SOURCE: Blue Dolphin Energy Company

Blue Dolphin Energy Company

November 14, 2014 08:00 ET

Blue Dolphin Announces Improved Third Quarter 2014 Financial Results

HOUSTON, TX--(Marketwired - Nov 14, 2014) - Blue Dolphin Energy Company ("Blue Dolphin") (OTCQX: BDCO) announced financial results for the third quarter financial period ended September 30, 2014.

For the three months ended September 30, 2014 (the "Third Quarter 2014"), Blue Dolphin reported net income of $816,047, or an income of $0.08 per share, compared to a net loss of $2,080,737, or a loss of $0.20 per share, for the three months ended September 30, 2013 (the "Third Quarter 2013"). The $2,896,784 improvement in net income in the Third Quarter 2014 was primarily attributable to favorable refining margins and the introduction of jet fuel into the product mix. Total revenue from operations for the Third Quarter 2014 was $87,903,657 compared to total revenue from operations of $106,620,393 for the Third Quarter 2013. The nearly 18% decrease in total revenue from operations was primarily the result of Blue Dolphin's crude oil and condensate processing facility (the "Nixon Facility") operating 12 fewer days and having lower refined product sales in the Third Quarter 2014 compared to the Third Quarter 2013.

For the nine months ended September 30, 2014 (the "Nine Months 2014"), Blue Dolphin reported net income of $8,448,877, or an income of $0.81 per share, compared to a net loss of $7,951,078, or a loss of $0.76 per share, for the nine months ended September 30, 2013 (the "Nine Months 2013"). The $16,399,955 improvement in net income in the Nine Months 2014 was primarily attributable to favorable refining margins and the introduction of jet fuel into the product mix. Total revenue from operations for the Nine Months 2014 was $311,117,774 compared to total revenue from operations of $320,254,921 for the Nine Months 2013. The nearly 3% decrease in total revenue from operations was primarily the result of decreased total refinery throughput at the Nixon Facility in the Nine Months 2014 compared to the Nine Months 2013.

On October 30, 2014, subsequent to the end of the reporting period, FLNG Land, II, Inc., a Delaware corporation ("FLNG") made a second payment of $250,000 to Blue Dolphin Pipe Line Company ("BDPL"), a wholly-owned subsidiary of Blue Dolphin, pursuant to a Master Easement Agreement dated December 11, 2013. Under the Master Easement Agreement, BDPL is providing FLNG with: (i) uninterrupted pedestrian and vehicular ingress and egress to and from State Highway 332, across the certain property of BDPL to certain property of FLNG (the "Access Easement") and (ii) a pipeline easement and right of way across certain property of BDPL to certain property owned by FLNG. Such second payment of $250,000 will result in FLNG making annual payments in the amount of $500,000 to BDPL in October of each year for a minimum of five (5) years. One year after the final annual payment of $500,000 is made to BDPL, FLNG will begin paying to BDPL annual payments of $10,000 for so long as FLNG desires to use the Access Easement.

Financial Highlights:

  • Total Earnings before Interest, Income Taxes and Depreciation ("EBITDA") increased $2,962,586 to $1,444,711 for the Third Quarter 2014 from a negative EBITDA of $1,517,875 for the Third Quarter 2013; total EBITDA increased $16,721,231 to $10,553,487 for the Nine Months 2014 from a negative EBITDA of $6,167,744 for the Nine Months 2013;
  • Net Income increased $2,896,784 to $816,047 for the Third Quarter 2014 from a net loss of $2,080,737 for the Third Quarter 2013; net income increased $16,399,955 to $8,448,877 for the Nine Months 2014 from a net loss of $7,951,078 for the Nine Months 2013; and
  • Cash Flow from Operations increased $10,773,338 to $6,212,791 for the Nine Months 2014 from a negative cash flow from operations of $4,560,547 for the Nine Months 2013.

