BKEP - Earnings call transcript Q1 2021 | Blueknight Energy Partners, L.P.

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Operator

Good morning. My name is Carl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Blueknight Earnings Conference Call for the First Quarter 2021. All lines have been placed on mute to prevent any background noise. [Operator Instructions] I would now like to turn the call over to Matt Lewis, Blueknight's Chief Financial Officer. sir. ahead, go Please

Matt Lewis

good and morning. you, Thank

XX, to We questions. open call the the to prepared March conference lines to of you we are first today, will your will ended for pleased where results discuss Blueknight's operating our any welcome financial we After XXXX. address quarter remarks and

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

Andy Woodward

a and infrastructure to call a where our business pure-play our will XXXX intent highlights Matt. like to update the and company. provide Thanks, to dialed through who On just first also few our on call, year on go to our then is terminalling details Blueknight morning of additional listen key transforming I in update are growth our more you since I walk to quarter and provide year-end everyone our today's into and journey months a strategy our metrics. you will back leading once will we on in? and Good during a thorough strategy, ago, Matt investors it results financial encourage

turning highlights. to back first our Now quarter

encouraged story going sheet forward. solid and balance fully have successfully to supportive Matt year see crude business its cleaner great and me gives first cash but and more tending to despite of with common sites our last first X.Xx business year. at and healthier earnings remain we've the to year-over-year. renewals As our call, made up more Furthermore, seasonality, will along a continuing approximately considerable go with in the on we distributable for progress this quarter, Operationally, also pleasure business lowest leverage first XX% sale, It very now from last the I'm transactions mentioned strategy quarter. financial contracted a operations. quarter grow outperform Post level we a oil to our distribution during the flow manage during into our metrics our top-tier due coverage this and more detail, maintained contract in and the to be of closed quarter X.Xx. much even we our first focused report

of today, levels are the full season. to As anticipated of supply perceptions construction summer prior customer and modestly pricing driven by our future storage facilities

back utilization dynamics favorable refineries increase this We to demand. as are further the reopens continue pre-pandemic to more and macroeconomic economy to levels seeing meet

proposals House the are States infrastructure federal in would to roadways. nation's to and much XX% directing and a White annual unexpected XX% encouraged surpluses improve and represent similar also needed and believe Bill are maintain to We our increase potentially attention we both spending. to proposals Many current the federal by budget funding state projects, prior

five know on our our bullish years. one miles considered these roadway impact details of debate, in over early the more versus season Although next the remains too this need the said, it's of condition. are as roads under improvement in many poor factors of are five view With bills in the to for year that

and the in unchanged So prior XXXX as year. a result, line our with remains for outlook

of corporate with measured associated I are the a to crude and oil quantify these Turning student up gets with our transaction. improved initiatives am tracking well saving cost gets disciplined to track what savings. we our a set process activities, and

we consolidate captured our and pro our As forma realized rents overhead insurance savings, our have lower due substantially today, overall operations. de-risking of reduce and to premiums office

expect As upper X.X a approximately result, end expect end of approximately in our of lower million we achieve range million to XXXX. XXXX, achieve synergies of the and X.X range of the our in to

plan $X enhances internal approximately this of repurchase further on best eliminating our of in As our of continuously for flows and approximately and by which and improves growth units, mind, the allocation liquidity. of our executed we distributions. prepare With cost we we capital annual evaluate to last mentioned cash optimize million as of preferred call, and use opportunities a capital $XXX,XXX cash

I'd Now, strategy your turn growth our to we're to the progress like attention and making.

changes in meaningful three and implementing are We early of the generate to in innings key growth. areas identify

last technology. The second the the and first being people, processes

us should, people. instituting and to not only progress for it also this and culture as it's promoting facilitate starts is growth. year-over-year, the with our right about it Growth First, measured organization the about

actively We creating and a growth activities. levels approach collaborative development people all engaging and cross-functional our at to our mindset are a to business establish

Second you focus firmly is get We process. what on. believe you

and track factors meetings challenge and prioritize, of we project strategic understand We fully have established review alignment to key evaluate downside and case. risk economics a and inside, own regular with projects and and personnel cadence our discuss ensure potential

these by yield and technology we Finally, these resources steps designed in technology initiatives. prudently on enhance and tools results. and Again, and investing getting track growth we people, to process, our meaningful are efforts and will time focusing our believe actions right,

we're time discussions our short progress growth about we're of as excited initiating. the and amount Just

do we by of a stages with with to and very evaluate summary, are the that these approach Blueknight to growing opportunities customers, adjacent products long-term we this and at oil in actions feedstocks renewable want our sale discuss enhance I the markets taken our recycled participating expectations our performance. the we crude to growth. process. with our for we the opportunities need handling in advance said, because targets, success. activity, as performance and such as to sites happy instance, disciplined maintain now Matt? our asphalt strategic business, with to complimentary patient ask and for unique very Officer, In early continuing it our of turn potential milestone explore over I'll quarter, processing generating Financial to our for the our identifying capability the orient temper For and and and we've to Lewis, Chief Matt With are connectivity to investors I'm more reached remain financial discussions M&A own

