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Edited Transcript of BKEP earnings conference call or presentation 7-Nov-19 4:00pm GMT

Q3 2019 Blueknight Energy Partners LP Earnings Call

TULSA Nov 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Blueknight Energy Partners LP earnings conference call or presentation Thursday, November 7, 2019 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* 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.

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Conference Call Participants

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* Andrew Kustas;White Pine Investments

* Jeffrey Doppelt

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Presentation

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Operator [1]

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Thank you for standing by. This is the conference operator. Welcome to the Blueknight Energy Partners earnings conference call. (Operator Instructions) The conference is being recorded. (Operator Instructions)

I would now like to turn the conference over to Andy Woodward, Chief Financial Officer. Please go ahead.

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

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

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

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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 had a very good third quarter, and we are pleased with it. Performance was strong across the entire business, and it showed in our financial results.

However, before I discuss our financial performance, I want to talk a little about our health, safety and environmental performance. As with any company in the energy industry, it is an important aspect of our business, and we take it very seriously. Not only is a strong HSE performance the right thing to do for our employees and the communities in which we operate, it also translates directly to the bottom line in the form of lower insurance premiums, lower workers' compensation costs and fewer safety and environmental liabilities going forward. Our performance in 2019 has been our best year on record, whether we are talking about injury rates, environmental performance or road safety. Our performance in all of these areas is significantly better than the industry standard, which is quite an accomplishment for a company of our size. Our leaders and people in the field especially deserve the credit for such a stellar year so far, and I want to make sure I started this call providing that recognition.

Now I'll turn back to our financial highlights. As we have stated in our last few calls, our top priority for 2019 is to strengthen our balance sheet and credit metrics and improve the stability of our business and underlying cash flows. Our strong performance in the third quarter showcased our progress in these areas. Distribution coverage for the third quarter was 1.43x, and for the first 9 months of the year, above 1.2x. These values compared to 0.92x in the third quarter of 2018 and 0.88x for the first 9 months of 2018.

Our leverage continues to strengthen as well. Our debt-to-EBITDA leverage ratio of 4.24x as of September 30 was another quarter-over-quarter improvement and was down from 5.1x at the end of 2018. As we have previously indicated, our year-end 2019 financial targets are a distribution coverage greater than 1.0x and a leverage between 4.0x and 4.5x. We are tracking well to meet and exceed our expectations in hitting those targets. Longer-term objectives, as we have stated, are to grow our business and further strengthen the balance sheet. We want to see our leverage at 3.5x and our coverage comfortably above 1.2x. We think these are the new market standards for high-performing MLPs. We no longer see growth funded by new public equity issuances. So our intention is to position ourselves to self-fund the business going forward. We will also look to increase our distribution at a sustainable rate when our underlying cash flows can support increases [and] when we've achieved our long-term objectives.

Getting into our operational performance for the quarter and individual segments, I will start with asphalt. As you may remember, the second quarter was particularly challenging due to the extensive flooding in Oklahoma, Kansas and Missouri. The loss of revenue and flood-related costs resulted in lower-than-normal earnings during the second quarter. However, the business has rebounded well. The net impact has been an asphalt season off to a slower start with the higher volume period lasting longer than normal. Once we got past the flooding, the weather across the U.S. cooperated and resulted in a good paving season. Longer term, we continue to see encouraging fundamentals in the business, underpinned by state and federal infrastructure spending and a good economy with record-low employment.

I will now turn to our Cushing crude oil storage business, which had another strong quarter. Our facility continued to run fully contracted, a substantial improvement over the third quarter a year ago. We also continue to see a very active customer base in terms of throughput and blending. As a result, our services revenue continues to be very strong, and throughput volumes are up 209% for the quarter versus the same period last year. So while the forward curve has been flat over the last few months, which is not conducive to higher storage rates, the increased throughput revenue we have seen this year has helped offset this impact. Overall, though, we are expecting a slightly more challenging market in Cushing next year than we've seen in 2019, but we remain encouraged by the strategic dialogues we're having with current and potential future customers. On that note, we do have a large contract expiring at the end of this year, but I'm happy to report we have made good progress towards the renewal and have agreed substantially to all material terms. This contract significantly reduces our recontracting risk heading into 2020, and we expect to get that finalized in the near term.

Moving now to our crude oil transportation segments. Overall, both pipeline and trucking remain well ahead of 2018. However, we are beginning to see lower drilling activity in Oklahoma. The SCOOP region is clearly experiencing less permitting and drilling. However, most of our volumes are from the southern part of Oklahoma, which remains fairly stable and active. Within this area, we expect to see a ramp-up in dedicated volumes early next year around our pipeline assets. We think the dynamics in the SCOOP and Southern Oklahoma will probably offset each other. We are fortunate in that we have a very flexible pipeline system. The 2 pipelines are connected in several locations, so we can adjust operations to take advantage of different levels of activity across the state. Similar to our Cushing 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. We believe our system, location and contract dedications are ideally suited for these partners or customers.

