BKEP - Earnings call transcript Q3 2020 | Blueknight Energy Partners, L.P.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Thank you for standing by. This is the conference operator. Welcome to the Blueknight Energy Partners Earnings Conference Call.

As a reminder, all participants are in a listen-only mode and the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Chase Jacobson, Blueknight's Investor Relations Advisor. ahead. go Please

Chase Jacobson

good and Thank morning. you

Woodward, We are any operational call Financial lines third today, performance, to third will Andy conference external factors welcome Blueknight to your the quarter results. you will the quarter of Chief XXXX. for Matt you where results discuss today's operating Officer, pleased financial After business to we an on provide our Executive Chief influencing of update And priorities. will and remarks will financial the open overview address strategic prepared Lewis, Officer, of questions. the and

call reminder answers disclosures can future be and to made call will questions a analyze statements that CEO, these future. no date differ under it and found to financial non-GAAP from earnings results are for you of is includes of measures to subject during are management's refer or could financial the website They statements as forward-looking uncertainties cause to As expectations risks actual release, forward-looking to our With now I this management's turn reconciliations should predictions. include the Woodward. will the that management and over that, and on that update Andy in statements Comments which These help Blueknight's expectations. to obligation results. the

Andrew Woodward

Good everyone dialed morning. to today. thanks And in who

September had the to the a Matt relevant have and confidence and value and private the CFO. in long-term. business brings Chief update joined and working will who performance. with both on the Officer track an of it third company company pleasure joined external to our our partnership utmost ability as add Lewis, a public to I turn I influencing quarter early before Financial Matt our focusing the Blueknight, will mentioned, be operations, Chase proven and him as financial his in before our and over long-term I Matt I experience As factors discuss on record strategy I XXXX over

operationally, despite the EBITDA Turning to increased business. a and volatility continue and We macroeconomic and compared Adjusted flow, to year, commodity challenging ongoing debt. reduce cash to both distributable solid quarter another the previous we had backdrop.

targets the have we forward to highlights earlier from become expect want in we more call. better year pure-play quarter. set will company, a I on and financial position to taken to which in discuss exceed to a steps downstream later terminalling detail Additionally, touch I Blueknight the few

adjusted million flow Year-to-date flow to and X% compared Third EBITDA Distributable to XX% quarter $X.X million, year. $XX.X cash the increased of $XX.X increased last prior million respectively and $X.X of million distributable compared XXXX prior year. increased versus cash year. the EBITDA adjusted

X.X been times of focus business, managing Blueknight. has tracking distributions lower all quarter, cash which expense, coverage on year of target our underlying enhancing continue X.XX and or well distribution this five priority in coverage on will interest Our the greater. Year-to-date, flow ahead our and ratio key ratio Actively in of distributable for capital was a ratio our maintenance resulted be coverage last to distribution represented the cash lower highest quarterly X.XX times, years. full times in a

on was X.XX X.X times, At leverage our to times. guidance debt of of XXXX is ratio the million, range improve. quarter, and Additionally, of leverage continued approximately a the debt our to low-end of in end balance the our resulting balance which ratio already X.XX $XXX

quarter the down volume, site year-to-date, versus across were during lower first and differences segment volume operational segment we essentially onto as throughput half activity while the prior one now this volumes are our This was the year-over-year. record particular terminalling, the saw to Moving outperformance Asphalt of relying experienced speaks quarter largest across region. regions not geographic versus of diversity flat of levels mixed portfolio our as or our our year. some In flat saw near performance. third or importance results on the either year. system our in others We Total were

factor a tank sites. of third was fire our our quarter large incident Another results one impacting at

As noted in impacted barrel our that the fire than which a as operational XX-Q the remain XX,XXX site's last capacity. quarter, tank, of less represented site XX%

$X third approximately $XXX,XXX $X.XX over next the million original cleaning are initial to insurance, to its million tank costs Before total and costs quarters. to the expected two quarter were during return the be form capital to

and expect stabilize Over U.S. the economy impacts long-term, we the in of recover and as especially asphalt, COVID-XX. the fundamentals from medium begins very for to demand