Business Segments:

Blue Dolphin has two reportable business segments: (i) "Refinery Operations" and (ii) "Pipeline Transportation." Business activities related to Blue Dolphin's "Refinery Operations" business segment are conducted at the Nixon Facility. Operations at the Nixon Facility also involve the storage and terminaling of petroleum under third-party lease agreements. Business activities related to Blue Dolphin's "Pipeline Transportation" business segment are primarily conducted in the U.S. Gulf of Mexico through pipeline assets and leasehold interests in oil and gas properties. Blue Dolphin's "Refinery Operations" business segment represents more than 99% of total operations.

Operational Update:

The Nixon Facility, which was refurbished and began operations in February 2012, has been operating for approximately two and a half years. Key operational statistics for the Nixon Facility were as follows:

         
    Three Months Ended September 30,   Nine Months Ended September 30,
    2014   2013   2014   2013
                 
Feedstock runs(1)   849,402   979,807   2,909,669   2,967,469
Refinery production   831,771   963,645   2,855,054   2,906,873
                 
(1) Represents barrels of crude oil processed.
 

The Nixon Facility operated for a total of 78 days at 73% of operating capacity during the Third Quarter 2014 compared to a total of 90 days at 73% of operating capacity during the Third Quarter 2013. This represented 12 fewer operating days in the Third Quarter 2014 compared to the Third Quarter 2013. The Nixon Facility experienced 14 calendar days of downtime in the Third Quarter 2014 primarily related to repair of an overhead accumulator and a temporary curtailment of certain crude oil deliveries compared to two calendar days of downtime in the Third Quarter 2013 for non-routine maintenance. 

The Nixon Facility operated for a total of 252 days at 77% of operating capacity during the Nine Months 2014 compared to a total of 265 days at 75% of operating capacity during the Nine Months 2013. This represented 13 fewer operating days in the Nine Months 2014 compared to the Nine Months 2013. The Nixon Facility experienced 21 calendar days of downtime in the Nine Months 2014 related to a planned maintenance turnaround and repair of an overhead accumulator compared to 8 calendar days of downtime in the Nine Months 2013 for a planned maintenance turnaround.

The "Refinery Operations" business segment generated EBITDA of $1,773,357 for the Third Quarter 2014 compared to a negative EBITDA of $1,142,267 for the Third Quarter 2013. The "Refinery Operations" business segment generated EBITDA of $11,495,160 for the Nine Months 2014 compared to a negative EBITDA of $4,765,377 for the Nine Months 2013.

Non-GAAP Financial Measures:

This press release and its attachments include EBITDA, a financial measure defined as non-GAAP by the Securities and Exchange Commission (the "SEC"). Net income (loss) is adjusted for income taxes, interest expense (or income), depletion, depreciation, and amortization. Management excludes these items so that investors may evaluate Blue Dolphin's current operating results without regard to Blue Dolphin's financing methods or capital structure.

Blue Dolphin's financial measures may be different than non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles ("GAAP"). An explanation of our non-GAAP financial measure and a reconciliation of the financial measure to the GAAP financial measure Blue Dolphin considers most comparable are presented in "Part I, Item 1. Financial Statements -- Note (4) Business Segment Information" and "Part I, Item 2. Management's Discussion of Financial Condition and Results of Operations -- EBITDA" of Blue Dolphin's quarterly report on Form 10-Q for the three and nine months ended September 30, 2014, as filed with the SEC on November 14, 2014.

About Blue Dolphin
Blue Dolphin Energy Company (OTCQX: BDCO) is an independent refiner and marketer of refined petroleum products in the Eagle Ford Shale. Blue Dolphin's primary business is refinery operations at the Nixon Facility, which includes the refining of crude oil and condensate into marketable finished and intermediate products, as well as petroleum storage and terminaling. Blue Dolphin also owns and operates pipeline assets and has leasehold interests in oil and gas properties. For additional information, visit Blue Dolphin's corporate website at http://www.blue-dolphin-energy.com.

