BKEP - Earnings call transcript Q3 2019 | Blueknight Energy Partners, L.P.

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Blueknight Energy Partners Earnings Conference call. [Operator Instructions] I would now like to turn the conference over to Andy Woodward, Chief Financial Officer. Please go ahead.

Andy Woodward

morning. good and you, Thank It's my where results today's call, you the to will discuss welcome we XXXX. operating quarter to Blueknight's third conference of pleasure financial for and

update Hurley, results you well Mark for external our provide Blueknight. I influencing After factors Executive on a Chief Officer, brief as on operational update performance our our as which, will business. will our financial

take your questions remarks. then prepared will We our after

and website, reconciliations release, earnings which be includes the that financial our help results. disclosures non-GAAP reminder, analyze a As should for found can measures financial our on you

Our no and to will date statements expectations. the comments management's to uncertainties results statements forward-looking differ obligation risks are that future. and expectations answers forward-looking our to actual under of as of to update are that questions these this during the refer subject the These cause from to made in include call, call or and could They predictions. future are statements we

Mark it With that, I to turn will over Hurley, CEO. now our

Mark Hurley

morning factors the and our and financial an for to performance on I in-today. and operational strategy, you dialed external be update who updating our Andy will will on business results then provide Good quarter. influencing everyone thanks

quarter and Performance we had a business are in very good strong our pleased with reflected Overall it. across it’s we third was and entire the financial results.

talk about our little a health, I before to environmental performance, our discuss performance. and want However, I financial safety

is industry, the very in it As of energy company take aspect and with it our any important seriously. business we

translates fewer line workers' insurance form which we environmental lower our compensation lower performance, directly Not going also forward. only in and and thing employees premiums, costs a the the to right It bottom of communities and liabilities in the to for safety HSE strong the is operate. do

safety. year best we in performance road talking or rates, record, our whether performance XXXX has are about been injury on environmental Our

company which for quite Our these than an the performance standard, better a areas of of significantly our industry is at all size. accomplishment is

far want Our such in make I providing I and sure deserve field credit recognition. year the people call and especially the to that for this leaders so a stellar started

highlights. turn our I'll back Now to financial

have and our and we stability and stated metrics XXXX our improve few sheet of strengthen balance is for underlying calls, our to credit our As the top flows. in cash last business priority

strong quarter third Our X.XX in quarter the our values times times times nine for progress areas. above and and for times, these coverage XXXX. performance X.XX for the year third of X.XX these XXXX nine first of showcased was compared quarter the of to the the third Distribution first the X.X in months in months

as Our leverage continues to strengthen well.

Our another debt-to-EBITDA quarter-over-quarter of ratio at was the down end as X.X was X.XX XX, of September from times and XXXX. times improvement of leverage

distribution targets our coverage we XXXX As than our between our end and times year previously financial are, and indicated greater times. leverage times X.X X.X have X.X

We meet to well those expectations exceed and our hitting are tracking in targets.

times. to no We X.X X.X we growth fund self are ourselves standards business stated further at our as and think the to business our our balance grow objectives Longer-term leverage comfortably coverage and sheet. want We times are have see market strengthen so new see MLPs. forward. funded the these performing the going new position to intention our We high for is by equity issuances, public longer above

objectives. and our our our cash long-term underlying We where when will at rate, achieved increase can also look we've to sustainable increases flows distribution support

individual asphalt. for our and into operational with quarter will Getting segments, the start performance I

quarter. and in during second the Oklahoma, loss was Kansas As than challenging Missouri. the and you costs related particularly earnings in to may extensive remember, lower the flood of flooding revenue second quarter The resulted due normal

than an net normal. impact periods start, slower but a volume has well. asphalt However, rebounded season longer the higher to The the has lasting business been off

U.S. and a business cooperated, good the infrastructure Once in spending good continue weather federal by see Longer-term, employment. underpinned we we patency. the and got past resulted a to fundamentals state the with in economy across the encouraging low flooding, record

