | ||
Interest expenses under loan and guarantee, related party | 25 | 0 |
LEH [Member] | BDPL Loan Agreement [Member] | ||
Interest expenses under loan and guarantee, related party | 160 | 160 |
LEH [Member] | June LEH Note [Member] | ||
Interest expenses under loan and guarantee, related party | 6 | 0 |
Ingleside [Member] | March Ingleside Note [Member] | ||
Interest expenses under loan and guarantee, related party | $ 26 | $ 47 |
9. Related Party Transactions_5
9. Related Party Transactions (Details Narrative) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Prepaid related party operating expenses | $ 9,153 | $ 8,575 |
Accounts payable, related party | 1,680 | 1,529 |
Jonathan Carroll [Member] | ||
Prepaid related party operating expenses | 1,330 | 1,147 |
Ingleside [Member] | ||
Prepaid related party operating expenses | 1,308 | 1,283 |
LEH [Member] | ||
Prepaid related party operating expenses | $ 6,515 | $ 6,145 |
10. Accrued Expenses and Othe_3
10. Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Disclosure Text Block Supplement [Abstract] | ||
Insurance | $ 539 | $ 61 |
Board of director fees payable | 435 | 273 |
Unearned revenue | 343 | 434 |
Easement payable | 205 | 223 |
Excise and income taxes payable | 185 | 47 |
Customer deposits | 109 | 109 |
Property taxes | 82 | 48 |
Other payable | 50 | 265 |
Accrued rent | 0 | 111 |
Accrued Expenses and Other Current Liabilities, Net | $ 1,948 | $ 1,571 |
11. Long-Term Debt, Net (Detail
11. Long-Term Debt, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Mar. 31, 2018 |
Guaranty fees | $ 158 | $ 163 |
Term Loan Due 2034 [Member] | ||
Guaranty fees | 112 | 116 |
Second Term Loan Due 2034 [Member] | ||
Guaranty fees | $ 46 | $ 47 |
11. Long-Term Debt, Net (Deta_2
11. Long-Term Debt, Net (Details 1) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Principal balance outstanding | $ 36,619 | $ 36,869 |
Less: Current portion of long-term debt, net | (34,645) | (34,863) |
Less: Unamortized debt issue costs | (1,974) | (2,006) |
Long term debt | 0 | 0 |
First Term Loan Due 2034 [Member] | ||
Principal balance outstanding | 22,376 | 22,550 |
Second Term Loan Due 2034 [Member] | ||
Principal balance outstanding | 9,234 | 9,300 |
Notre Dame Debt [Member] | ||
Principal balance outstanding | 4,978 | 4,978 |
Capital Leases [Member] | ||
Principal balance outstanding | $ 31 | $ 41 |
11. Long-Term Debt, Net (Deta_3
11. Long-Term Debt, Net (Details 2) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Debt Disclosure [Abstract] | ||
First Term Loan Due 2034 | $ 1,674 | $ 1,674 |
Second Term Loan Due 2034 | 768 | 768 |
Less: Accumulated amortization | (468) | (436) |
Long term debt | $ 1,974 | $ 2,006 |
11. Long-Term Debt, Net (Deta_4
11. Long-Term Debt, Net (Details 3) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Long-term Debt Net Details 2 | ||
Notre Dame Debt (in default) | $ 3,041 | $ 2,843 |
Second Term Loan Due 2034 | 108 | 53 |
First Term Loan Due 2034 | 175 | 43 |
Total | 3,324 | 2,939 |
Less: Interest payable, in default | (3,324) | (2,939) |
Long term debt | $ 0 | $ 0 |
11. Long-Term Debt, Net (Deta_5
11. Long-Term Debt, Net (Details 4) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Debt Disclosure [Abstract] | ||
Crane | $ 94 | $ 94 |
Less: accumulated depreciation | (17) | (14) |
Capital lease obligation | $ 77 | $ 80 |
12. Asset Retirement Obligati_3
12. Asset Retirement Obligations (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Asset Retirement Obligation Disclosure [Abstract] | |||
Asset retirement obligations, at the beginning of the period | $ 2,580 | $ 2,315 | $ 2,315 |
Accretion expense | 0 | $ 66 | 265 |
Asset retirement obligations | 2,580 | 2,580 | |
Less: asset retirement obligations, current portion | (2,580) | (2,580) | |
Long-term asset retirement obligations, at the end of the period | $ 0 | $ 0 |
13. Concentration of Risk (Deta
