U.S. Markets closed

Edited Transcript of BKEP earnings conference call or presentation 8-Aug-19 3:00pm GMT

Q2 2019 Blueknight Energy Partners LP Earnings Call

TULSA Aug 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Blueknight Energy Partners LP earnings conference call or presentation Thursday, August 8, 2019 at 3:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* D. Andrew Woodward

Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C.

* Mark A. Hurley

Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C.

================================================================================

Conference Call Participants

================================================================================

* Jeffrey Doppelt;Merrill Lynch;Analyst

* Joshua Golden;JP Morgan;Analyst

* Kevin Roth

Allstate Investments, LLC - Senior Portfolio Manager

* Kurt M. Hoffman

Imperial Capital, LLC, Research Division - MD of Institutional Research Group

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Blueknight Energy Partners Earnings Conference call and Webcast. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Andrew Woodward, Chief Financial Officer. Please go ahead, sir.

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [2]

--------------------------------------------------------------------------------

Thank you, and good morning. It's my pleasure to welcome you to today's conference call where we will discuss Blueknight's financial and operating results for the second quarter of 2019.

 

Mark Hurley, our Chief Executive Officer, will update you on our operational performance as well as external factors influencing our business. After which, I will provide a brief update on our financial results for Blueknight. We will then take your questions after our prepared remarks. As a reminder, the earnings release, which can be found on our website, includes financial disclosures and reconciliations for non-GAAP financial measures that should help you analyze our results. Our comments and answers to questions during the call will include forward-looking statements that refer to management's expectations or future predictions. These statements are made as of the date of this call, and we are under no obligation to update these forward-looking statements in the future. They are subject to risks and uncertainties that could cause actual results to differ from our expectations.

 

With that, I will now turn it over to Mark Hurley, our CEO. Mark?

--------------------------------------------------------------------------------

Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [3]

--------------------------------------------------------------------------------

Good morning, and thanks to everyone who dialed in today. I will be updating you on our strategy, operational performance and external factors influencing our business, and then Andy will provide an update on financial results for the quarter.

 

Overall, we are very pleased with the second quarter performance, especially in light of the challenges, the flooding in Midwest created for our asphalt business. We will cover this in more detail. But in short, we had 6 asphalt facilities impacted by the historic flooding in Oklahoma, Kansas and Missouri. Despite this, we produced strong results and remain on track to meet our EBITDA distribution coverage and leverage targets for the year. It speaks to the resiliency of our people and the geographic and asset diversity of our footprint.

 

Our top priority for the year is to strengthen our balance sheet and credit metrics and improve our base business cash flows and coverage. We are very pleased with our performance so far, both for the quarter and for the first half of the year. Distribution coverage for the quarter was 1.0x, and for the first half of the year it was 1.1x. These values compared to 0.82x in the second quarter of 2018 and 0.86x for the first half of 2018.

 

Those who follow the company over the last few years, will know that we typically had them below 1.0x in the first and second quarters due to the seasonality within our asphalt business. So we are happy to be above 1.0x for the first half of 2019, and we are looking forward to improving those ratios in the third quarter.

 

Our leverage continues to strengthen as well. Our debt-to-EBITDA ratio of 4.6x at the end of the quarter was slightly better than the prior quarter and down from 5.1x at year-end 2018. As we have previously indicated, our year-end 2019 financial targets, our distribution coverage greater than 1.0x, and our leverage ratio between 4.0x and 4.5x. We are tracking well to meet those numbers. As we look longer term, our goal, of course, is to continue to improve and grow our business, build coverage and make progress towards that long-term leverage target of 3.5x. Ultimately, we want to be in a position to grow the company and the underlying cash flows without any reliance on additional equity financing.

 

We will look to increase our distribution at a sustainable rate, when we have achieved those objectives. With our financial profile and operations both improving and stabilizing, we're directing more efforts towards growth and value creation opportunities, especially within our crude oil operations. As we progress these ideas, we'll continue to be transparent with our investors and share more details at the appropriate time.

