BKEP - Earnings call transcript Q3 2021 | Blueknight Energy Partners, L.P.

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Operator

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

Matthew Lewis

good and Thank morning. you

XX, We are disclosures should can call, for be our to that and September conference analyze found that on includes for welcome which to the earnings we financial which ended results reconciliations you measures during operating will Blueknight’s and certain help note financial website pleased you discuss release Please XXXX. our results. quarter our financial non-GAAP

filed is to be with in you under include obligation our the these to Additionally, I statements the or refer They XX-Q, differ like the statements call cause update management’s are future. supplemental no that in as information expectations. forward-looking to be results would future will These could subject from uncertainties SEC. date that will that available which made management’s comments questions and management may tomorrow to remind expectations to of actual Statements risks are the to predictions. and and Forward-Looking answers of during this call,

we publicly units. publicly October with acquire Board of the the outstanding and Directors of on Ergon and preferred a Xth, partner was offer all note on received Additionally, of general to non-binding available is our the Blueknight’s The cash that offer common held should from SEC filed website.

Ergon, independent subsidiary Given which solely an three that is the Blueknight’s the evaluate will directors Conflicts Committee, of the partner wholly owned indirect, composed of offer. general is

Woodward, lines today, open matter With unable the after review our is and Additionally, process the Committee’s Even Chief that, and Andy Officer. it negotiation will management offer. our legal the prepared I to further. is of if the advisors we remarks assist in Conflicts Committee potential any to Q&A. to their evaluation independent turn now not retained and Executive about over financial this will Conflicts comment will for ongoing, the discuss

Andrew Woodward

call progress an on our the today’s making performance details dialed with financial operating in. influencing business by for metrics quarter strategy. by open everyone performance and start I we Q&A. on third Thanks, during the plan will and update to factors morning provide our who external to followed the Matt we highlighting Matt. more Good before our our year-to-date, lines financial and then are key growth and

Now, pleased our during turning quarter, our a over which handful third to I’m of we achieved business for milestones highlights. especially with major partnership. the the performance

achieved oil our sale First, following synergy crude our we of business. and successfully transition the targets

current more all well. XX-months. lastly, last contracts X.X is or Second, expiring XXXX have looking when And our also tracking target business long-term The favorable we all have terms. renewed now times the extended that reached over at been to-date distributions on extremely uncovered

having and guidance said, strongest one year-to-date and by one to-date, year to prior has earlier of our to year. that and expect EBITDA contributed adjusted we the environmental our are laid which our of exceed years XX% We XX%, recorded respectively. safety performance and to to out best health With DCF XXXX quarters this financials be higher compared

by generate five further robust to should the we consistent for growth as in and Finally, with over demand improve our outlook advanced the asphalt our that years. lead passage trillion continues $X strategy supported bill infrastructure to next projects federal historic of plus

these This up XXXX, more this year-over-year, XX% and our leading in other financial improvement into X.X financial targets market on common year, XX% the we performance X.XX our interest X.X For X.XX The was distributions achieve and into of times. of leverage drivers approximately we communicated Earlier leverage The corporate distributions industry all coverage both on of unit maintaining X.XX included translated pleased all now XX.X long-term LTM in growth savings. continual to report total to times times metrics. achieved distributions, this in an the volumes, greater million, year-over-year. million today, distribution higher income, on times basis. have costs desire coverage the I’m DCF of in X.X up go at was or Matt third detail. times EBITDA will targets of quarter of on in adjusted measures. million to XX.X

in As of we consider maximizing repurchasing critical, increases. regarding have communicated getting before distribution we units unit returns, our we capital targets returning opportunistically policies, back allocation two to as preferred balanced adjusted and previously are the holders form these capital risk

and consider the above in distribution level. underlying forward, flow increase before, with the provided sustainable cash X.X increase as times Looking raising may the a stated the we corresponds

will As we ahead we Nonetheless, this our are reached underlying in prior above X% average. of decisions, third quarter, throughput have to very total the up the slightly and Operationally year-to-date headwinds trailing and tailwinds those point. growth, over were X% we long-term excited volumes the forecast. actual evaluate year-over-year be both considering three-year and year business

we the decades. contracts favorable year, executed XXXX in our Congress at or a At level, investment representing have so largest infrastructure terms. macro renewed the have more far of nation’s recently passed a bill addition, In we more this has current in

demand spending construction throughout we bill level road increase should to a infrastructure levels a years leads at in for noted stable year, to work come. sizable plus for next This and along the funding this environment and bill As with provide the years. five rising over the increased state

