UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
DATE OF REPORT MARCH 1, 1999
(Date of earliest event reported)
BLUE DOLPHIN ENERGY COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 0-15905 73-1268729
(State or other jurisdiction of Commission File Number: (I.R.S. Employer
incorporation or organization) Identification No.)
801 TRAVIS, SUITE 2100, HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
(713) 227-7660
(Registrant's telephone number, including area code)
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 1, 1999, a wholly owned subsidiary of Blue Dolphin Energy Company
("Company") acquired Black Marlin Pipeline Company from Enron Pipeline Company
("Enron"), for $5,404,270 cash. Black Marlin Pipeline Company is the owner of
the 75 mile Black Marlin Pipeline System originating in High Island Block 136 in
the Gulf of Mexico off the Texas Gulf Coast extending across Galveston Bay to
onshore facilities at Texas City, Texas.
This acquisition was funded by selling a one-sixth (1/6) undivided interest in
the Company's Blue Dolphin Pipeline System and the Black Marlin Pipeline System
to WBI Southern, Inc. for $3,713,000 and selling a one-third (1/3) undivided
interest in the Black Marlin Pipeline System to MCNIC Pipeline Processing
Company ("MCNIC") for $1,801,423. MCNIC owns a one-third (1/3) undivided
interest in the Blue Dolphin Pipeline System.
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS.
(A) FINANCIAL STATEMENTS PAGE
Index to Financial Statements:
Independent Auditors Report............................................... 3
Historical Summary of Revenues and Direct Operating Expenses
for the Year ended December 31, 1998 for
Black Marlin Pipeline System.............................................. 4
Notes to Historical Summary of Revenues and Direct Operating Expenses..... 5
2
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
BLUE DOLPHIN ENERGY COMPANY,
I have audited the accompanying Historical Summary of revenues and direct
operating expenses of the Black Marlin Pipeline Company acquired by Blue Dolphin
Energy Company and Subsidiaries from Enron Pipeline Company for the year ended
December 31, 1998 ("Historical Summary"). This Historical Summary is the
responsibility of Enron Pipeline Company's management. My responsibility is to
express an opinion on the Historical Summary based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. I believe that
our audit provide a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in the Form 8-K of the Blue Dolphin Energy Company) and are not
intended to be a complete financial presentation of Black Marlin Pipeline
Company.
In my opinion, the Historical Summary referred to above present fairly, in all
material respects, revenues and direct operating expenses of the Black Marlin
Pipeline Company for the year ended December 31, 1998, in conformity with
generally accepted accounting principles.
PHILIP H. SALCHLI, CPA
Houston, Texas
May 11, 1999
3
HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
OF THE BLACK MARLIN PIPELINE COMPANY
FOR THE YEAR ENDED DECEMBER 31, 1998
(in thousands)
Revenues $ 2,571
Direct operating expenses 1,118
-----------
$ 1,453
===========
The accompanying notes are an integral part of this statement.
4
NOTES TO THE HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
OF THE BLACK MARLIN PIPELINE COMPANY
FOR THE YEAR ENDED DECEMBER 31, 1998
1. OPERATIONS, ORGANIZATION AND BASIS OF PRESENTATION
The accompanying historical summary represents the revenues and direct
operating expenses of Black Marlin Pipeline Company's ("Black Marlin") Black
Marlin Pipeline System. On March 1, 1999, a wholly owned subsidiary of Blue
Dolphin Energy Company acquired Black Marlin from Enron Pipeline Company
("Enron"), for $5,404,270 in cash. The Company simultaneous sold a fifty percent
(50%) interest in the Black Marlin Pipeline System. Black Marlin is the owner of
the 75 mile Black Marlin Pipeline System originating in High Island Black 136 in
the Gulf of Mexico off the Texas Gulf Coast extending across Galveston Bay to
onshore facilities at Texas City, Texas.
The Black Marlin system is a major natural gas and condensate gathering
line with related shore facilities servicing the High Island Area, offshore
Texas, with transportation capacity of 160/Mmcf/d and 1500 Bpd of condensate.
Present throughput is approximately 55 Mmcf/d and 300 Bpd of condensate.
The Historical Summary was prepared from the historical records of Enron
(accrual basis, in accordance with generally accepted accounting principles).
This Historical Summary may not be representative of future operations.
Historical financial statements reflecting financial position, results of
operations and cash flows required by generally accepted accounting principles
are not presented as such information is not meaningful. Historically no
allocation of general and administrative, interest or federal income tax expense
was made. Accordingly, the Historical Summary are presented in lieu of the
financial statements required under Rule 3-05 of Securities and Exchange
Commission Regulation, S-X.
2. RELATED PARTY ACTIVITY
Black Marlin derived approximately 84% of its revenues from affiliated
companies.