However, to support new environment funding. to progress we year long-term in monitoring legislation next into are macro near-term, the construction persist towards expect and highway the closely uncertain

that contract we average contract spending and a structured await business with approximately quarter, earnings. six exceptional our since infrastructure underlying combined road is contracts. future provides on years but construction as XX% and weighted vary we saw length As may remains stable, pay into of supported us by bill, this take-or-pay This our of with relatively quarter-to-quarter, visibility earnings

day. XX% the the asphalt U.S. X.X compared barrels independent well-positioned as prior down third-party believe at the largest the backed experience quarter remained oil looking year. terminalling, contracted success just long-term period In to well network by our but million investment-grade quarter. the third are in million the of terminals storage we this in over second was solid with crude our in year-over-year, average X.X per barrels when XX,XXX segment, we primarily largest in averaged line at XXXX, the Throughput This to Additionally, business. during barrels during with customers,

to benefit storage continues Our from environment. market the contango business

we to in in renewed our capacity we contract going extended this into another of revenue more quarter. higher which approximately and terms, This favorable will into contract was year XXXX and was X set December, full successfully expire storage largest storage year. at XXXX crude representing translate XX% separately next earnings recently million barrels additional oil or contracted and storage our total September, For example,

and commodity lower price current to areas year. The trucking both resulted our last environment crucial Now, in turning operating which compared has in activity completion drilling to volumes and transportation services. segments, reduced and includes pipeline our generally

per new segment despite generated the received our for arrangements We marketing which ongoing and day environment, to earnings upstream declined positive most gas and opportunistic the buy/sell Despite margin to efforts less prepare the exposure made remain X,XXX and higher oil unprecedented year. performance pleased to and our and and operating the trucking we for than quarter XXXX. our Again, quarter total drive fourth during are have XXXX. overall with segment in and year-to-date. prior to that have on X% to that the the pipeline barrels upstream indications four the represented Transportation we dependence challenging our crude our oil compared On three environment. is higher the earnings ability in we region, a volumes very to of has due opportunities minimal our note, market wells this our fortunate system an identify of year in in

will of We of to and Looking we for X.XX adjusted financial year, downstream our times. to at better company, coverage advantage remainder strategy. line this remain or expect become in and differentiated a on further on leverage for be Blueknight's XXXX, times to market transportation XXXX pure-play exceed and markets. to business EBITDA position We competitive and and sustainable distribution at greater targets, infrastructure with for in success. focused emphasize end X.X four the Blueknight the our focused the terminalling to Switching strategy the long-term unique keenly which vision growth believe called

all, direction is in progress that that step and a a or segments that oil crude our monetization of critical of strategy, business. we potential portion As our of evaluation a

As over position announce months. the we're actively may next we meaningful mentioned update those last optimistic segments we and two to quarter, that in be a marketing a to remain four

are the difficult predict, you potential and of likelihood As any transaction timing current in market aware, especially to is environment.

of investors demonstrates on of committed our with to these believe remain patient I relentless our ask operations we strategically the to now I'll few Matt? cash quarters market call our track focused pleased quarter I'm guidance. and improving financing this to our we to third we're of the are exceed provide and a in assets. the stability XXXX, flow only confidence However, activities turn performance, Three said and Matt, Financial our activities. on one highlights our over which our companies summary, Officer. which Back have people, March willing In in business in, process. with were our guidance, the we from to Chief

Matthew Lewis

Thanks, Andy.

to would by on like I serve in I for how start and worked for Andy's I his emphasis opportunity success the role. vision previously. this him with culture trust grateful First, having appreciate am saying to

non-cash adjusted Excluded third months jump quarter to crude Blueknight discuss net with corporate I to engage the to XX, commodity and reported on I'm item proposition gain a value we ended Additionally, the and an in and today Yesterday, here right I during during great legal to first seven-year later a that rest quarter we September prior a million time of in derivatives a confident EBITDA a few website. It's moments which with XXXX fees and be with to oil our the operating in benefit our as the of business. in. been Adjusted $X.X SEC note the we for exciting transaction third the segment $XX the continue detail $XX.X team to we Ergon to pipeline quarter, at growth the income G&A. the results XXXX. related the greater to attributable report basis. the increasingly financial results partnership compared potential million, million XX-Q, provide expect regarding again, be new the on in on available from for quarterly in will operations was filed X% provided quarter expect Form our go-forward was third and year, executed few XXX,XXX will partnerships on agreement higher EBITDA additional up Please and XXXX lower from which information