I had strong storage which will another to Cushing our business quarter. crude now oil turn

fully substantial continued facility a quarter run the improvement over to ago. year third contracted, Our

a We also of active continue customer blending. to base see very and throughput terms in

period result, revenue very our the services a be versus and continues throughput the are for quarter up As to volumes strong XXX% year. same last

throughput in seeing been the offset this revenue this not months, has year is seen the has which The rates. we to storage forward impact. over conducive while higher curve few are last So by helped flat year increased though current Overall, but customers. next a strategic expecting potential encouraged we've and will we're market seen XXXX, Cushing in with future dialogues than the we are remain challenging slightly more having

and contract note, terms. finalized we in agreed get we I'm large progress year, a re-contracting into the our expiring material do but that their good XXXX the risk contract reduces that this of renewal to we've This have happy made have at substantially all heading near-term. expect to end towards report to significantly and On

Moving oil now transportation remain both XXXX. and well overall, through pipeline trucking of segments, ahead crude our

activity and beginning The is lower clearly SCOOP drilling. region in However, experiencing drilling are see we to Oklahoma. less permitting

We ramp SCOOP are of Oklahoma, early the Southern next will this dynamics up around Oklahoma part in of Southern volumes our most Within each and probably active. from the which we in to area, stable and think other. pipeline expect the see offset year dedicated However, remains assets. our fairly a volumes

with work and we who and have integrated our advantage storage location We adjust SCOOP regions in pipelines very so partners Oklahoma activity seeking operations. We believe connected are can oil our are across the locations dedications or flexible system. these suited partners system, are the we two Southern of different crude ideally out are for customers. levels opportunities production take Similar fortunate local in transported to several that of The their value contract state. for operations or customers to of Cushing pipeline a business, strategic we to

few make points like on corporate Finally, costs. turning to results, a I our overhead corporate to would

reducing the company and significant streamlining corporate calls, a on and has We progress. focused this high years have in the last been over for extensively us not we've costs priority topic recent but made several

XX% of to period last quarter percent year from third lower adjusting the are deal has same approximately in costs XX% for related approximately of this a in XX% as this year. the G&A XXXX EBITDA example, costs year after dropped than Corporate fees. For

Corporate efficiently headcount has trend on committed has business been focused last reduced by corporate to by remain in XX% employee since increased continue expect the We approximately XX%, in and our and this per running more and EBITDA almost XXXX. four years. XXXX

two look our highest terminalling priorities core our our to distribution plan streamline and business strengthening improving continue be sheet to around confident our to accomplish and ahead, We balance Looking remain the coverage. our XXXX for capabilities. assets we'll also goals. opportunities will in these And

sheet, provide this focus the an improving needed to turn our with and to strategy, foundation And balance growth. will operation

and to are our assets value We excited very the for our to position area this future about unlock ability leverage we're growth. and existing us dialogues having better in

our Officer. will that, With now I Andy turn Chief the to Financial over Andy? Woodward, call

for XXXX. financial Yesterday, XXXX. the quarter, million period three million results Mark. $XX.X Adjusted third compared XXth, we EBITDA for Thanks, September ended as months same to reported $XX in for the was the

approximately would XXXX you adjusted for XX%. If have by $X.X July, purposes, divestiture higher million the the year-over-year asphalt impacts been or EBITDA remove $XX.X million, from compatibility

continues was despite last and having year, the Mark earlier, to for outperform deliver mentioned even us this great in fewer assets. quarter As another versus business XXXX, and

are million Adjusted release as issued income reconciliation third the for measures to period net earnings a was year-over-year. such to flow XX% the financial flow section the cash Distributable quarter the a $X $XX.X and distributed compared in non-GAAP same of explained measures cash for of XXXX, million yesterday. increase EBITDA including in

the XXXX, today be our the Additional to for be ended filed results provided with regarding SEC. information on operations XX, of XX-Q partnership's will Form quarterly September months three the in report

into amortization, for prior operating year. for excluding asphalt few for I'll quarter segment. slightly each than a third go compatibility year the margin adjusting our million after terminalling, Within the decreased for now asphalt quarter, higher and last was margin, was third depreciation the divestiture highlights purposes, total $XX.X

issues up in Mark due the as very earlier As volumes year. made the were for customers ground mentioned, to quarter lost weather-related strong,

oil, an higher the million or crude this mainly period was same XXXX, of storage to and was depreciation terminalling for amortization months and throughput. the storage. three excluding Total contracted margin, increase $X.X million to due XXX% compared in ended $X.X XXXX, XXth, to Moving operating and September