Now, our strategy. turning to

will terminals, complementary capabilities opportunities logistical in We turn financial Matt. will described appropriate call and for have to with time. more opportunities long-term for strategic enhance how walk growth our asphalt. These our and I in to If are advancing taking this have Matt we existing have of customers include the and executed or over our at now growth beyond our products outlook the the and existing past pursuing product performance the new business in earnest. products and that advance our solutions encouraged when areas been work in the terminals we certain began hard of quarter, performance. acquisitions to that when out projects the were year summary, definitive agreements, strategy. we align in we detail In earlier projects we initiated generating at I’m announce and steps by these prove new through

Matthew Lewis

Andy. Thanks

during XX.X prior to year. the XXXX reimbursements XX.X operations EBITDA year. third income to highlights X.X at adjusted prior million in was in our In quarter, million that financial was continuing million compared X.X from to in million income quarter insurance to asphalt the operations was quarter XX%, from we continuing year. Looking approximately the up business. three the XX.X XX% Adjusted With quarters prior compared compared certain Blueknight’s EBITDA was other of related up claim recognized million the

unit was calculated distributions on times To approximately up on X.XX sequentially, Third common year and operations the X.XX all common XX%, year-over-year XX.X XX.X on coverage X.XX year. that unit distributable continuing prior cash was million from this times expense on times is over million, coverage in all flow period, I interest highlight quarter which ratio and ratio, was distributions. up our cash typically our improved of the XX-months times during X.XX distributions. trailing bring both was compared cash each distributable the flow strongest quarter and our and distributions our third to

quarter since third of XXXX. Looking at performance, XXXX our third segment strongest represented quarter

escalators. in prior variable administrative achieve margin compared million when X% throughput was X% thresholds minimum of take amortization to and to operating which be full-year three can year, to throughput other was excluding during to a variable quarter X% or prior contract X.X fixed X% customers million. to annual depreciation million, revenue year. to or and expect averages after million renewals fluctuate Total year. excluding up of annual compared basis, to the the XX.X around revenue, from total each quarter revenue, with line of prior pay based primarily revenue the year, expense and XX.X General historical fee Asphalt costs. higher terminalling we And due third Variable throughput fourth down compared revenue recoverable X% on on

Andy reduced of successfully crude business. divestiture As profile we highlighted, post oil our the cost have

to XXXX. to be quarter maintenance capital expect XXXX a to million prior synergies guidance is end the update activities, million. of compared XXXX approximately year, X.X And year-to-date X.X reiterate, maintenance million on expect essentially of investing third bit in give you capture We our to an X.X during higher To upper full-year flat the we amounts. of but capital within range it to was

debt a position to liquidity highlight to and This improve time continued ratio I X.XX XXX a Finally, periods. that million of we year total debt our reported times. total leverage prior relative would last of and

ahead XXX our to we balance XXXX, XX, Operator, to please outstanding total leverage support lines September of debt and well million We believe the Q&A. was X.XX and sheet initiatives. utilize for our go times. positioned was ratio open total growth are future As our

Operator

question Please is first ahead. Garden Our go with Thank Steve you. Instructions] Sebi’s [Operator from Capital. Chick