$X.X cash distributable highlighted, a XX% flow healthy Andy year-over-year. XXXX the up million, was third billion or As for $XX.X quarter

full the remain by perspective, lower distributable the during And distributions flows first prior averaged our unit led the interest year-to-date $X enhancing cash from Notably, expense $X.X the times. flow year. distributable our in cash distributions, reduction the expenditures. of XXXX, earnings has ratio XXXX million during distributable capital X.XX to reconciliation cash cash prior cash cash was million yesterday this lower decreased quarters to compared has on common quarter After from EBITDA rate, and ratio to interest distributable balance or in three interest XX% our quarterly amount. or generated coverage business. XX% income in in was times the Non-GAAP X.XX and cash flow flow section units effective which all year. our X.XX% benefited Financial year. expense net increased already is lower flow flow, the coverage year focused XX% the Our on versus including put Distributable prior all on and the debt to issued distributable preferred of that times cash maintenance related continued of X.XX $X.X million labeled flow subtracting from To cash the adjusted We $XX.X in are our of note Please measures such release Measures. explained million

to Now, revenue million, discuss due and terminalling, a increased XX% compared customers. was highlights asphalt excluding X% the $XX.X decline financial to XXXX a certain total operating third segment. throughput and for quarter represented for lower margin, amortization I each Within sequentially from will prior the year excess which depreciation

seasonally prior year. our was realized has when the important $X.X up XXXX. million quarter in operating compared new a market fourth is our excluding crude It's impact full million fourth depreciation related prior quarter achieve million from the in the essentially barrels XXX,XXX during amortization the quarter total we of activity see margin, was XXXX. depreciation early XXXX our $X.X segment, the rate combined derivative during that quarter in step and throughput. deep from expect the third that flat agreements note down have the second during the during operating of contract segment at XXXX and contracts representing contract revenue included XXXX period fees Historically, the that trucking $X.X EBITDA. Within amortization a that advantage margin $X.X been XXXX approximately This this and revenue $X.X we third quarter crude corresponding which in September, incremental terminalling after million this one and the revenue XXXX. our million we time. in We adjusted a This environment. XXXX, in buy/sell additional the year. capturing below items variable in total customers and was are margin, $X.X the excess million on of do storage and of a basis. quarter that quarter $X.X deep non-cash non-cash from minimum certain where represents gain commodity quarter X% of receive prior to they in excluding reminder, income, with was higher. a quarter intersegment during was pipeline an oil contango contango and October, existing In the operating contract third offset throughput gain non-cash terminalling of to Currently, a This executed annual oil year, once operating reported an XXXX. was from expired Compared short-term uplift As to excluding from trended component These a storage, the initiated to second excluded to customers million the of loss second on take

a arrangement metrics. of However, XXXX, liquidity quarter and pipeline move since I'll during of gain in the financial to our now summary segment. the we settled activities, crude investing a oil third key our $X.X position, million recognize cash

crude total capital million The million. capital to XXXX expenditures truck expansion capital net $X.X capital $X.X were related million. $X.X of line buyout leases oil to included and pipeline maintenance This million net business. million $X.X $X.X marketing related quarter of Third fill included the crude and existing of expansion oil our of

amount incident. as the within we guidance be the our year for fire recoveries any were to spend this net we'll expenditures on to provide an know capital related range, the excluding tank for pursuing more. and expect and We maintenance event, insurance the timing We update

per Our as priorities we X.XX the a was the debt X.X to Q&A. post metrics times ratio and X.XX to further debt have outstanding our the total us on now of X.XX prior key our at was agreement times. target prepared reduced times. over position end our remarks. in the an third of toward our quarter-end, same October, the that compares call our $XXX.X quarter, times for debt leverage provide million. update million To work I calculated concludes for year. of Reducing credit XXXX. outstanding we end And and of second XXXX borrowing longer quarter our turn This leverage $XXX.X period Operator, XXXX in improving remain at term will the

Operator

Thank you.