3. COMMITMENTS AND CONTINGENCIES
As part of the sales agreement noted above, Enron has indemnified Blue
Dolphin for any liability in excess of $1,000,000 that occurred or was caused to
occur prior to the effective date of the sale. This indemnification includes but
is not limited to any liability such as a refund obligation imposed by the
Federal Energy Regulatory Commission, litigation or taxes.
5
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
(B) PRO FORMA FINANCIAL INFORMATION
The Pro Forma Consolidated Balance Sheet at December 31, 1998, Pro Forma
Consolidated Statement of Operations for the year ended December 31, 1998 and
Pro Forma Consolidated Statement of Operations for the two months ended February
28, 1999 (collectively the "Financial Statements") are presented assuming that
the sale of a one-sixth (1/6) interest in the Blue Dolphin Pipeline System, and
the purchase of Black Marlin Pipeline System and simultaneous sale of a fifty
percent (50%) interest in the Black Marlin Pipeline System occurred as of the
date of the Pro Forma Balance Sheet and at the beginning of the period for each
respective Statement of Operations presented. The Financial Statements have been
prepared based on the historical financial statements as of the same date or for
the same period indicated.
Index to Pro Forma Financial Statements: Page
Pro Forma Consolidated Balance Sheet, at December 31, 1998........... 7
Pro Forma Consolidated Statement of Operations, for the year
ended December 31, 1998.......................................... 9
Pro Forma Consolidated Statement of Operations, for the two
months ended February 28, 1999.................................... 11
6
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
ADJUSTMENTS
ASSETS AUDITED DEBIT CREDIT PRO FORMA
------ ------- ----- ------ ---------
Current assets:
Cash and cash equivalents $ 593,509 2,795,788 (1) 2,720,181 (1) (2) 669,116
Trade accounts receivable 771,268 771,268
Crude oil inventory, at market 5,248 5,248
Prepaid expenses and other assets 152,340 152,340
---------------- ---------------------
Total current assets 1,522,365 1,597,972
---------------- ---------------------
Property and equipment, at cost:
Oil and gas properties (full-cost method) 21,210,806 21,210,806
Pipelines and onshore facilities 3,426,252 2,621,635 (2) 831,859 (1) 5,216,028
Land 1,133,333 80,500 (2) 283,333 (1) 930,500
Other property and equipment 343,220 343,220
---------------- ---------------------
26,113,611 27,700,554
Less accumulated depletion, depreciation and
amortization 17,172,057 253,670 (1) 16,918,387
---------------- ---------------------
8,941,554 10,782,167
Deferred federal income tax 2,010,060 703,455 (3) 1,306,605
Acquisition and development costs - Petroport 1,576,391 1,576,391
Escrow fund 1,107,573 1,107,573
Other assets 23,867 44,172 (4) 68,039
---------------- ---------------------
Total Assets $ 15,181,810 16,438,747
================ =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable and accrued expenses $ 892,190 892,190
Accrued interest payable 105,662 105,662
Current portion of accrued abandonment costs 206,000 206,000
Current portion of long term debt 200,000 200,000
Income taxes payable 13,970 13,970
---------------- ---------------------
Total current liabilities 1,417,822 1,417,822
Long-term debt 2,060,600 2,060,600
Accrued abandonment costs, less current portion 108,594 152,766 (1) 44,172 (4) 0
Common Stock 45,046 45,046
Additional paid-in capital 17,700,833 17,700,833
Retained (deficit) since January 1, 1990 (6,151,085) 703,455 (3) 2,068,986 (1) (4,785,554)
---------------- ---------------------
Total Liabilities and
Stockholders' Equity $ 15,181,810 16,438,747
================ =====================
7
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(1) To record the sale of a one-sixth (1/6) interest in the Blue Dolphin
Pipeline System effective December 31, 1998.
(2) To record the acquisition of a fifty percent (50%) interest in the
Black Marlin Pipeline System effective December 31, 1998.
(3) To record federal income tax expense at the statutory rate and
utilizing net operating loss carryforwards (crediting deferred tax
assets), as a result of the gain on sale of a one-sixth (1/6)
interest in the Blue Dolphin Pipeline System.
(4) To reclassify abandonment costs.