 

Breaking down our operations, I'll start with our largest segment, asphalt. It was a challenging quarter due to the extensive flooding in Oklahoma, Kansas and Missouri. We had 6 sites impacted. However, our people did a remarkable job of preparing for the flood and recovering swiftly thereafter with all sites in operation and running well today. In spite of these severe conditions, I am also happy to report we had no safety or environmental incidents, no injuries and no releases, which is truly remarkable and a testament to our team. We estimate the adverse conditions impacted us approximately $300,000 for the second quarter, net of insurance. The remaining expected impact for the year, net of insurance, we expect to receive will be a little more than $1 million.

 

Considering the weather impact, the business performed as expected, driven by our take-or-pay arrangements that generates steady cash flow and in line with last year when factoring in the July 2018 asset divestitures and weather-related impact. Weather aside, we continue to see encouraging fundamentals in the business, underpinned by state and federal infrastructure spending and a strong economy.

 

I will now turn to our Cushing crude oil storage business, which had one of its better quarters in a long time. For the full quarter, we averaged 5.9 million barrels of leased storage, an increase of 44% versus the same period last year. We benefited from several short-term contracts executed during the quarter at attractive rates. Signaling a healthy Cushing market despite the persistent shallow contango pricing environment. In addition, we continue to see a significant increase in activity at the terminal and as a result, increased throughput and processing revenue. Our services revenue, which includes blending and throughput continues to be very strong, and our throughput volumes are up 153% from the prior year. We have customers blending 8 to 12 different grades of crude and moving it into the market. This type of business is less sensitive to the shape of the crude oil forward price curve, so it's a positive customer trend that we're keeping a close eye on.

 

As we look forward, the balance of 2019 remains fully contracted, and we are encouraged by the various demand factors at play underpinning the market as we begin to prepare for potential renewals with existing customers and/or contracting with new customers at the beginning of next year. Strategically, we are focusing efforts on customers and contracts that are longer-term in nature. Business or operational storage at Cushing is an integral part of the customer's operation. We think there are opportunities in this space as we see increased demand for crude oil blending and segregation services that can be integrated into a customer supply chain and deliver them real value downstream. We are having encouraging discussions with potential customers along these lines.

 

Lastly, our crude oil transportation segments had a strong year-over-year performance. We continue to see the benefit of high volumes on our 2 Oklahoma pipelines with an average throughput of 32,000 barrels per day, an increase of 60% compared to the same period in 2018. Similar to our crude oil storage business, we are seeking opportunities to work with strategic partners or customers who value local crude oil production transported out of the SCOOP and Southern Oklahoma regions for their integrated operations. Similar to prior quarters, I'd like to take some time to update you on the latest from the Cimarron Express pipeline project. During the quarter, we finalized expected cost estimates, including adjustments for the asset sale in April 2019.

 

Based on these revisions, the put value as of June 30, 2019 is approximately $12 million, which includes accrued interest since the start of the project. This value is reflected on our balance sheet as a contingent liability. Accrued interest for the second quarter was approximately $400,000. Recognizing the high interest rate on the put, uncertainty around timing, potential impact of leverage, we are in active discussions with our sponsor on alternative forms of consideration. We will share more details at the appropriate time.

 

Looking forward, our 2 highest priorities for 2019 continue to be strengthening our balance sheet and improving our distribution coverage. With 2019 off to a good start, we remain confident in our plan to accomplish these goals. And with an improving operation and balance sheet, we can now also turn more focus to growth. We are excited about the dialogue we are having on a number of fronts, strategic projects that leverage the value of our existing assets that could generate further growth opportunities while minimizing our own capital investment.

 

With that, I will now turn the call over to Andy Woodward, our Chief Financial Officer. Andy?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [4]

--------------------------------------------------------------------------------

Thanks, Mark. Yesterday, we reported financial results for the 3 months ended June 30, 2019.

 

Adjusted EBITDA was $15.1 million for the second quarter as compared to $15.4 million for the same period in 2018. If you remove the impact from the July 2018 asphalt divestiture for comparability purposes, adjusted EBITDA would have been higher year-over-year by approximately $2.1 million. Despite the severe weather that Mark mentioned earlier impacting our asphalt operations, we are very pleased with this performance.

 

Distributable cash flow was $8.1 million for the second quarter as compared to $8 million for the same period in 2018. Similar to comparing adjusted EBITDA, our distributable cash flow would have been $1.5 million higher year-over-year after adjusting for the July 2018 asphalt transaction. Adjusted EBITDA and distributable cash flow, including a reconciliation of such measures to net income are explained in the non-GAAP financial measures section of the earnings release issued yesterday.