Please session. begin Jeff We Beach is will from now the question question-and-answer Capital. [Operator Instructions] The from first ahead. go Bailey

Jeff Bailey

you Hey, good morning. me? Can hear

Andrew Woodward

morning. We Yes. Jeff. hear can you, Good

Jeff Bailey

Andy? Wonderful. Well, How both Congratulations the first, you you and of doing, I to the want to to Blueknight. call. welcome Chase are joining Matt

Andrew Woodward

Doing well. well. Doing Yeah.

Jeff Bailey

Good.

First question maybe for Matt.

of Blueknight, long time. and as to Matt me becoming it's has in seems EBITDA for a XX% kind like So, -- meaningful DCF is less it of been almost so a metric highest strong DCF was been is because revenue, the as the which QX

floor there's Because for for your think regarding of you super there room regarding DCF of Is the flat, -- -- a do sorry it lost or -- the a but covenants or any the room debt any EBITDA the minute. else? with DCF obviously some kind is I just loosening there any is you negotiation are strong So, what while for matters more. lower anything lenders any

Matthew Lewis

May And I and the both lender were a early again, will XXXX. facility I on Absolutely. kicked that the we've just in Andy of group. I past cash have in with rest say, And of since -- matures September, we joined discussions, introductions this I the we off focused flow for mean, business. quarter, very got

a us making early priority of certainly for and turning we're sure our that year. kind next that is So, focus

to can just but are on strength credit our here. discussions, us cash are So, going profile. the some I that And do we what focused we actually think absolutely improve on improving focused gives those flow we into

Jeff Bailey

of and X.X exceed whether really you're are? going or Okay. as what about growth you target. Can those talk or some the leverage seeing -- for you're targets you're Andy, on in, your go And that X.X% going interested to you whether targets are in whether really DCF to opportunities Investors short-term and some distribute, priorities into then that prioritize leverage. get

As going for your with where, at more you can all talk get comfortable what's you about Blueknight on that? priorities

Andrew Woodward

Yeah.

think question, wise, think And I Jeff. that's first I a continuously priority good foremost is just and leverage.

Our is long-term noted Matt in leverage our target as the is in -- remarks times. X.X prepared

that, do here more not be position in even flexibility seeing our limited, the that's a be where than be we sheet Now, marketplace nice we're it to the we where opportunities get to because some can and trying had consider. be a so, we something really would lower do the flexibility had balance a that go-forward is -- is we great reason perhaps we into standpoint we from can And if growth have being create some the in to on proactive they'd much basis. what are -- out additions business could

so priority that our is, flexibility high without that in return second And use capital pressure having is sheet to areas. debt. balance is putting increased is there first to And to then an by deploy

areas doing be cash would I to that And that us we'd flow buyback and before, so, foremost, in look then that a more really redeploy that the I and for the return in first areas within give generate a areas, would from business think return in this fit that first over the time. risk at opportunistically, nice and finding absent returns return would we've perhaps create basis adjusted investments mentioned higher high core our think strategy, core

Jeff Bailey

-- release say Are buyback, considering our press previous that specified you you still you assumption? classes preferred are Or when you by both potentially? the that And is when mentioned issue.

Andrew Woodward

we to with it that again, wise, give the with do see out start the there. priority clearly would flexibility able the we that we growth we -- and be say to would still do preferred parameters weren't would where ourselves I'd

we ultimately by so, preferred put so. And at certainly the balance and wouldn't sheet doing pressure on look our

that's capital between the structure. two, preferred a up So, -- the outside debt. but structure, our it's capital of within those higher sits balance priority that's It second

I our certainly And cost also trying it for here but low Matt pretty of long-term. is addition what the today. over as ultimately I are and it's at trades see do to growing a to in think possible It's capital as the driving us. capital be it'd business, where to cost of high

Jeff Bailey

Yeah.

you thank clarity. Well, Okay. that for

Just more two quick ones.

and -- As a how is little sale about you've during have that fond market your barrels Cushing valued of Cushing storage? the value. is Blueknight and with number can flow by that dividing talk improved career, Cushing the X.X you by But coming bit really multiplying of investors a and because the you in all from seen I'm And CVR why taking that Cushing distributable out are then your cash asking operation. has

I'm And it's the Cushing on kind assets, so, barrel if storage in price of sell Cushing is factor based to if most that wondering -- or just calculation. for buy and to people potentially any if going sale a straight

Andrew Woodward

Yeah.