Matt Lewis

results XXXX. quarter ended March first XX, we Yesterday, financial for reported Andy. the Thanks,

metrics include with during the reminder, both operations. the a sale and discontinued these presented discontinued business, continuing may As segments oil the crude of which as quarter, operations. Certain closed are

the that which note reflect references is we explained ratios net believe release of non-GAAP for continuing on measures recovered earnings appropriate in please non-GAAP financial However, the Reconciliations the measures. measures, labeled to such in our issued such all flow, basis. are business a operations, income adjusted comparison cash as distributable more to section EBITDA, go-forward yesterday,

this which quarterly website. be results of to regarding filed our report on afternoon the later with expect Form in our provided we SEC will the partnership's information on XX-Q, be available operations Additional

Blueknight’s Now financial results. looking at

between net book of calculated This our based agreements. and and net difference amount from XXXX million crude $XX.X proceeds sale estimated was quarter was income the million $XX.X oil the on our gain net the included to business. a sale value First related

the previously that XXXX, If trucking were is transaction when recall, impairment we $XX and you approximate Losses fourth segments, gains when oil the quarter our crude loss and pipeline held an sale. assets are closes. million classified during reported for related recognized identified to are recognized as

business. $X.X our XXXX to Distributable the prior million to was adjusted or up related continuing X% quarter up flow EBITDA prior continuing the from $X.X a the EBITDA of other $X.X cash to or operations fees, was First quarter the for $XX.X severance, XX% year. sale Excluded of $X.X compared costs XXXX, compared million, year. was adjusted from million operations of of oil and transaction million first million to crude from

business, interest underlying improvements our compared expense year-over-year approximately in year. prior was In addition the lower XX% asphalt to to cash

X.XX year. during X.XX our compared compared coverage flow, distributable common times ratio year. to unit distributions prior was during XXXX, from X.XX distributions on all during times first to cash distributions coverage first prior preferred on times all Our subtracting unit was quarter X.XX ratio the during the After quarter XXXX, times

believe to times covered distributions. coverage year a full or of ratio all all Given distributions on provide it’s target our XX-month X.XX to on trailing X.X basis. ratio the appropriate seasonality quarter of We also a flows, lowest and as our cash business second reminder to and for year. be each operations on continuing times our metrics coverage the trailing XX-month and Relative first greater was tend XXXX

was Our XX-month unit all trailing on common ratio distributions times. coverage X.XX

experience segment, arrangement was Structurally $X.X net the asphalt revenue was quarter amended to increase This were Total expenses, our contracts a the first and excluding and were depreciation variable fixed-fee, million amortization depreciation arrangement. operating an revenue higher a above year. to more costs both expenses. margin. of X% terminalling an margin, certain the prior total take-or-pay the and to On impact renewed compared million. point approximately or cost and prior Looking a favorable things million. Couple was of out, $XX.X insurance after period year or in did asphalt operating We this total total terminalling basis, total excluding operating in $XX.X revenue $XX.X at Total XX% amortization operating from million lease reimbursements. resulted year-over-year. excluding

we million mentioned expense General other operations transaction and recent costs quarter Andy business. was crude and with to However, continuing position. severance to in million some the debt quarter on our related expect I’ll first during sale and fees, cost $X.X to as our sale investing now see of following approximately business, $X.X oil crude move the activities of and and highlights first XXXX from the included to oil the liquidity savings administrative related renewals.