 

Additional information regarding the partnership's results of operations will be provided in the partnership's quarterly report on Form 10-Q for the 3 months ended June 30, 2019, to be filed today with the SEC.

 

I'll now go into a few highlights for each segment. Within asphalt terminalling, total operating margin, excluding depreciation and amortization, decreased by $2.9 million for the 3 months ended June 30, 2019, as compared to the prior year. As mentioned earlier, after removing impacts from the asphalt divestiture last year for comparability purposes, the remaining decrease from the prior year is largely due to the severe weather this year.

 

Moving to our crude oil terminalling and storage business, total operating margin, excluding depreciation and amortization, increased by $1.1 million for the 3 months ended June 30, 2019, compared to the same period in 2018 due to storage fully leased and higher throughput. As mentioned previously, we had a very strong quarter with average lease storage of 5.9 million barrels, a 44% increase from the prior year, and our throughput increased 153% versus the same period last year.

 

Now onto our crude oil pipeline trucking segment. Performance over the quarter remained strong, with throughput on our pipeline systems, significantly higher than the prior year. Pipeline throughput averaged 32,000 barrels per day, an increase of 60% compared to the same period in 2018.

 

Trucking volumes were also more favorable than last year. For the 2 segments combined, operating margin, excluding depreciation and amortization was $0.4 million, approximately $1.2 million higher than the same period in 2018. Benefiting from solid operations, coverage for the second quarter of 2019 was approximately 1x and 1.1x for the first half of 2019.

 

Our leverage ratio for the quarter was roughly in line with the prior quarter at 4.6x, which represents a substantial improvement from year-end 2018. We ended the second quarter with a debt balance of $262 million and cash of $1.5 million. As of August 1, our debt balance was approximately $257 million.

 

Expansion capital remained very low and net maintenance capital totaled approximately $3.1 million for the quarter. We remain very focused on driving higher distribution coverage and lower leverage through improved operations and efficiency of our existing assets, sales of noncore assets, strategic partnerships to leverage our existing asset base and retaining more cash flow.

 

Our quarterly common unit distribution announcement of $0.04 per unit, supports this effort, and we are on track to exceed our target of coverage greater than 1x for the full year 2019 and on track to achieve a leverage ratio of 4x to 4.5x by the end of the year.

 

One last item I'd like to mention. I'm sure you all saw our press release earlier this week that Ergon has made a proposal to the Partnership's Board of Directors to acquire the common units and preferred units of the Partnership, not already owned by Ergon. As we mentioned in the press release, the Conflicts Committee of the Partnership's board will review this proposal. I'm sure you all understand that we cannot comment any more beyond what has been publicly disclosed about the proposal at this time.

 

Operator, that concludes our prepared remarks. I will now turn the call over for the Q&A session.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question today will come from Kurt Hoffman of Imperial Capital.

--------------------------------------------------------------------------------

Kurt M. Hoffman, Imperial Capital, LLC, Research Division - MD of Institutional Research Group [2]

--------------------------------------------------------------------------------

It's refreshing to see some improved performance on the crude oil terminalling side this quarter. It seems that the EIA direct Cushing is significantly elevated versus last year. I believe we recontracted a lot of our storage when the Cushing numbers were nowhere near as healthy as they are today. You mentioned looking to recontract towards the end of this year and some things that are rolling off, but I didn't hear you comment on rates. Is it reasonable to believe the new contracts will be at higher rates, given where things stay in at Cushing now?

--------------------------------------------------------------------------------

Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [3]

--------------------------------------------------------------------------------

Yes, Kurt, this is Mark. It's a little bit unpredictable obviously. We haven't started those discussions quite yet. And we have the bulk of that expiring right at the end of the year. So we'll get more into those negotiations probably September something in that time frame. But what we see is an improving market. We see higher levels of crude oil, certainly in storage today than what we saw mid last year when we get lot of these recontracts. And so one would think that bodes well for higher rates, but we'll have to, obviously, wait and see what happens when we get into those negotiations.