8
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
ADJUSTMENTS
AUDITED DEBIT CREDIT PRO FORMA
------- ----- ------ ---------
Revenue from operations:
Pipeline operations $ 2,788,944 469,820 (1) 1,285,500 (2) 3,604,624
Oil and gas sales and operating fees 769,829 769,829
-------------- --------------
Revenue from operations 3,558,773 4,374,453
-------------- --------------
Cost of operations:
Pipeline operating expenses 796,144 557,500 (2) 149,796 (1) 1,203,848
Lease operating expenses 669,377 669,377
Repairs and maintenance costs 264,630 14,651 (1) 249,979
Impairment of oil and gas properties 12,011,544 12,011,544
Depletion, depreciation and amortization 400,982 199,736 (2) 29,897 (1) 570,821
General and administrative expenses 1,466,738 57,500 (2) 1,524,238
-------------- --------------
Cost of operations 15,609,415 16,229,807
-------------- --------------
Income (loss) from operations (12,050,642) (11,855,354)
Other income (expense):
Interest expense (215,141) (215,141)
Gain on sale of assets - 2,068,986 (3) 2,068,986
Interest and other income 105,994 105,994
-------------- --------------
Income (loss) before income taxes (12,159,789) (9,895,515)
Income tax benefit 3,099,810 732,955 (2) (3) 93,662 (1) 2,460,517
-------------- --------------
Net income (loss) attributable to
common stockholders $ (9,059,979) (7,434,998)
============== ==============
Earnings (loss) per share:
Basic $ (2.02) (1.66)
============== ==============
Weighted average number of common shares
outstanding and dilutive potential common shares:
Basic 4,492,344 4,492,344
============== ==============
9
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(1) To record reductions in revenues, pipeline operating expenses,
depreciation and amortization, general and administrative expenses,
and provision for income taxes as a result of the sale of a
one-sixth (1/6) interest in the Blue Dolphin Pipeline System
effective January 1, 1998.
(2) To record increases in revenues, pipeline operating expenses,
depreciation and amortization, general and administrative expenses,
and provision for income taxes as a result of the acquisition of a
fifty percent (50%) interest in the Black Marlin Pipeline System
effective January 1, 1998.
(3) To record the gain from the sale of a one-sixth (1/6) interest in
the Blue Dolphin Pipeline System.
10
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
TWO MONTHS ENDED FEBRUARY 28, 1999
ADJUSTMENTS
UNAUDITED DEBIT CREDIT PRO FORMA
--------- ----- ------ ---------
Revenue from operations:
Pipeline operations $ 272,176 45,363 (1) 225,250 (2) 452,063
Oil and gas sales and operating fees 96,497 96,497
----------- -----------
Revenue from operations 368,673 548,560
----------- -----------
Cost of operations:
Pipeline operating expenses 119,654 92,917 (2) 19,942 (1) 192,629
Lease operating expenses 98,836 98,836
Repairs and maintenance costs 50,310 50,310
Depletion, depreciation and amortization 52,872 33,289 (2) 8,812 (1) 77,349
General and administrative expenses 297,026 9,583 (2) 306,609
----------- -----------
Cost of operations 618,698 725,733
----------- -----------
Income (loss) from operations (250,025) (177,173)
Other income (expense):
Interest expense (37,738) (37,738)
Gain on sale of assets - 2,068,986 (3) 2,068,986
Interest and other income 8,985 8,985
----------- -----------
Income (loss) before income taxes (278,778) 1,863,060
Income tax benefit (expense) 89,639 708,372 (2) (3) 5,647 (1) (613,086)
----------- -----------
Net income (loss) attributable to
common stockholders $ (189,139) 1,249,974
=========== ===========
Earnings (loss) per share:
Basic $ (0.04) 0.28
=========== ===========
Diluted 0.28
===========
Weighted average number of common shares
outstanding and dilutive potential common shares:
Basic 4,564,627 4,517,960
=========== ===========
Diluted 4,544,895
===========
11
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
TWO MONTHS ENDED FEBRUARY 28, 1999
1. To record reductions in revenues, pipeline operating expenses,
depreciation and amortization, general and administrative expenses,
and provision for income taxes as a result of the sale of a
one-sixth (1/6) interest in the Blue Dolphin Pipeline System
effective January 1, 1999.
2. To record increases in revenues, pipeline operating expenses,
depreciation and amortization, general and administrative expenses,
and provision for income taxes as a result of the acquisition of a
fifty percent (50%) interest in the Black Marlin Pipeline System
effective January 1, 1999.
3. To record the gain from the sale of a one-sixth (1/6) interest in
the Blue Dolphin Pipeline System.
12
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
(C) EXHIBITS
10.29 Press Release March 1, 1999
10.30 Asset Purchase Agreement between WBI Southern, Inc. and Blue Dolphin
Pipeline Company, Buccaneer Pipe Line CO. and Mission Energy, Inc.
10.31 Purchase and Sale Agreement between Enron Pipeline Company and Black
Marlin Energy Company and Blue Dolphin Energy Company
10.32 Asset Purchase Agreement between WBI Southern, Inc. and Black Marlin
Pipeline Company and Black Marlin Energy Company
10.33 Asset Purchase Agreement between MCNIC Offshore Pipeline & Processing
Company and Black Marlin Pipeline Company and Black Marlin Energy Company
13
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLUE DOLPHIN ENERGY COMPANY
Date: May 13, 1999 By: /s/ G. Brian LLOYD
G. Brian Lloyd
Vice President, Treasurer