Stephen Chick

and for common talk questions. And about DG offer but topic. stands And it. gets initial today, and still made last partner unlike make Ergon is put as not And I XX% important. today. apps in and The first the that low to to at pretty is guys was it common undervalues alignment. capital not year-to-date say guidance, for I now And Hurley, to in of unit right, put that deteriorated. letter lower per became is cut a and of got that comment call and the partner. a partner trends bronze Hey the XX% And partner the general preferred offer years XXX call, background, It have investment front bullish way per I’m in preferred the like strategic strategic businesses management then. to objections deficient obviously common and Hi have Ergon became years, bid they XXXX then question offensive. it as of I a and dividend understand over levels general acquire by despite Leslie you Blueknight the distribution stock it like first made Once And but it per Blueknight since for that because was first the when thanks. at today management twice. made, Blueknight. to forced since my per can’t they oil investment. Mark to Blueknight the invested catalyst taking unit. returning bid significantly Blueknight capital down a with It can course, became then. of and two of would Blueknight on XX%, again, Blueknight I is thanks Ergon to insulting Lampton invested I from unit And common is is month thereafter think crude CEO discuss XXX was may October unit like that The insulting on facts $X.XX for to a that in that I’m to became been on said, you I offer is unit going to I their that because on to down unit relatively not former three to again Blueknight common got to it And It first has I for put, former raised that right. showed though. of want the comment distribution XXXX. and sure the I of deployed unhappy I at significantly the is simply in offensive towards conference us they $X.XX to unit say the The ensuing Ergon they unit. Blueknight, on is make and by But in general XXth. a I’m XXXX it facts dividend down the dated was And going position common Blueknight, who up were holder say Ergon the a acquire the want the holders, ago. had that. per it you sure also know channeled would had actually, but holders is

have XXX% management they good XXXX April the balance this now destruction the out the you successfully obviously Namely not any they under June since infrastructure best partner. history bit and the take as you of doesn’t your got Andy, is appointed CG a made well. units value stands are company. cleanest course, has decisions then divested And up or times may when leadership, returning crude And you the it may on crude it sheet CFO, offer, in there been good general been the CEO news the have change. letter. now is pointed of business got have Blueknight account of the position right at But oil low actually and leverage takeout this overdue have way that oil is some you the as you common Blueknight, comp, the the along of year. So company, in made now, the they the a the stock capital know this. since joined XXXX in And as earlier Ergon’s the bill of ever in X.X as financial And in. been And for they of in company

the divesture times. have crude oil, an Following sheet balance X.X levered you under at

looking a you depressed holders, preferred XX% Ergon. all alternative why and in inefficient. unit is My for conversion withdrawn valuation that a high target And other will is a that trading would was have you of conversion the efficient. X.X common massively capital within probably a importantly, capital. made out evidenced for million Company’s shareholders, value It with Ergon. the way benefit would when for the quarter. illiquid, uses holders Ergon has the it take reason security times, reflect cost up though Your a ratio company as and clean of it units, to to-date this preferred Ergon pencil have structure are would the diluted the sorry, growth will X.X not was higher a common doesn’t be the is leverage market has units sources with I they And million cash you its times get any of like yet this sidesteps you a equivalent it diluted forward. is stock. preferred through bid leverage. under. the And years of ropes. what five of It I’m couldn’t is ago the an fully It company this easily. negotiated cash you The exchange lower on the going is reflect sorts, this common. also the $XXX ratio, sellers, value a say, be improvements the outlook that use company, and your have $XXX structure cap it the likely implied Blueknight’s you of could takeout, as doesn’t is which taxable of bid the daily the isn’t with preferred book and is weeks. highly offer, Andy. words, tax you or execute of the have to this capital really the this point is and balance shareholders, more this raise by better fully At bid. recapitalization result preferred was In benefit because as looks the for Two-thirds to is a is a it acquire time it of when the in and that two sheet by for And would insulting, equity for that shareholders, all Ergon costs of and including lot value. unit preferred ahead It But gross. outlay the

And so as can the party is it. benefits state, its offer it only as current And Ergon. in see far that one I

more by hear the question question My partner And to least the for ago. something the on to it get bid the timing how working March, were been a of meaningful? been the its question. you hear at come something to we we Now then have strategic might to month plans do it fourth partner change impression when just to made we way. have a timing, of more process is said, internally and out does presenting growth you you quarter stuff of the And and are that does But bid. on, was about not board. My general with have is, that call, I want and say change hoping board? present the as as I surrounding meaningful the that general internally stuff the