--------------------------------------------------------------------------------

Kurt M. Hoffman, Imperial Capital, LLC, Research Division - MD of Institutional Research Group [4]

--------------------------------------------------------------------------------

Okay. All right. Well, staying with Cushing, then we saw a deal in May where CVR Energy sold the 1.5 million barrels of Cushing storage to Plains All American, I think for $36 million, around $24 a barrel of storage. Can you comment on that transaction? Is that $24 barrel valuation metric could be fairly applied to the storage that Blueknight owns?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [5]

--------------------------------------------------------------------------------

Yes, Kurt, this is Andy. Yes, we're well aware of that transaction. And we at Blueknight Management, we're constantly looking at different valuation techniques to truly understand the value of our units. And we certainly think that CVR transaction is meaningful and something we need to take into consideration for our own value in the assets that we hold in Cushing.

--------------------------------------------------------------------------------

Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [6]

--------------------------------------------------------------------------------

I would also like to -- we're pretty familiar with those assets, and we think that the assets that we have in our terminal stack up well with those in terms of capability, age, as well as the other competitors at Cushing also.

--------------------------------------------------------------------------------

Kurt M. Hoffman, Imperial Capital, LLC, Research Division - MD of Institutional Research Group [7]

--------------------------------------------------------------------------------

Got it. Okay. Well, then if that's the case, it would be about $160 million value. I know you can't comment on the Ergon transaction, so I don't -- I'm not asking to do that, but just to help me frame it, I think, $5.67 in the preferred, a $1.35 on the stock were creating the company for around $525 million. If those storage assets are worth $160 million, even if we assumed our crude oil pipeline and trucking businesses is worth 0, Ergon is trying to buy the asphalt business for around $365 million. And I think it's doing $60 million of EBITDA pretty conservatively based on what you presented today. So that's about a 6x multiple on the asphalt business assuming other oil businesses away from storage at 0. Can you remind me what multiples we've done deals with Ergon on the asphalt side historically?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [8]

--------------------------------------------------------------------------------

Yes, Kurt, this is Andy. I, obviously, just joined the company so I don't have all the details of the transactions between Blueknight and Ergon. I think with some of the data we shared today around the 3 asphalt -- the divestiture of 3 asphalt facilities to Ergon last year was approximately $2.4 million for the quarter. I think roughly the value we got for those were $90 million.

--------------------------------------------------------------------------------

Kurt M. Hoffman, Imperial Capital, LLC, Research Division - MD of Institutional Research Group [9]

--------------------------------------------------------------------------------

Got you. All right. Well, for 6x -- I kind of recall kind of upper single-digit type multiples. So every turn multiple here is worth about $1.50 on the stock. So $1.35 doesn't strike me as really a serious offer so I hope the company doesn't spend enormous resources trying to figure that out.

--------------------------------------------------------------------------------

Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [10]

--------------------------------------------------------------------------------

I understand your views. And obviously, as Andy said, we really can't comment any further on the value of the offer, but appreciate your comments.

--------------------------------------------------------------------------------

Operator [11]

--------------------------------------------------------------------------------

And our next question today will come from Josh Golden of JPMorgan Asset Management.

--------------------------------------------------------------------------------

Joshua Golden;JP Morgan;Analyst, [12]

--------------------------------------------------------------------------------

I'm not sure, but can you remind me of similar language and the prospective for the pref about M&A dissolution et cetera? I believe the face value of those preferreds are around $6.50 at 11%. There is some language about those being redeemed at $6.50. Can you refresh my knowledge about that?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [13]

--------------------------------------------------------------------------------

Yes, Josh, this is Andy. I definitely encourage you to go out and read the prospectives to fully understand your rights. Based on my knowledge of the preferred, they do get a separate vote, and the vote requires majority approval. And right now, as it stands, Ergon does own over 50% of the outstanding units for that approval. So they do have the ability to change the terms of that $6.50 liquidation price.

--------------------------------------------------------------------------------

Joshua Golden;JP Morgan;Analyst, [14]

--------------------------------------------------------------------------------

So just looking at this, roughly speaking, at the current value of the pref and sort of the debt you're looking at an enterprise value of around $425 million plus-minus. If we're talking about doing multiples with our sponsor around 10x even through the pref that's 7x multiple likely to pref at $5.67 using updated leverage and EBITDA. If we drop down all the way through the common, it's even, it's breakthrough, the multiples are fairly inconsistent with transactions at the sponsor level. So I think there's something for the Conflicts Committee to look at and addressing some of the corporate governance issues between GP pref et cetera. I know you can't comment but the multiples look out of line with past industry transactions.