net million, quarter of which million. was in capital for expenditures $X.X This First year maintenance with operations $X.X net XXXX, million. $X.X continuing capital prior of expansion included was the line total capital

significantly to XXXX, units, organic sheet $XXX.X flexibility ago. future evidenced position as $XXX.X million at The crude strategy. total balance of fits March, allocation XXX,XXX serve holders, flow was in from we capital and to investor cash our Help common cash also as consideration units Blueknight’s distributable $X.X debt the acquisition of in hurdle unit debt repurchase liquidity cost and and Additionally our consider our preferred XX, March at our profile Repurchased preferred a by unit. a year Including enhances leverage as rate opportunities. compared capital oil a was on growth million retired it per Total investing balance transaction third-party only end. within outstanding and but not we strengthened $X.XX improves million. repurchased quarter

basis quarter leverage first leverage into of year a further covenant Our on times calculation partnership restrictions $XXX.X translates point throughout the March availability the revolving was improvement prior applicable essentially credit pricing margin subject XX, ratio X.XX our X.XX availability XXXX, of half our to XXXX grid. to the under This ratio $XXX.X and year XX our times. the million will was benefit of current as facility was million. as Total

you XXXX, give liquidity in us a update refinance of we through working to an Finally, on key the extend preserve credit revolving for priority our available facility. are partnership, currently to and a financial

up Q&A. of participants the to open more new We and lender second a feedback positive existing quarter. have a during we for both provide lot the received With update hope will Operator? that, material line and from

Operator

Thank you.

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

Jeff Bailey

Hey, dollar buyback if Matt. wondering, preferred I’m as any questions quarter. for shares. ranges there’s the great as My amount couple are of Andy another or Matt, of number Matt, and far first around

Matt Lewis

Jeff. Appreciate Good morning, that.

in the even like think thereafter, we first we about do being Then and In We clearly, how about allocation. business. mean, checked terms how opportunistic I the mean, X.X we’ve we always we communicated last – to we of I we grow quarter, preferred think -- that due we that. at use times. of think how mean, now part feel on box the the kind term about I capital buybacks, that’s

into that on projects redeploying capital so And high a risk adjusted returning basis.

absent And repurchasing about, would you which that so did. preferred think opportunistically, we what units, is

of in credit that part We’ve of that a to want program flexibility and I not think broader it’s flexibility. so maintain And necessarily our got kind agreement. we

went shares moving ahead target to so on go-forward I’d somewhat and think scenario, up And we continue a time, extent, about like basis. to preserve want lift something say pretty and we in of that a we this that’s were the kind took tranche to But at one able protect significant of to we of where just, action.

Jeff Bailey

Okay.

a on be also ongoing? fair of block any to they time. the it’s may give say say fair you given you dependent, they at investor that sell if Is may market it’s price, should that – to want you And So price dependent a all in to have call course.

Matt Lewis

Yes. That’s totally fair.

Jeff Bailey

Okay. you subdued officials you monetary and obviously, out operate? in the question, materials markets. sorts some concerns a the especially lot are making inflation, Matt, optimistic CPI of the my raw really Anecdotally, pretty of there’s coming second in inflation different comments, but are our anecdotes inflation, corners are of numbers of that wild of lot business seeing a all

Matt Lewis

different the kind No. lot think add seen of haven’t seen of the say on mean, we’re a necessarily well. our lumber and comment, inflation But Andy that necessarily yet. of to out we end I But from it’s kind let maybe impact haven’t higher commodities at a Maybe really other of from what I as I I’ll fair it some in look levels. it’s business. of would see kind that hearing we there, certainly really

Andy Woodward

economy Yes. And and title Big business. impact question, aren’t of like hot And take we clearly, Matt think like a now of benefits seeing U.S. is we standpoint. inventory. model one our a I said, our topic it is, very the to this you right don’t from said, Jeff,

a tolling arrangement sites. so almost it’s truly at And our type

is any so that And that impacts by see the I inflationary well. directly think we from standpoint as minimized,

high we’re measures be impacting are we seeing lead any as capital to again, obviously But and could equipment. Now, inflationary well. not clearly that spending that us buying

Jeff Bailey

was And of kind that follow-up. Yes. that my – addresses

really CPI. clear that contracts the just the down. narrow so lot a at least to XX-K it And index The makes of are to loosely

risk either But the a there from are to CPI inventory that don’t expenditures maybe CapEx inflation, margins reimbursed. of that affect you costs any danger in so any where you the is contracts but costs is CPI, besides and to or HIPAA are the lot have other there our So inflation to that any from to we margins other take there is be not linked strong danger know the entitled basis may tied could closely margins.