Certain of the statements included in this press release, which express a belief, expectation or intention, as well as those regarding future financial performance or results, or which are not historical facts, are "forward-looking" statements as that term is defined in the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. These forward-looking statements are not guarantees of future performance or events and such statements involve a number of risks, uncertainties and assumptions, including but not limited to: changes in the general economic conditions; changes in the underlying demand for our products; fluctuations of crude oil inventory costs and refined petroleum products inventory prices and their effect on our refining margins; our dependence on Genesis Energy, LLC ("Genesis") and its affiliates for continued financing, sourcing of crude oil inventory and marketing of our refined petroleum products; the early termination of our agreements with Genesis and its affiliates; our dependence on Lazarus Energy Holdings, LLC for continued financing and management of all of our subsidiaries and the operation of all of our assets, including the Nixon Facility, pursuant to the Management Agreement; our ability to generate sufficient funds from operations or obtain financing from other sources; failure to comply with certain financial covenants related to certain of our long-term indebtedness; regulatory changes that reduce the allowable sulfur content for commercially sold diesel in the United States, which will require us to incur significant capital upgrades and could have a material adverse effect on our results of operations, financial condition and cash flows; availability and cost of renewable fuels for blending and Renewable Identification Numbers to meet Renewable Fuel Standards obligations; strict laws and regulations regarding employee and business process safety to which we are subject, the compliance failure of which could have a material adverse effect on our results of operations and financial condition; potential increased indebtedness, which may reduce our financial flexibility; regulatory restrictions on greenhouse gas emissions, which could force us to incur increased capital and operating costs and could have a material adverse effect on our results of operations and financial condition; access to less than desired levels of crude oil for processing at the Nixon Facility; and the factors set forth under the heading "Risk Factors" in Part I, Item 1A of Blue Dolphin's previously filed Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and Part II, Item 1A of Blue Dolphin's previously filed quarterly report on Form 10-Q for the quarterly periods ended March 31, 2014 and June 30, 2014. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Blue Dolphin undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

   
Blue Dolphin Energy Company & Subsidiaries  
   
Consolidated Balance Sheets (Unaudited)  
   
    September 30,     December 31,  
    2014     2013  
                 
                 
                 
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 1,182,475     $ 434,717  
Restricted cash     1,005,886       327,388  
Accounts receivable     11,428,482       13,487,106  
Prepaid expenses and other current assets     181,028       333,683  
Deposits     860,498       1,219,660  
Inventory     7,566,128       4,686,399  
  Total current assets     22,224,497       20,488,953  
                 
Total property and equipment, net     37,191,958       36,388,666  
Surety bonds     850,000       -  
Debt issue costs, net     473,186       498,536  
Trade name     303,346       303,346  
TOTAL ASSETS   $ 61,042,987     $ 57,679,501  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
CURRENT LIABILITIES                
Accounts payable   $ 20,030,921     $ 20,783,541  
Accounts payable, related party     1,801,376       3,659,340  
Notes payable     1,795,702       11,884  
Asset retirement obligations, current portion     107,509       107,388  
Accrued expenses and other current liabilities     2,178,424       1,600,444  
Interest payable, current portion     49,106       40,272  
Long-term debt, current portion     590,098       2,215,918  
  Total current liabilities     26,553,136       28,418,787  
                 
Long-term liabilities:                
Asset retirement obligations, net of current portion     1,946,484       1,490,273  
Deferred revenues and expenses     734,745       -  
Long-term debt, net of current portion     9,948,673       13,889,349  
Long-term interest payable, net of current portion     1,222,360       1,767,381  
  Total long-term liabilities     13,852,262       17,147,003  
                 
TOTAL LIABILITIES     40,405,398       45,565,790  
                 
Commitments and contingencies                
                 
STOCKHOLDERS' EQUITY                
Common stock ($0.01 par value, 20,000,000 shares authorized;10,596,218 and 10,580,973 shares issued at September 30, 2014 and December 31, 2013, respectively)    
105,963
     
105,810
 
Additional paid-in capital     36,698,813       36,623,965  
Accumulated deficit     (15,367,187 )     (23,816,064 )
Treasury stock, 150,000 shares at cost     (800,000 )     (800,000 )
  Total stockholders' equity     20,637,589       12,113,711  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 61,042,987     $ 57,679,501  
                 

See notes to consolidated financial statements in Blue Dolphin's quarterly report on Form 10-Q for the three and nine months ended September 30, 2014.