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [15]

--------------------------------------------------------------------------------

We appreciate the feedback. And like you said, we cannot comment on the process that Conflicts Committee is currently undertaking at the moment.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

The next question will come from Jeffrey Doppelt of Merrill Lynch.

--------------------------------------------------------------------------------

Jeffrey Doppelt;Merrill Lynch;Analyst, [17]

--------------------------------------------------------------------------------

My concern about this acquisition by Ergon is this that or my question really is, can Ergon actually vote on this since they are the ones making the proposal to buy the shares at $1.35 in the preferred, I think, at $5.67? And just to answer, my understanding of the preferred versus that it could be redeemed at $8.45 or when the dividend on the common was greater than the preferred. So it seems that that's a depressed price. But more importantly, can Ergon actually vote on this because they are the ones making the acquisition offer?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [18]

--------------------------------------------------------------------------------

Yes, this is Andy. We don't have full knowledge of exactly how the voting will occur related to the proposed transaction. If you were to read the partnership agreement, a merger, which this would be a merger between Blueknight and a sub of Ergon, would require the approval of a unit majority. Unit majority means a majority of the outstanding common units and preferred units voting as a single class, and that includes units held by Ergon as well. And so as you'll note in the 13D filed, Ergon's total ownership, including the preferred and common is roughly 28%.

--------------------------------------------------------------------------------

Jeffrey Doppelt;Merrill Lynch;Analyst, [19]

--------------------------------------------------------------------------------

Okay. I have no further comment other than I think people that I speak to that own substantial amounts, including myself are not in favor of this acquisition whatsoever. So I'll leave it at that.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

And our next question is a follow-up from Josh Golden of JP Morgan.

--------------------------------------------------------------------------------

Joshua Golden;JP Morgan;Analyst, [21]

--------------------------------------------------------------------------------

All right. Can you remind me the cost on the revolving credit line was? I believe it was 5-and-change. So can you just roughly give me the cost of capital on the revolver?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [22]

--------------------------------------------------------------------------------

Yes. For the quarter, it's roughly 6.5% right now.

--------------------------------------------------------------------------------

Joshua Golden;JP Morgan;Analyst, [23]

--------------------------------------------------------------------------------

And how much limit do you have on that revolver that's available?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [24]

--------------------------------------------------------------------------------

As noted in the prepared remarks, as of August 1, the -- we have approximately $257 million outstanding of that split offer.

--------------------------------------------------------------------------------

Joshua Golden;JP Morgan;Analyst, [25]

--------------------------------------------------------------------------------

Right. And any restrictive covenants, et cetera? I understand there's $257 million, but given some stepdown line et cetera, how much would be available on that?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [26]

--------------------------------------------------------------------------------

Our covenant does step down this quarter to 5x.

--------------------------------------------------------------------------------

Joshua Golden;JP Morgan;Analyst, [27]

--------------------------------------------------------------------------------

Yes. And how much would be available from a liquidity standpoint on the revolver?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [28]

--------------------------------------------------------------------------------

Liquidity -- So our Q will get filed today. I don't have the exact number in front of me, but it'll be issued to you today and filed.

--------------------------------------------------------------------------------

Joshua Golden;JP Morgan;Analyst, [29]

--------------------------------------------------------------------------------

Okay. I guess one of the reasons I ask is what if the company itself offer to make a tender offer for the prefs given the cost of capital on the prefs, why doesn't the partnership look to make a tender offer and transfer some of those on to the revolver?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [30]

--------------------------------------------------------------------------------

Yes. Again, the pref itself has -- it's more than the liquidity we have underneath the revolver.

--------------------------------------------------------------------------------

Joshua Golden;JP Morgan;Analyst, [31]

--------------------------------------------------------------------------------

Sorry, I didn't hear that, can you repeat.

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [32]

--------------------------------------------------------------------------------

The amount of pref that's outstanding is more than the liquidity we have on the revolver.