at For year. prior the first terminal has year, day, throughput approximately time been the the a XX,XXX months per barrels average our of from the increase XX%

quarter Now business. under Total for Growth excluding last our $X.X capture within year-over-year our trucking million was crude margin better to operating marketing same primarily segments. XXXX depreciation crude of amortization period oil margin, higher oil due the and third versus the year. was pipeline combined and

quarter from year. X.XX we to the was of months a our in metrics and times on move ratio. corresponding of coverage key Now X.XX financial improvement for nine Similarly, third liquidity solid down times Benefiting operations to last over debt drive the approximately leverage significant and position. first for XXXX, continue our XXXX

Our was leverage million September debt and XXXX. balance X.XX as times $XXX was of XXth,

balance Xst, million than $XXX million, to debt report pleased roughly November of the lower a of is approximately of start $XX As which I'm the year.

included were for of capital. for expenditures net $X.X As capital maintenance the investments, million quarter, capital $X which net million

contributed debt. intense Our ability in of costs capital management to and focus lowering both XXXX has down to in spending pay borrowing our

current approximately of be our a cash. put credit million. Ergon’s value sheet is balance outlook, approximately Cimarron settle to position which XXXX, availability and Ergon covenant we in of Express, relates put, of to investment quarter our under The third as to Lastly, near-term expect of current to in the in we on had restrictions subject the $XX liquidity, in Based the million. $XX agreement the

year one our priorities and financial this strengthening improving sheet mentioned, metrics. our key of our Mark been top As balance has

areas, those both and quarter highlights as success future operationally to our begin company for strategically growth. This the we in reposition

you units comment to already of all and September further its on Ergon acquire have its Similar the what to affiliates. XXXX last is been withdrew call, disclosed. on outstanding cannot by many that we publicly as beyond owned offer our Finally, Ergon XX, any saw, already process not

prepared turn call will that Operator, remarks. our Q&A. now I for the concludes over

Operator

you. Thank

question Instructions] question-and-answer Merrill first We will Doppelt Lynch. session. now The the Jeffrey begin with from comes [Operator

Jeffrey Doppelt

more I questions. a everyone. common than as exposition as have units quick a and and the preferred. for a of more you, of for go individual Blueknight with couple Hi XXX,XXX of than holder I have numbers actually XXX,XXX I little clients, in

of is of all they you first that company? regarding essentially are comment by September. in The Directors the two the Directors units held still back of and question Can on the disposition

Mark Hurley

can’t are of obviously comment those Well, I on they comment the personal right. units, but I disposition the All transactions, so. company, can't of on still Directors

Jeffrey Doppelt

to Directors unit? the So type in maintain you company's a any certain are required where plan of don't essentially place position in have

Mark Hurley

not. do we No,

Jeffrey Doppelt

should considered. that's perhaps be Okay,

chance of is, Ergon, you that additional is The is second completely off briefly that recovering and with pipeline no a question reviving selling with just the and on it there's you're that dead partner, whatever possible? touched

Mark Hurley

production selling forward Yes, we’re really that do the and I production. rock do capitally struggled it out there of the process in getting the with really going assets. stack. have the and with has economics Producers understanding to of efficiency see not

going do So forward not time. we this see that at

Jeffrey Doppelt

I guys know for if anybody environment on you. outlook will favorable only that that. that's to it But to in major a future that that, come and it. but may decide, something the be is the my complete on looking you is to political don’t is Thank and somebody thought favorable and saw have make investment for that’s I

Mark Hurley

Thank Jeffrey. you,

Operator

next question Instructions] is Private [Operator David The Rothschild, Investor. from

David Rothschild

just here your in much was the Xst, that your you of mean third quarter. mentioned What earnings the was year? or the last it of Yes, debt debt debt I looking level was wonder was as a November was $XXX release think I end I what how ago, million down paid year here,

Andy Woodward

Yes.

the of paid down So we from debt million year in approximately year. last $XX end

David Rothschild

year from ago? or From year end a

Andy Woodward

From of end, at the year XXXX. end

ago. $XXX year approximately million So debt was about a

David Rothschild

Thank you. Okay.