 
Blue Dolphin Energy Company & Subsidiaries
Consolidated Statements of Operations (Unaudited)
                     
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2014     2013     2014     2013  
                                 
REVENUE FROM OPERATIONS                                
  Refined product sales   $ 87,846,757     $ 106,541,284     $ 310,938,981     $ 320,025,559  
  Pipeline operations     56,900       78,909       178,793       229,162  
  Oil and gas sales     -       200       -       200  
    Total revenue from operations     87,903,657       106,620,393       311,117,774       320,254,921  
                                 
COST OF OPERATIONS                                
  Cost of refined products sold     83,876,239       105,314,208       292,154,207       317,508,586  
  Refinery operating expenses     2,496,514       2,629,518       8,092,738       8,099,371  
  Pipeline operating expenses     50,100       40,813       139,542       122,592  
  Lease operating expenses     7,041       16,797       21,037       58,088  
  General and administrative expenses     253,437       387,100       1,049,981       1,333,203  
  Depletion, depreciation and amortization     393,871       337,156       1,175,643       997,671  
  Abandonment expense     -       8       -       51,360  
  Accretion expense     53,731       28,173       158,264       84,513  
    Total cost of operations     87,130,933       108,753,773       302,791,412       328,255,384  
Income (loss) from operations     772,724       (2,133,380 )     8,326,362       (8,000,463 )
                                 
OTHER INCOME (EXPENSE)                                
  Tank rental and easement revenue     282,516       278,349       1,055,882       835,048  
  Interest and other income     1,813       668       45,411       2,480  
  Interest expense     (214,407 )     (226,374 )     (675,586 )     (788,143 )
  Loss on disposal of property and equipment     (4,400 )     -       (4,400 )     -  
    Total other income     65,522       52,643       421,307       49,385  
                                 
Income (loss) before income taxes     838,246       (2,080,737 )     8,747,669       (7,951,078 )
Income tax expense, current     (22,199 )     -       (298,792 )     -  
Net income (loss)   $ 816,047     $ (2,080,737 )   $ 8,448,877     $ (7,951,078 )
                                 
                                 
Income (loss) per common share                                
Basic   $ 0.08     $ (0.20 )   $ 0.81     $ (0.76 )
Diluted   $ 0.08     $ (0.20 )   $ 0.81     $ (0.76 )
                                 
Weighted average number of common shares outstanding:                                
Basic     10,446,218       10,421,731       10,439,684       10,450,906  
Diluted     10,446,218       10,421,731       10,439,684       10,450,906  
                                 

See notes to consolidated financial statements in Blue Dolphin's quarterly report on Form 10-Q for the three and nine months ended September 30, 2014.

   
Blue Dolphin Energy Company & Subsidiaries  
Consolidated Statements of Cash Flows (Unaudited)  
             
    Nine Months Ended September 30,  
    2014     2013  
OPERATING ACTIVITIES                
  Net income (loss)   $ 8,448,877     $ (7,951,078 )
  Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                
    Depletion, depreciation and amortization     1,175,643       997,671  
    Unrealized loss on derivatives     26,150       (297,020 )
    Amortization of debt issue costs     25,350       25,350  
    Amortization of intangible assets     -       9,463  
    Accretion expense     158,264       84,513  
    Abandonment costs incurred     -       51,360  
    Common stock issued for services     75,001       100,000  
    Loss on disposal of assets     4,400       -  
  Changes in operating assets and liabilities                
    Restricted cash     (678,498 )     62,210  
    Accounts receivable     2,058,624       6,358,937  
    Prepaid expenses and other current assets     152,655       (186,467 )
    Deposits and other assets     (490,838 )     (213 )
    Inventory     (2,879,729 )     (2,085,969 )
    Accounts payable, accrued expenses and other liabilities     (5,144 )     (3,395,086 )
    Accounts payable, related party     (1,857,964 )     1,665,782  
      Net cash provided by (used in) operating activities     6,212,791       (4,560,547 )
                 