--------------------------------------------------------------------------------

Joshua Golden;JP Morgan;Analyst, [33]

--------------------------------------------------------------------------------

Do you believe there will be any opportunity to refinance that kind of at more attractive cost of capital?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [34]

--------------------------------------------------------------------------------

It's been something we're always looking all the time with our banks and something we're constantly reviewing with them.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

Our next question will come from John Adams of Adams & Company.(technical difficulty) . And our next question will come from Kevin Roth of Allstate Investments.

--------------------------------------------------------------------------------

Kevin Roth, Allstate Investments, LLC - Senior Portfolio Manager [36]

--------------------------------------------------------------------------------

Not to belittle the discussion on the Ergon proposal, but does Ergon have the ability since they own majority of the shares to buy more shares in the open market?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [37]

--------------------------------------------------------------------------------

Yes. I mean, again, we don't fully know Ergon's intent and what they plan to do, but I would assume they would have the ability to open -- to buy more shares in the open market.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

And our next question will come from [Richard Frei], a private investor.

--------------------------------------------------------------------------------

Unidentified Participant, [39]

--------------------------------------------------------------------------------

As a follow-up to some of the questions already asked on the Ergon proposal, has the company or the board retained any outside adviser to value the company as a whole on a liquidated basis, where debt preferred and whatever left for the unitholders is returned so as to make an enlightened vote knowing what the alternatives are, if the company was liquidated?

--------------------------------------------------------------------------------

Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [40]

--------------------------------------------------------------------------------

Yes, Richard, it's Mark. They have. It's a Conflicts Committee activity. And we know that they've reached out to advisors and are doing quite a bit of analysis. And so I think you can feel comfortable that they'll look at this from many different angles and get the opinions of quite a few outside folks.

--------------------------------------------------------------------------------

Operator [41]

--------------------------------------------------------------------------------

(Operator Instructions) Not showing any further questions. Pardon me, we did have a question come in. The next question is from [Tom Forth], a private investor.

--------------------------------------------------------------------------------

Unidentified Participant, [42]

--------------------------------------------------------------------------------

Yes, my question is when will the information that's made -- evaluated from the Conflicts Committee and/or outside consultants be available to the investors?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [43]

--------------------------------------------------------------------------------

Tom, this is Andy. We can't comment, again, on the process itself other than what's been disclosed in our press release and the 13D that was filed by Ergon. As noted in the 13D letter from Ergon, they have plans to try to be able to negotiate this and close by the end of the year. And as part of that process, it would require approvals at their Board level, Conflicts Committee approval, our Board as well along with a majority unitholder votes. So as part of the unitholder vote, you would then be privy to that information. But at the same time, the letter itself and what we've noted in the press release doesn't mean that the proposal at hand will be accepted or that a transaction will be consummated.

--------------------------------------------------------------------------------

Unidentified Participant, [44]

--------------------------------------------------------------------------------

Well, is your Board going to disseminate to investors the reasons for its recommendation and the financial analysis or at least the summary of it so that the investors can make a reasonable decision?

--------------------------------------------------------------------------------

D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [45]

--------------------------------------------------------------------------------

Again, we can't comment on the process itself, but there would be a proxy that would detail some of that information.

--------------------------------------------------------------------------------

Operator [46]

--------------------------------------------------------------------------------

Ladies and gentlemen, this will conclude our question-and-answer session. At this time, I'd like to turn the conference back over to Mr. Mark Hurley, CEO, for closing remarks.

--------------------------------------------------------------------------------

Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [47]

--------------------------------------------------------------------------------

Yes. Thank you, everyone, who dialed in today. We appreciate your participation. We appreciate your interest in Blueknight. We know that we are entering a period here where you're going to have views and some uncertainty and probably some frustration. We encourage you to use our investor e-mail, investor hotline that is available on our website.

 

In the meantime, I can assure you that the management of the company, it's going to come to work every day, just like we always have and looking to increase value for you the shareholders, and that doesn't change. And we will remain focused on that throughout this process. And so once again, thank you very much for dialing in today.

--------------------------------------------------------------------------------

Operator [48]

--------------------------------------------------------------------------------

Ladies and gentlemen, the conference has now concluded. We thank you for joining today's presentation, and you may now disconnect your lines.