Operator

remarks. concludes question-and-answer over conference would turn to I the like CEO session. to for This any Mark Hurley, back the closing

Sorry, there Investor. question ahead. of Please a Private lined from is couple is next go Tom just Forbes, up. The questions have that

Tom Forbes

or company shares what market units were estimate the believe My the is, to per of what is be in, Yes. you question if value would sold unit the the value? you the

Andy Woodward

what that's Well, Tom, on be. that call. anybody would appreciate we just anybody's the could I potentially just �� be mean, speculating like

we'll to value cash on Mark decent what an sheet really be we're we're if our for underlying noted, position here. unlock those improving balance ability fronts, getting our our in successful to base believe As focused asset on And improved flows, grow. able we is some

Tom Forbes

Okay.

Operator

The next from Bailey with comes question Jeff Blueknight.

Jeff Bailey

are Hey, and guys Mark how Andy, you doing?

Andy Woodward

well. doing We're

Mark Hurley

Hey, Jeff.

Jeff Bailey

to you. Good by talk quarter the to Great way.

Andy Woodward

that. hearing appreciate would They

Jeff Bailey

for little a line? on X.XX million is not Andy, interest for of accounting that that A that first. Andy asset part XX asset looked impairment couple of impairment the put? Isn't the times, X.XX, line why pushdown is on $X.XX for million the small, accounting not based the the questions times, on cost why that Ergon

Andy Woodward

we and outs. accounting Ergon the but Yes, down push ins pretty had had to modest put, some related quarter, the over it some was we

I per interest sheet to our an have offsets think, as quarter. as perspective value we did around – last which put the from roughly XX some the moment at well stated put as continued our liability impairments so approximately that's quarter for year $XXX,XXX on we related per that's a But and balance the recognized million. at impacts

Jeff Bailey

be down in that my based that push on reflected interest line. the was Yes. And accounting, impairment cost understanding on asset would quarterly

quarter? there that offsets this out were saying mentioned would doing XXX,XXX, so you're And just I just so that come some to to the calculation,

Mark Hurley

That's right.

Jeff Bailey

we Okay. What going expect can forward?

Andy Woodward

without from per put. an the standpoint can revisions a $XXX,XXX on quarter that quarterly Again you estimates basis expect related to to any interest still potential

Jeff Bailey

guys Okay. timing off as any far as Have you paying the put? articulated Ergon

Andy Woodward

could Yes. pay leverage, feel we today, In the our cash, to in year. off we're near-term position put prepared in and now at that had of do I near-term our position liquidity the that with where we beginning sit we in mentioned our next a remarks be

Jeff Bailey

to so – that assume of is fair first else But equal? Okay. XXXX, half all

Andy Woodward

That fair. is

Jeff Bailey

by insights administrative amount project object, as and be roughly of project offer G&A the forward G&A, other you the for then any And kind going do would could have overhead, on Okay. forward, general we that we then you blunt as as or take forward? the XXXX we multiply and can a XXXX, going going X.X,

Andy Woodward

Yes.

reported, good next our earnings I and detailed to just think my for that's our take a recommendation estimate there quarter for we is release just in annualize current then that year. that

Mark Hurley

we're a guidance the that good year's keep Andy's through got gotten cycle mind view next the and year and couple Andy's in planning haven't so… a G&A things But is all. into think of mean I do going so really I next we've in hopper still we – guide at on one,

Jeff Bailey

Yes.

projecting, this, over I savings in to million million, to going nobody's but even you're So $X G&A you XXXX. $X.X mean, XXXX maybe hold

Andy Woodward

say million would probably Yes. estimate that's $XX decent million. I $XX a between and of

Jeff Bailey

costs. talks transaction mean Okay. And kind the XXX,XXX was at partner/Ergon of side then is expenses In the and the are number about – release, the was – of number, for both that other covered Is MLP? that in in by general other that that the there EBITDA that press MLP pick words, looks adjusted up? under transaction included the is and footnote I got it – the is deal those that the side largish.