INVESTING ACTIVITIES                
  Capital expenditures     (1,145,720 )     (1,244,859 )
  Proceeds from sale of assets     -       201,000  
      Net cash used in investing activities     (1,145,720 )     (1,043,859 )
                 
FINANCING ACTIVITIES                
  Proceeds from issuance of debt     -       5,750,611  
  Payments on long-term debt     (6,103,131 )     (60,876 )
  Proceeds from notes payable     2,000,000       15,032  
  Payments on notes payable     (216,182 )     (206,445 )
      Net cash provided by (used in) financing activities     (4,319,313 )     5,498,322  
Net increase (decrease) in cash and cash equivalents     747,758       (106,084 )
                 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     434,717       420,896  
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 1,182,475     $ 314,812  
                 
Supplemental Information:                
Non-cash operating activities                
  Reduction in accounts receivable in exchange for treasury stock received   $ -     $ 800,000  
  Surety bond funded by seller of pipeline interest   $ 850,000     $ -  
Non-cash investing and financing activities:                
  New asset retirement obligations   $ 300,980     $ -  
  Financing of capital expenditures via capital lease   $ 536,635     $ -  
  Deferred revenue recognized   $ 115,254     $ -  
  Accrued services payable converted to common stock   $ -     $ 50,000  
Interest paid   $ 1,211,773     $ 617,091  
                 

See notes to consolidated financial statements in Blue Dolphin's quarterly report on Form 10-Q for the three and nine months ended September 30, 2014.

 
Blue Dolphin Energy Company & Subsidiaries
GAAP to Non-GAAP Reconciliation -- EBITDA
 
                         
    Three Months Ended September 30, 2014        
    Segment              
                         
 
 
 
 
Refinery
Operations
 
 
 
 
Pipeline
Transportation
 
 
 
 
Corporate &
Other
 
 
 
 
 
Total
 
 
Revenues   $ 87,846,757     $ 56,900     $ -     $ 87,903,657  
Operation cost(1)(2)(3)     (86,355,916 )     (110,872 )     (274,674 )     (86,741,462 )
Other non-interest income     282,516       -       -       282,516  
EBITDA   $ 1,773,357     $ (53,972 )   $ (274,674 )   $ 1,444,711  
                                 
Depletion, depreciation and amortization                             (393,871 )
Interest expense, net                             (212,594 )
                                 
Income before income taxes                           $ 838,246  
                                 
Capital expenditures   $ 815,849     $ -     $ -     $ 815,849  
                                 
Identifiable assets(4)   $ 57,520,835     $ 2,998,619     $ 523,533     $ 61,042,987  
                                 
     
(1)   "Refinery Operations" and "Pipeline Transportation" include an allocation of general and administrative expenses based on respective revenue.
(2)   "Refinery Operations" includes the effect of economic hedges on our refined petroleum products and crude oil inventory. Cost of refined products sold within operation cost includes a realized gain of $466,821 and an unrealized loss of $70,550.
(3)   "Corporate and Other" includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees and legal expense.
(4)   Identifiable assets contain related legal obligations of each business segment including cash, accounts receivable and recorded net assets.
     