Andrew Woodward

opportunistically through I just opportunity. letter this for And is there comments that now this do do that as call that. that but least it. Relations Steve. I my don’t to certainly projects investors are Happy the investors, there that opportunities relates want answer answering that Investor are our call. behind quarter I take holding that. with back hopeful concerns, maybe said, year-end, still of comments, remain And is I by I think sharing I the nothing’s encourage questions, use think to, department. want we appropriate it referencing projects, by But like that by is that absolutely questions and and question, do saying can comments stand if types your Steve, is to I is our medium that announce our to growth appropriate those you I as with medium. and I send No, all at concerns will think and something to to to And we strategic think board. one, will I But year-end start us those last

with oil as since hand priority you lot personally we investors. is one have think me think as And our whole we been have know and board. that completed takes number with we we with I crude all how and have on on our have a now of liquidity right dialogues pride pretty transaction clear how the think that Along we management with I dialogues have I and of these a our calls growth.

now are likely we point So time with at showing since and essentially our imagine, can board as just time. other opportunities more any then than passing you in with

would say very from something have and year-end any will itself our management’s by I least not at offer been our again, all board to that supportive board call are what meetings, hopeful meetings of board with of with and Ergon has the has year-end but and along this of down. investors. recommendations, those slowed So that we announce,

Stephen Chick

little on trends And helps now, guess your quarter I for a just bit, Okay, obviously a good. then that the the numbers very are there. and good and

mentioned now. you as guidance, of XXXX for guidance EBITDA. well kind exceeding but you remember, of say I flat with of ahead are let’s to and ex-synergies kind obviously that And just XXXX, right was, your relative You trending EBITDA, are your

So I to tell but look what at quarter, talking number in EBITDA? trends XXXX Do range you to of don’t one’s like, think fourth want you and for in in quarter to going pinpoint forth? terms and I’m terms, year-over-year to be comparisons so expect the you can fourth a and the us, up least with total you

Matthew Lewis

Steve, we that I I our one. remarks, might guidance full-year those that to quarter, Matt, than the specifically that I targets exceed fourth expected to will just going did Hey share pick that our I this laid mean, release we mean, out. within note rather within And prepared we

And kind specifically that but back variable into think that to our so the year-to-date, quarter, fourth obviously, one that you your then of around of throughput maybe that XQ XQ of I performance is can comment, drivers take revenue. maybe kind biggest

that that full-year I and And on think revenue. between to just X% basis, of we calling X% so total be expect out a

of we pleased can those benefits kind in quarter and that run take with to-date rate. So performance we your kind synergies think number, pieces, and are are seeing saying really of G&A but the gets I you that the fourth

you know, just would question. is that speak that so, how probably to And I

Stephen Chick

next, would to next And may out, you to that bill is of contracts mean fourth that until how know the tell, now, anything able Maybe, there at next the with up hear then is second as be secondly, is it But you half? but contribute don’t anything point. I to is as about And percentage for this to about you year that this many year’s early that contracts, be a next renewal? report. guidance say then, quarter kind year of probably can Okay, infrastructure counsel expect I something helpful. we expect

Andrew Woodward

for We when have in right. an to we this more Andy, you are the is of business XXXX call to on give year-end guidance plan our year. visibility more that Steve update

it as think I relates contracts to XXXX. for

is year. I with at assume haven’t you but think publicly, infrastructure relates would this what this it start of just We line then And it are I we the that in as right. to have bill, had provided the

finally, We to shows that unknown passed, but a up have that how us. is bit gotten

contribute but So as of business. I we guidance full bill around and think we the likely the next something than to baseline more as to and plan have that you start after early on some you see on to the past provided to it could it would it. impact it call is time play likely around contribute our that amount next said, in year, have year see state But with

Stephen Chick

Alright guys. Okay. is Thanks helpful. that

Andrew Woodward

Thanks Steve.

Matthew Lewis

Thanks Steve.