Andy Woodward

reflects advisor the from our referenced committee offer to primarily is just is so our that you their – fees that Ergon, related take that's portion. legal but So counsel, what private portion of the the only own conflicts hiring in

Jeff Bailey

Okay. bigger And then two questions.

is the lot is? think of that sustainable how due an blending the far number of awesome to As WTL the the is you do goes, and – number that mean, obviously that Cushing throughput is I throughput as a

Mark Hurley

it's I WTI you to doing in goes the very think it's lot facility sustainable. of – we It we're and grades. customers are. of have the what fortunate to some and And other their think and in market blending types have strategies a customers their who active are really of

and throughput the the in reflected see you what that's so And processing fees.

Jeff Bailey

Okay.

say in you that the to the portion throughput lighter significant WTI coming increase of a of would due So a was out? blending wonderful

Mark Hurley

just the fees things, associated moving It's fees facility. crude to associated it's crude due it's blending and through with two with

the the higher throughput blending more and the those the and So customer is, active buying higher fees. and selling the

Jeff Bailey

Right.

for plans now. for year Cushing we've been a almost talking then And about future Okay.

discussion would effort – wondering storage, kind was the as of different storage, to And to direction. Cushing structural investors, been so, clients on of essentially the that we've pipeline get if you articulate I'm different an there was – to as like has two some the sort perhaps obviously marketing well enhancement namely in the for

what you on far structural what just about the then kind of could a going I'm Cushing are as kind wondering talk see plans level front of you opportunities so your on for the as and forward more broadly storage. And marketing if

Mark Hurley

the of have refiners customers. need need has could to on and be their fields. who value need producer because strategic are who could are are who customers Cushing into storage have chain, and they It for in so for Yes, integrate very for It could parking the looking that be marketers what blenders storage. out storage we're coming their be a a barrels production active

are And those had number conversations. we of of kinds those number want still conversations having So network. We've having we're and customers to grow. a those a that of

– we direction want So the Cushing. are with that's to those go

the sort a we lot as of very actually is piece, of don't purely It's from our piece something marketing value the far As – small. operation marketing creates create that marketing itself.

small marketing operation our onto volume pipelines. We have a to some facilitate

And it's volume. so other we that I see not to don't one than of our activities say would but facilitate key changing,

Jeff Bailey

In – previous ahead…. go calls

Mark Hurley

ahead. go No,

Jeff Bailey

previous you the structural appeal or changed, Cushing plans talk Cushing have didn't potentially the other with that stories We changed? potentially enhancing the in calls projects. talked marketplace hear this Can quarter, ventures you In have the about that? about of the dynamics joint to your

Mark Hurley

those partners When things about venture We of a we're at. in could ventures, turn the are into and didn't we mention specifically cases. looking joint strategic kinds very strategic talk some joint but well relationships

Jeff Bailey

taking questions. for Thanks Okay. my

Mark Hurley

Jeff. Okay. Thanks,

Operator

is The [indiscernible]? next coming question from

Unidentified Analyst

Good Mark. morning, are Andy, how you?

Mark Hurley

you? are how John, Hi

Unidentified Analyst

my question quarter let questions. sort ask different a on Congrats of around similar for just thanks. We've this taking way. a a and a but danced Great, in me good thanks bit, little

related or terms to source your future you they're acquisitions? of organic potential think do more In growth, as

Mark Hurley

we year a and that well. the Coast, of transactions we we particularly business. before like that asphalt our I the and in they're Oklahoma. think the Last we they're probably, so past, Well, on we did or fits to have we into some thing Muskogee, It accretive. I – both, footprint East transactions year our transaction kind did terminals done – do of year we acquired that it's the some like think very around because the in did those, in immediately Wyoming really Prior we one but

the the would done that would We we forefront And prefer but we do. that's at to acquisition away say what I steer like in things the do wouldn't so of from inorganic projects past. to we've

Unidentified Analyst

about what sorts Talk more possibilities? for are are a bit market What seeing? What the you acquisition little now? the of those is

Mark Hurley

Well, one normal – fits counter and fits these That's for transaction sale. just to recently. couple assets. or are we these And buyers see broadly and could the things a puts we that those I of of that prefer puts up transaction things did mean, we assets in Muskogee come are find group be where and The these for ones a bring and join just opportunities other communications where came potential us us come there on a along through with sales they with came Wyoming ways. about. block that's us We the business One really to and fairly of we itself them that relationships that about. are our that parties and communicated

have comfortable it could other oil, agricultural be things. be could and active would lines that any looking in of feel refined are terminal crude for that is getting number the business thing, strong And those. in around right, so we it very And we a business of products, competency other we very chemicals, into these things feel course we and of very the products, find we'll be asphalt, normal capability John, but

the all we we that year areas. have for something at priority think some to hesitate key spreads into next or that'll U.S. product a not to footprint be And explore. go us want I a and We across other would

Unidentified Analyst

Right.

to assume about I of that would the that, So more build or congress any pipelines you're to? not attempt

Mark Hurley

the We don't near happening in No. see that future.

