Second quarter earnings for Tulsa-based Blueknight Energy Partners slipped $2 million as the company reported net income of $1.4 million along with operating income of $4 million and adjusted EBITDA of $16.1 million. But crude storage took a big jump upward and the company might make a stronger focus on terminalling.
Net income was $1.4 million in the second quarter 2020, compared to net income of $3.4 million for the same period in 2019.
As the COVID-19 pandemic caused a drop in fuel demand worldwide, the need for crude storage increased dramatically, resulting in a 24% increase in operating income for Blueknight. Its storage facilities generated $4.1 million as a result of the higher margin storage contracts.
Because of the improved income from storage, Andrew Woodward, Chief Executive Officer said, “We continue to evaluate strategic options and a potential sale of our crude oil pipeline and trucking businesses. As part of that effort, we may consider adding a portion of Cushing storage, which could take the form of a long-term lease or joint venture depending on interest.”
“Crude oil terminalling had its best quarter since mid-2017, with earnings up 24% year-over-year due to fully contracted storage, higher throughput and processing revenue, as well as our efforts to capture additional high margin storage opportunities during the deep contango market,” added Woodward.
Blueknight’s distributable cash flow was up 37% from a year ago and its coverage and leverage ratios also saw improvement. The company’s asphalt terminalling volumes outpaced last year by 9% and earnings from the segment improved 4% over the year.
The improved storage segment has bolstered the company’s leadership and its strategic plan to transition Blueknight into a pure-play terminalling company focused on serving specialty niche infrastructure and transportation end markets.
“We executed this week a new seven-year agreement with Ergon that consolidates previous agreements for twenty-two asphalt facilities and extends our total weighted average remaining contract length for take-or-pay revenue to six years. The new agreement is expected to generate incrementally more earnings without additional capital, and further improves the overall stability of our business,” continued Woodward.
Net capital expenditures in second quarter 2020 were $2.9 million, which included $2.6 million of net maintenance capital. The Partnership ended the second quarter of 2020 with total debt of $269.4 million, which resulted in a leverage ratio of 4.19 times, and $1.0 million of cash. As of July 31, 2020, total debt was $263.4 million and cash was $0.6 million. At the end of the second quarter of 2020, total availability under the credit facility was approximately $130.6 million, and availability subject to covenant restrictions was $36.0 million.
Click here to view entire company release.
Source: Blueknight Energy Partners