Operator

Instructions] Capital. next from Our question Bailey ahead. is Jeff Please go Beach [Operator with

Jeff Bailey

questions Andy, investment impressive first like Hey, two is provided debt Matt. appreciated. up And good Blueknight is the to-date available the you have sometimes of just another shareholder Do quarter. Matt, really morning, My lines you balance. for and for the greatly that communication with for Matt thank to question, open XX.XX balance? or has debt community, are the to affirm it

Matthew Lewis

within We was the released it XX release, Yes. million. press

as was the November. of Xth that of think I

Jeff Bailey

you how offset? are lower debt XXXX? expense forward out the interest Given for balance the Matt, And but then, penciling also to curve,

Matthew Lewis

quarter on to I cash going below that the have a I as Sure. XXX,XXX? interest calls think expense was previously. say that little talked was this we

fair into is sense forward reduce reductions the then and is upward and pretty a going on mean, sloping balance. is we something prior an it on makes calls think curve think taking assumption just is think fair quarterly quarterly with continued internally most standpoint. from pretty number timing that are item I lenders evaluating a talked I a obviously, account is debt But that that I I about on our that that with basis. the a and that what senior forward, have we go and

Jeff Bailey

is it XXX,XXX then amortization, to is as right? expense interest And cost reaffirm up debt the quarter non-cash, shows each but line? couple just a It

Matthew Lewis

exactly is right. That

cash see issuance income amortization is your that So between the on will tomorrow. our detail the the DCF. additional is what And queue difference you be that that in on statement cost paid would available of filed debt

Jeff Bailey

be the like is there for year all not anything great. cost It so not non-cash going interest representative, the the XXX,XXX a more up is in that. or catch Okay expense? cash at the non-cash is of interest this end couple of there to or

Matthew Lewis

Right. Right.

Jeff Bailey

are not Got talked operating quarter, guys it, Andy this this okay. ever how then, no or or you you realize, on And flow and your Cushing every Is still for and for every of but I’m it came if I’m forward or synergies of and kind looking investors those you cash Matt, quarter operating since discounted and sure for by for there measured completed, is is going distributable dollar grown that you is at exception. about more pretty leverage much the year-over-year, leverage revenue? can

Andrew Woodward

Thanks is Andy. Jeff. This

drive in always continuously how we in improvements something business. standpoint, is our can efficiencies at, looking from are we baseline think drive our business, it our I

Now, business that efficiently, more we and along run have we is at find identified oil is looking how lot say improvements a But to way. but of one in won’t business that just And done to constantly we find more. it over run not are the the to we sizeable challenge last That and that, ways the pieces earnest years of another. not as related transactions. has to part only it we quite the you crude couple is with the say, urgency bit, a including of noted,

Jeff Bailey

the up to synergy the because oil crude Yes show before started disposition.

still so targets to And the if that just realized that, I’m there disposition? even, more crude related left, you oil is wondering have despite already

Matthew Lewis

give executed couple benefit I in we those mean, space kind contract and Jeff, I effective, are maybe and mean, There down footprint I forward. half think, some is I examples, our from October mean, of we Oklahoma, office by a a really, certain to here the things new of just consolidated Tulsa, took that

from spending XXXX. are things we certainly to of synergies, a something to But more sure we extent that benefit that we see capture And make trying of on I will so fully. lot those the that we mean to have those time to continue XXXX are is examples

Jeff Bailey

problem talked come industry. Andy about a we refining but forward? is have still before, And of still, asphalt daily procurement has out this of continued Do million are a for barrels you going a not trend that then about seeing capacity is that the it you domestic as

Andrew Woodward

growing I the similar views for slate past. think is what is think other of and have you and are on strong asphalt asphalt of views produce no, their our think that unrelated the this sometimes can more refiners on that Yes, are even to to tweak products in I product demand marketplace. We that side seen and products there we refined to asphalt certainly refined seeing

don’t think we that even So shutting even down, are five we think to as the - see over next gets growing years. demand I some that still think supply we fulfill the demand out regardless, demand filled you to renewable diesel, but that is plenty the know there there certain of refiners potentially and converting plus

Jeff Bailey

see don’t any you then price And related increases.

projects, relatively demand a of asphalt given of for lot capacity for before is said talked you market. the a maybe inelastic, price these of is times is the today. lead that, pretty big number but And just industry in refining that have the We for a apps, X% commodity

in So much increase affecting subsequent in the demand asphalt too price near you don’t future? any as see

Andrew Woodward

either as I or personally large they slightly are produce and asphalt products declining. other No, amount flat namely, speak increasing the I refiners that impact don’t to that an perhaps of their of see