Unidentified Analyst

never? It’s

Mark Hurley

be. Could

Unidentified Analyst

That's All great. right, thanks.

Mark Hurley

John. to Okay. Thank talking you, you. Good

Operator

Northern Capital [indiscernible] Partners. question next from Systems The comes

Unidentified Analyst

Hello.

Mark Hurley

Hi, Glenn.

Unidentified Analyst

answered, was ratio your questions been my now X.XX. leverage I last X Most one, it's but Hello. and just have of over had year

Mark Hurley

That's right, that's right.

Unidentified Analyst

you would am you will to another mentioned And get then about X.X and at time to just achieved take the extrapolating is say you I X.X. this get objective to to X.X that? X.X X.X, to X that next it have your was would year

Andy Woodward

and making appreciate last is of progress X.XX. X.X significant currently the long-term Yes, about feel goal question. at ending as And we we're ours. year That noted, you a around times

mentioned there's to be headed year. progress there, to on that of make able potentially direction, end a opportunities few for need we it'd get we could help us but by And say be the as too early in right working, lot X.X would the of to get we're had there times. next still to get to So that that me a Mark

to the where expect Our standpoint. and plan forecast able a EBITDA, year, then few next our work terms, more be bit to would more leverage is the months for is we market is guidance more over to in to next an include a – which little formal our from from provide be

Unidentified Analyst

one on early be might in other that active From I question, today, quite assume between your comments fourth year, year-end? and be the And there now part basis quarter. in the on will Okay. that you acquisition nothing mentioned the an going of you

Mark Hurley

I any we get kind to can of sheet for and looking mean, acquisitions a where I always do that. place we we self out No, we're that want want necessarily. to in fund acquisition the our comments are balance think around that not

we And are us be and I so acquisitions far anything more but opportunities. constantly see I looking as will concerned, getting imminent see active you'll as for don't think do

in would of surprise those if surfaced, not it nothing there. So be a one but

Unidentified Analyst

Okay. answers for quarter. the Thank on and good congratulations you the

Mark Hurley

Glenn. Appreciate question. your Hey, thank you

Operator

from The Andrew with question comes White Kustas Investments. Pine next

Andrew Kustas

Hey great guys, a quarter.

Mark Hurley

Thanks, Andrew.

Andrew Kustas

Any business. it's up fourth on quarter is quarter beyond? for for shaping generally third quarter and how the great asphalt third know I color – is the

Mark Hurley

Yes.

year. particular for Outside a the asphalt said space. side, to pick of is during fairly that consistent business is like as of mentioned volumes in get the that you So on additional you what revenue pickup tend months our that and up summer the stable we entire

make occur lost I to it of saw say, quarter an you would the continue hopper which in we will weather year. cooperates, third starts the we fourth of can that the in But in in so as quarter. projects quarter. and have as saw has slower folks a still -time long bit this year, And softer year quarter standpoint, the the up in know, you a to them earlier than be current the the from expect as what fourth asphalt certainly

Andrew Kustas

Right.

Thanks. Okay. Great job.

Mark Hurley

Thank Okay. Andrew. you,

Operator

This closing concludes conference the Hurley, turn over like remarks. to any session. CEO question-and-answer would I for the Mark to back

Mark Hurley

Yes.

First want your of all, We to and we're business thank appreciate good We just I if as all your about us and generally a of And both it. you or a fantastic year and did you Andy for this talk optimistic very We we are having to questions time want you not really very next think we're to answered that year. I, do available, today. think get really there have so or thank year, the quarter. so always, giving interest we're much.

Operator

today's concludes This you. Thank call. conference

have disconnect a day. may for lines. your You and Thank pleasant you participating

Blueknight Energy Partners (BKEP) 7 Nov 192019 Q3 Earnings call transcript