                         
    Three Months Ended September 30, 2013        
    Segment              
                         
    Refinery
Operations
    Pipeline
Transportation
    Corporate &
Other
   
Total
 
Revenues   $ 106,541,284     $ 79,109     $ -     $ 106,620,393  
Operation cost(1)(2)(3)     (107,961,900 )     (114,105 )     (340,612 )     (108,416,617 )
Other non-interest income     278,349       -       -       278,349  
EBITDA   $ (1,142,267 )   $ (34,996 )   $ (340,612 )   $ (1,517,875 )
                                 
Depletion, depreciation and amortization                             (337,156 )
Interest expense, net                             (225,706 )
                                 
Loss before income taxes                           $ (2,080,737 )
                                 
Capital expenditures   $ 356,889     $ -     $ -     $ 356,889  
                                 
Identifiable assets(4)   $ 48,925,380     $ 1,569,005     $ 844,334     $ 51,338,719  
     
(1)   "Refinery Operations" and "Pipeline Transportation" include an allocation of general and administrative expenses based on respective revenue.
(2)   "Refinery Operations" includes the effect of economic hedges on our refined petroleum products and crude oil inventory. Cost of refined products sold within operation cost includes a realized loss of $378,899 and an unrealized gain of $81,720.
(3)   "Corporate and Other" includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees and legal expense.
(4)   Identifiable assets contain related legal obligations of each business segment including cash, accounts receivable and recorded net assets.
     
             
    Nine Months Ended September 30, 2014        
    Segment              
                         
    Refinery
Operations
    Pipeline
Transportation
    Corporate &
Other
   
Total
 
Revenues   $ 310,938,981     $ 178,793     $ -     $ 311,117,774  
Operation cost(1)(2)(3)     (300,291,370 )     (355,645 )     (973,154 )     (301,620,169 )
Other non-interest income     847,549       208,333       -       1,055,882  
EBITDA   $ 11,495,160     $ 31,481     $ (973,154 )   $ 10,553,487  
                                 
Depletion, depreciation and amortization                             (1,175,643 )
Interest expense, net                             (630,175 )
                                 
Income before income taxes                           $ 8,747,669  
                                 
Capital expenditures   $ 1,145,720     $ -     $ -     $ 1,145,720  
                                 
Identifiable assets(4)   $ 57,520,835     $ 2,998,619     $ 523,533     $ 61,042,987  
                                 
     
(1)   "Refinery Operations" and "Pipeline Transportation" include an allocation of general and administrative expenses based on respective revenue.
(2)   "Refinery Operations" includes the effect of economic hedges on our refined petroleum products and crude oil inventory. Cost of refined products sold within operation cost includes a realized gain of $13,712 and an unrealized loss of $26,150.
(3)   "Corporate and Other" includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees and legal expense.
(4)   Identifiable assets contain related legal obligations of each business segment including cash, accounts receivable and recorded net assets.
     
                         
    Nine Months Ended September 30, 2013        
    Segment              
                         
    Refinery
Operations
    Pipeline
Transportation
    Corporate &
Other
   
Total
 
Revenues   $ 320,025,559     $ 229,362     $ -     $ 320,254,921  
Operation cost(1)(2)(3)     (325,625,984 )     (433,065 )     (1,198,664 )     (327,257,713 )
Other non-interest income     835,048       -       -       835,048  
EBITDA   $ (4,765,377 )   $ (203,703 )   $ (1,198,664 )   $ (6,167,744 )
                                 
Depletion, depreciation and amortization                             (997,671 )
Interest expense, net                             (785,663 )
                                 
Loss before income taxes                           $ (7,951,078 )
                                 
Capital expenditures   $ 1,244,859     $ -     $ -     $ 1,244,859  
                                 
Identifiable assets(4)   $ 48,925,380     $ 1,569,005     $ 844,334     $ 51,338,719  
                                 
     
(1)   "Refinery Operations" and "Pipeline Transportation" include an allocation of general and administrative expenses based on respective revenue.
(2)   "Refinery Operations" includes the effect of economic hedges on our refined petroleum products and crude oil inventory. Cost of refined products sold within operation cost includes a realized loss of $627,340 and an unrealized gain of $297,020.
(3)   "Corporate and Other" includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees and legal expense.
(4)   Identifiable assets contain related legal obligations of each business segment including cash, accounts receivable and recorded net assets.
     

Contact Information

  • Contact:
    Jonathan P. Carroll
    Chief Executive Officer and President
    713-568-4725