I boils marketplace. business traded presidents the ultimately the what think, have based on dollar always itself cash to from based the and a per in on not barrel, it flow down other

we around yes, million X.X well, I do marketed barrels anywhere that what of barrels the barrels think between any just storage. X.X market I investors up million contract is when But these there X.X assets, barrels. caution X.X, capacities we is would -- total and that million to remember the

to what for valuation again, at which boils be is And so on. how it. ultimately based cash, ability these we generate looked down assets But the will that's the it

Jeff Bailey

Got it.

surety a municipal property last of the companies are projects, in those -- that that all? of you projects. the industry, insurance talking have units Are Okay. about lot seeing infrastructure municipal And at all casualty then suspended question, any --

Andrew Woodward

Yeah.

that think, more -- we I my across previously areas. regionally. activity. some nice is in the I looking of I'll really And today really on rock foreseen Rockies U.S., it the comments based in it call around depends the think

more and Colorado, the Utah, than East Coast. to on So, normally see we activity like probably less

healthy regional for we from And when work. do differences the construction there medium board. road I out so, and fundamentals here to we different how are demand long-term municipalities some asphalt related see a basis, to the there think prospects there is really, largely really think approaching across But construction about

Jeff Bailey

and Okay. taking thanks Well, a All quarter. right. thanks wonderful for for questions my

gentlemen day. a have good You

Andrew Woodward

Jeff. Thanks

Matthew Lewis

Jeff. Thanks

Operator

The from Please is [ph] Partners. Instructions] Lydekker John [Operator Bridge question go next ahead. from

Unidentified Analyst

talk those Thank of you. a the how time And declining show about on good that more that bit in receive Oklahoma for the you quarter. able pipeline do I'm might to been in in such in And a good wondering morning. earnings sector could production. valuation strong congrats marketplace? the you've a how Again, if you you think plays little assets

Andrew Woodward

question, No, that's fair John. Thanks, question. I think good a

one think, I from pipeline benefited we've what two with of things. is

been we've and as use that system a And Matt think turn mean, us within game the two sort out game earnings the in value storage was past increased contracts with the in is, Cushing. combined. of saw system First these to with arrangements pipeline our generate buy/sell up types along to do able to I certain with the pointed led that of our and assets, quarter. of this result we I those

were work the contango on activities and was again. necessarily see those opportunistic saw market that -- based And to I that those more earlier able we occurring call unusual activities in types do unless those to events we that's the of not to we deep year, so, expect would on continue

saw advantage on we other able And been basis. year volumes that versus higher in we've are a volumes would thing last margin lower. those activities we So, I shipping total despite the what our end is, this add to you on being up take line of being market, barrels then the

Unidentified Analyst

sustainability you how in the might the address that play that values and And see?

Andrew Woodward

Yeah.

million to million out at we take results, the was gain if So, And also $X.X back you'll do as that earnings look sustainable investor activities is, to Matt of non-cash more a too. the what result on pipeline I better items cash And get would then is at saw out a charges. what we looking I derivative of an that our $X.X I standpoint, from those a pipeline feel back related the referred a to related reported basis. think, a

Matthew Lewis

only the three was new volume that our I customer. from we to other looking the the prepared four in add just And quarter, new to wells fact fourth some from thing remarks are might add existing

again, very with going price. extent, to So, as a we dependent But on improve cost can focusing think, spend adds certainly marketing values commodity well on time. just reductions, I or some as our the efforts, our we're of to is lot where

Unidentified Analyst

Great. Thanks. right. All

Andrew Woodward

John. Thanks,

Operator

turn concludes This I to remarks. question-and-answer to conference Woodward the session. over like any Andy would the for back closing

Andrew Woodward

the Well, and thank Look, again, in participating excited everybody future. about just today's are with want call. Blueknight very for pleased we remain to quarter

In meantime, As this call the of several to the to investor to conferences quarter team don't look many over support the further few with have and here. role again. I in interest thrilled reach hesitate the one on Matt be out We plan forward we any I'm to mentioned questions, our months. thanks our appreciate but your attend of last speaking at company please and joined virtual in next this you to and

Operator

today's This call. conference concludes

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

Blueknight Energy Partners (BKEP) 8 Nov 202020 Q3 Earnings call transcript