Andy Woodward

this impact contracts our and are think Again, mentioned take a the to pay we quarter from inflation. way his I XX% excludes just variable or the Jeff, downside is that the model were and of Matt minimal had structured impacts in revenue. very statements that reimbursement

up that out that probably utility things to both passed pass-through revenue again, so one of us pass-through a And are related that But OpEx in for expenses biggest our show we things directly and – through to our are like cost activity. there that's costs. customers. the it's And

directly. feel don't we that So expense

Unidentified Analyst

kind Okay. question. philosophical And a then broader of of last my more is question Andy, kind

thinking are is holder all long-term adopting philosophy lot You practices corporate the a and and of very really best unit oriented.

how growth MLP, next a to for capital. distribution and and price so should as kind should over new you? metrics been an lot Historically, as progress what several center they've prominent, sort how the here looked So at evaluate measure you blaze of of unit the investors your you success? trial appreciation are your a a look for investors but front of years, hasn't The

Andy Woodward

Jeff And probably question a can time that's lot Yes, question. of we spend good a around. a

think this said and I've before. I

this characterize almost we're like a I is over and our think the call. sustainable business for investors. What to in that strategy very the strategy I I value as on this on said corporate more would manner long-term focused here a last create a run

at unit, return per investors. return care to drive metrics that And so to are, not and It's will distribution units a to market pursue accretion total plans. going DCF much values, our we consideration will we the yield be that meaning to as into as will total that which just we the and business looking about any but which we again issued we take this plan our year-over-year, minimize as growth self-fund possible

or the a our about over And This the long-term a as very for structure value so, MLP driven we by going much not of first policy first. forward. manner are sustainable distribution investors creating all again in is

Unidentified Analyst

Okay.

from the implicit amount with corporations do for best looking that equity, charge you're value corporate say, invested the charge and what we've learned to economic really to at return a fair created it's on equity, fair the say, superior is So of capital metrics a for Andy?

Andy Woodward

Jeff, right. student a invested exactly big and big that's I'm on a No, on return believer capital.

So of our for those measures a over end are thought, most the the lot exact type that long-term. think of value the we up generating investors

Unidentified Analyst

questions. Thanks and Matt. my That's Okay. all Andy

Matt Lewis

Jeff. Thanks

Andy Woodward

Appreciate it Jeff.

Operator

Instructions] [Operator question go from Please next The Steve ahead. Chick comes Yucaipa. with

Steve Chick

that to little here. it acceleration Good quarter asphalt XXXX X% Matt what the the did a and quarter asphalt also business in fourth, good and kind last looks place which first Hey you year-over-year of the renewal, change of versus I'm growth is, guys. like guess quarter. looking out and question I at an margin call the of reported contract the in my you start was and bit had last

if kind might I'm reading uptick execution if what, right, know be we if better but a don't in that's I'm the seeing kind have So if for there of bit I wondering as if of first that's – of – – or business that quarter the here. just that an had I'm did a

Matt Lewis

go-forward really is renewed think a was the again, about we kind the is place. the quarter, a certain we a Rockies, kind in of beginning last second to And And fixed nice from contracts second year-over-year, we have a of what it variable the the baseline at at of variability year, think, Yeah, half activity then, new of this about the basis. on of of a the that had year had look lot nature like saw of a a weather standpoint. talk of of to Steve. well. function in thanks just lot great kind in that revenue year and When as areas year, and kind of year that we of that of which through that lot that We the activity. for example, half nice extended, last we I the a And

And so, increment see yes, get a that's really of of you above function improvement and we of, year, did base. the we this quarters fourth kind once we some should as see third But kind year-over-year renewed. that the this contracts the to

Steve Chick

bit that's this a quarter, within and know, I for variable line item. a of it's that revenue And Okay. throughput had the from small, a you contribution but

we to to see looks given more normally early. it's there as small, it indicative see me. kind of on. think I don't about to year out know seasonally, this additive high I of goes that don't that that's it anything know or? to if can it's of like item I again, margin it's we what just line but speak of stood typically that it's the XXX,XXX, kind Is And

Andy Woodward

most Not I because into Andy. show quarter of Yes, look up in wouldn't variable have too really, that we tend the this in Steve, revenues much season. quarter years amount is, small is this in business. been few first a to our the What types that those and is remarks it's I in said I our think say very we early that first in would prepared we’ve times on

we quarter year. have visibility lot projects that start sites out is quarter these next the underway. of and projects lowest at to get various a construction our get really areas of timeframe lot And to when a start we better June First quarter, earnings the

better a variable standpoint. at to that the in time read a revenue have much year point tend And the rest from of of look so how might we

Steve Chick

two? if could know the, bit you told We to of last the good. kind of that's of – I'm on and and level some second, how interesting and the last – Okay. could more the singles comments, a speak be that to I the helpful. the how course talked what's of and they having if just your or year feeling, could wondering And conversations kind you on say then sizable, over the front. whether your next confidence or people conversations patient you that That's to be quarter the you comments broadly M&A talk your doubles going on doing and you're to landscape, be something just something relative Andy, little pretty