13. Concentration of Risk (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Total refined petroleum product sales | $ 67,858 | $ 71,512 |
Concentration Risk | 100.00% | 100.00% |
LPG mix | ||
Total refined petroleum product sales | $ 8 | $ 3 |
Concentration Risk | 0.00% | 0.00% |
Naphtha | ||
Total refined petroleum product sales | $ 13,795 | $ 16,318 |
Concentration Risk | 20.30% | 22.80% |
Jet Fuel | ||
Total refined petroleum product sales | $ 20,809 | $ 20,567 |
Concentration Risk | 30.70% | 28.80% |
HOBM | ||
Total refined petroleum product sales | $ 16,160 | $ 16,429 |
Concentration Risk | 23.80% | 23.00% |
AGO | ||
Total refined petroleum product sales | $ 17,086 | $ 18,195 |
Concentration Risk | 25.20% | 25.40% |
13. Concentration of Risk (De_2
13. Concentration of Risk (Details Narrative) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Risks and Uncertainties [Abstract] | ||
FDIC insurance limit | $ 1,200 | $ 1,200 |
14. Leases (Details)
14. Leases (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Leases Details Abstract | ||
Operating lease right-of-use assets | $ 754 | $ 0 |
Current portion of long-term operating leases | 164 | 0 |
Long-term operating leases, net of current portion | 698 | $ 0 |
Total lease liabilities | $ 862 | |
Weighted average remaining lease term in years - operating lease | 4 years 5 months 1 day | |
Weighted average discount rate - operating lease | 8.25% |
14. Leases (Details 1)
14. Leases (Details 1) $ in Thousands | Mar. 31, 2019USD ($) |
Leases Details 1Abstract | |
2019 | $ 171 |
2020 | 230 |
2021 | 234 |
2022 | 237 |
2023 | 161 |
Total minimum rental payments | 1,032 |
Less: imputed interest | (171) |
Total operating lease liability | $ 862 |
15. Income Taxes (Details)
15. Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Income Taxes Details Abstract | |||
Current federal | $ 0 | $ 108 | |
Current state | 0 | 43 | |
Impact of change in enacted tax rates | 0 | 0 | |
Change in valuation allowance | 0 | 109 | |
Total provision for income taxes | $ 0 | $ (217) | $ 260 |
15. Income Taxes (Details 1)
15. Income Taxes (Details 1) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Net operating loss and capital loss carryforwards | $ 11,479 | $ 11,260 |
Accrued arbitration award payable | 2,586 | 2,850 |
Business interest expense | 833 | 704 |
Start-up costs (crude oil and condensate processing facility) | 657 | 678 |
Asset retirement obligations liability/deferred revenue | 541 | 542 |
AMT credit and other | 50 | 108 |
Total deferred tax assets | 16,146 | 16,142 |
Deferred tax liabilities: | ||
Basis differences in property and equipment | (5,409) | (5,153) |
Total deferred tax liabilities | (5,409) | (5,153) |
Deferred tax assets, net | 10,737 | 10,989 |
Valuation allowance | (10,687) | (10,881) |
Deferred tax assets, net | $ 50 | $ 108 |
15. Income Taxes (Details 2)
15. Income Taxes (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Beginning balance | $ 46,939 | $ 39,833 |
Net operating losses | 1,036 | 7,106 |
Ending balance | 47,975 | 46,939 |
Pre-Ownership Change [Member] | ||
Beginning balance | 9,614 | 9,614 |
Net operating losses | 0 | 0 |
Ending balance | 9,614 | 9,614 |
Post-Ownership Change [Member] | ||
Beginning balance | 37,325 | 30,219 |
Net operating losses | 1,036 | 7,106 |
Ending balance | $ 38,361 | $ 37,325 |
15. Income Taxes (Details Narra
15. Income Taxes (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |||
Income Tax Benefit | $ 0 | $ (217) | $ 260 |
16. Earnings per share (Details
16. Earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Earnings Per Share [Abstract] | ||
Net income (loss) | $ 747 | $ (151) |
Basic and diluted income per share | $ 0.07 | $ (0.01) |
Basic and diluted | ||
Weighted average number of shares of common stock outstanding and potential dilutive shares of common stock | 10,975,514 | 10,925,513 |