Jeff Bailey

then price don’t other protections the increases, to. really pretty from are are know that have relates and as And SEC okay. last it, those we to question But cost clear that documents increases. we what indices talked Blueknight Got inflation, and has then my on calls investors, pegged previous and escalators general

more our start inflation CPI, we taking we change, in plugging a can that just we looking As numbers as escalation I mean, for Blueknight. number or but the how we on little cost I’m price X% XXXX, say, can models? clarity into build incorporate yesterday just in those X% models get a our is of for and I headline escalation should for

Matthew Lewis

Yes, mean look, Matt, the that point, data lot Jeff, taking would read. do, our this I contracts rather I of a in a are I and lag is one way just probably what effect there than is that that

would look period, kind is would average, and to And lag. it way a the if look so, a maybe a of you there be so if effectively of that from October call it to better monthly it November then compare to what is escalator and and take at year-over-year, you that be an kind that at annual

And down so flat, of X% if another stay then of it kind to kind call that period, plus. for know, XXXX would, you that further roll XX-month would

just you with would those January are I of a actual adjustments, I like of up So trailing it, trying said, XXXX. whenever to come take, kind call average,

Jeff Bailey

then, used over on are but to not expect there, indices roughly what And because we or or from is to lag privy to as forward, are I as to can even indexes there being renegotiate a move inflation progresses? a basis, it mirror results chance indexes, or we said, CPI Okay. we that escalate Blueknight like under

Andrew Woodward

to we customers one to the to A this we time increases is historical. Jeff, it. to as seeing mean, year been inflation these over that business sensitive are Andy. currently. rather our well than what’s increases I look are days, hopefully I sensitive year would as are it

not use renewals and truly it on consideration customers with take certainly, these to our so basis to into somehow business for that them value well. when want look advantage, not negotiations to but we business we it future long-term and a at only as because that comes and them And

it all comes renewal. those things take we So to when consideration into

the enough say So to is probably that hopefully guidance. related can we moment it. at gives all that But you

Jeff Bailey

Okay, that I all got. is

Thanks quarter. great Another guys.

Andrew Woodward

Jeff. Thanks

Operator

Our Partners]. with [John Birch go next Lidecker ahead. question Please is from

Unidentified Analyst

Congratulations and quarter. Matt. Andy morning great Good on another

Andrew Woodward

Thanks John.

Matthew Lewis

Thanks John.

Unidentified Analyst

A the you, any were or preferred granular couple I able In October, questions more if may. more for stock? in third quarter to you buy

Andrew Woodward

with us. did opportunity trade third we investors transact a What in approached we is, in to actually in August institutional had early an quarter buck the that

XX,XXX acquire unit. So we did per approximately $X.XX at roughly units

that was So it.

Unidentified Analyst

specifying and that rights more Ergon any in orientation. a that on question further. if great. And appraisal have is public Delaware without Would Law? second is shareholders the my Okay, agreed legal deal, under And hypothetically company

Andrew Woodward

you John further? that on elaborate Can question

Unidentified Analyst

cases give And not have if can appeal I I’m pay a And appraised. think number Courts of and and a performing the made we inadequate, been price that takeover offer that higher to quite is you number. Well, takeover property have yes, said, a offer under is lawyer, is courts understanding if their the my to Delaware worth a believe company is the Law, this of shareholders lay to interests offer where Delaware they required but it they typically, the years over is will that undervalues the that. have

Andrew Woodward

Okay, I yes. answer quick Well, can’t from process. the me know we just again, don’t on is, comment and

Unidentified Analyst

But saying, a what fact, as process a understand you shareholders then that. right. are of respect question not I to I whether Well, this that of question is have

something is Appraisal have the Law. say. to see Rights Delaware So, counsel advised be if house of is might or possible, and they you of counsel the onset It be what Committee your that to in outside in under aware Conflicts

Andrew Woodward

Yes.

We along. those pass will comments

Unidentified Analyst

great. Okay, Thanks.

Operator

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

Andrew Woodward

I thank again. rest support. of to for many Thanks have I a to and your good you Operator. speaking appreciate everyone forward we dialing want soon in dialing Again, of with for week. in. your look

Operator

concludes This call. conference sir. you, Thank today’s

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

Blueknight Energy Partners (BKEP) 11 Nov 212021 Q3 Earnings call transcript