Andy Woodward

back will I literally A Steve. good question, comments, two going say it's almost ago. those to months And really

we're not in from we're excited that is, say growth what pursuing very Since that ago And a I progress will in we're is So confidence the high. my standpoint. about. those that then, making is long very areas

for market five I at think prepare very in growth we're over our right infrastructure customers sites for existing years. asphalt a within the potential potentially spend conducive stronger organic a now our next as especially

discussions that of couple would say ideas looking probability bringing don't is of really strategy, we're you standpoint to to in similar M&A great last non-core seeking fit from because a months and portfolios are we're what ourselves think big is to companies do. with their working them proactively potentially year need the from the lot monetize of I that the over I that their and we're a but now. re-evaluating any a one a believer lot And assets market them us these standpoint out out opportunities having are well low. I'm fit them last within of just a trying that true of at thesis overall in most for of is

forward. going big most And is we I we XX% best part XX% a really of right our our of so then should that business. these to of into what and what in the rank for job is And focusing investors on do, position the call here, to to a ideas decide think then not on really my do of drive start forward most my exactly focused for that value what job efforts it now deciding what we're and us being to prioritize a going think and that's generating is lot we

Steve Chick

Thanks, Okay. Thanks. Andy. Alright. put. We'll

Operator

William comes go Co. from question William from ahead. next & Please Smith The Smith

William Smith

versus doesn't for take Could that? $X.X $X.X which buyback then XX is you're comment $X.X seem your years question My could capital million optimism Hi. your a compelling shares and saving year and around to the growth you comments million, were have recover growth It if preferred organic about otherwise. your million. you optimistic the that on

Matt Lewis

X.X% yield long-term the that to think and in most I certainly what best sense like be Sure. we use unit accretive XXX holders is business. I mean, back units is March and will you're right. think our we feel will when capital in Yes. transacted I the growing of about

And sure comment also so I little is balance credit that's leverage facility, to growth, making preserving for of that's but as for about a a the think also that same cost X%. it's a capital that decision we time, Andy's at liquidity over got we're you've thinking well, and example, where

units, think available you really what's debt future as So down to us that going about or of not cash of pay or preferred whether of function kind to a be you just – at you excess repurchase X% flow, time. that's

want keep we that's to flexibility, we on and grow? right that though So you're we focused why do were certainly how

William Smith

the that Is I it XX-year correctly? payout that is Am on payout? million? XX-year about But thinking a $X.X a

Matt Lewis

Yes.

I that's fair it. math think kind on of

William Smith

opportunities to you're that compare better opportunity on optimistic seeing your that's you a if So comments? else other based what than

Andy Woodward

and doing is levered could the today, arrangements pay standpoint we taking really significantly approach cash I what this to support, or we're this our would capital. blended is stability take flows. a What of we're we're high Andy. quality almost argue versus Again, to allocate the And under due how business William

previously to it by Steve, It and sets that time. going opportunities those As Matt mentioned to I And still where presenting be might mentioned some take as that's be grow. have availability deciding next might year. when opportunity this we with evaluating year; we're themselves excess and

capital, balance or maybe us X% the so we're is price during that return is debt some the the of at may optimize a incremental if we instead purchases allocation holding right, preferred, off look of continuously And and the again but paying bad on right. to time, you're going sheet where opportunistically absolutely gives of cash our return right,

us the our highest will adjusted return, on return generate in that going net finding projects significant best future. a is really Our for to be good risk basis back

William Smith

those Was Ergon seller the of shares?

Andy Woodward

No. In a it the third-party institutional we mentioned comments prepared that investor. was

William Smith

their Ergon not any of So or affiliates?

Andy Woodward

Correct.

William Smith

Okay. Thank you.

Andy Woodward

you. Thank Yes.

Operator

more Woodward questions any conference phones. no session. turn concludes to Andy I for the like This question-and-answer are to over would Mr. the There the on remarks. closing back

Andy Woodward

and Thanks, again in for today's Carl. appreciate everybody We call. continuous interest support Blueknight. your Thanks participating

a be will number listed of this that at conferences our on website. We be month will

And reach ask conferences, in the speaking to of we thanks the so of out many at week. but too questions. support. forward all feel you meantime with we free And for a to any your just to you to good certainly please And look rest again those have

Operator

This call. concludes today's conference

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

Blueknight Energy Partners (BKEP) 5 May 212021 Q1 Earnings call transcript