Finally, and turning to our corporate results, I would like to make a few points on corporate overhead costs. We've not focused extensively on this topic in recent calls but reducing corporate costs and streamlining the company has been a high priority for us over the last several years, and we have made significant progress. For example, G&A costs in the third quarter of this year are approximately 20% lower than the same period last year after adjusting for deal-related fees. Corporate cost as a percent of EBITDA has dropped from approximately 30% in 2015 to 20% this year. Corporate headcount has been reduced by approximately 35% since 2015, and EBITDA per corporate employee has increased by almost 60% in the last 4 years. We remain committed and focused on running our business more efficiently and expect this trend to continue in 2020.

Looking ahead, our 2 highest priorities for 2019 will continue to be strengthening our balance sheet and improving our distribution coverage. We will also look for opportunities to streamline the business around our core assets and terminalling capabilities. We remain confident in our plan to accomplish these goals. And with an improving strategy, operation and balance sheet, this will provide the needed foundation to turn our focus to growth. We are very excited about the dialogues we're having in this area and our ability to leverage our existing assets to unlock value and better position us for future growth.

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

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

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Thanks, Mark. Yesterday, we reported financial results for the 3 months ended September 30, 2019. Adjusted EBITDA was $18 million for the third quarter as compared to $14.5 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 $18.6 million, higher year-over-year by approximately $4.1 million or 28%. As Mark mentioned earlier, this was another great quarter for us in 2019. And the business continues to deliver and outperform versus last year, even despite having fewer assets.

Distributable cash flow was $11.6 million for the third quarter as compared to $9 million for the same period in 2018, a 29% increase year-over-year. 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 our quarterly report on Form 10-Q for the 3 months ended September 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, was $17.1 million for the third quarter. After adjusting for the asphalt divestiture last year for comparability purposes, our third quarter margin was slightly higher than the prior year. As Mark mentioned, volumes for the quarter were very strong as customers made up lost ground due to weather-related issues earlier in the year.

Moving to crude oil terminalling and storage. Total operating margin, excluding depreciation and amortization, was $3.3 million for the 3 months ended September 30, 2019, an increase of $2.1 million or 168% compared to the same period in 2018. This mainly was due to higher contracted storage and throughput. For the first 9 months of the year, our average throughput at the terminal has been approximately 87,000 barrels per day, a 74% increase from the prior year.

Now onto our crude oil pipeline and trucking segments. Total operating margin, excluding depreciation and amortization, combined for the third quarter of 2019 was $1.4 million higher versus the same period last year. Growth year-over-year was primarily due to better margin captured within our crude oil marketing business.

I'll now move on to our key financial metrics and liquidity position. Benefiting from solid operations, coverage for the third quarter of 2019 was approximately 1.43x and 1.22x for the first 9 months of 2019, a significant improvement over last year. Similarly, we continued to drive down our debt and corresponding leverage ratio. Our debt balance was $259 million and leverage was 4.24x as of September 30, 2019. As of November 1, I'm pleased to report a debt balance of approximately $252 million, which is roughly $15 million lower than the start of the year.

As for our capital investments, net capital expenditures were $3 million for the quarter, which included $2.1 million of net maintenance capital. Our intense focus in management of capital spending in 2019 has contributed to both lowering borrowing costs and our ability to pay down debt.

Lastly, as of the third quarter of 2019, we had availability under our credit agreement, subject to covenant restrictions, of approximately $46 million. Based on our current outlook, balance sheet and liquidity, we expect to be in a position in the near term to settle the Ergon put, which relates to Ergon's investment in Cimarron Express in cash. The current value of the put is approximately $12 million.

As Mark mentioned, one of our top priorities this year has been improving our balance sheet and strengthening our key financial metrics. This quarter highlights our success in those areas as we begin to reposition the company both strategically and operationally for future growth.

Finally, as many of you saw, on September 11, 2019, Ergon withdrew its offer to acquire all the outstanding units not already owned by Ergon and its affiliates. Similar to our last call, we cannot comment on that process any further beyond what has already been publicly disclosed.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Jeffrey Doppelt with Merrill Lynch.

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Jeffrey Doppelt, [2]

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I have a large position in Blueknight as an individual holder and as for clients I -- go over quick numbers with you, more than 550,000 of the common units and more than 105,000 of preferred. I actually have a couple of questions. The first question is regarding the disposition of essentially all of the units held by 2 directors back in September. Can you comment on that? And are they still directors of the company.

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

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All right. Well, I can't comment on the disposition of the units. They are still directors of the company, but I obviously can't comment on those personal transactions. So...

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Jeffrey Doppelt, [4]

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So essentially, you don't have any type of plan in place where directors are required to maintain a certain position in the company's units?

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [5]

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No, we do not.

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Jeffrey Doppelt, [6]

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Okay. Perhaps that should be considered. The second question is, is the pipeline, you touched on it briefly with Ergon. Is that completely dead and there's no chance of reviving that with an additional partner? You're just selling that off and recovering whatever is possible.

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [7]

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Yes. We were in the process of selling assets. I do not see that going forward. And really, it has to do with the production economics out of the stack. Producers there have really struggled understanding the rock and getting capital efficiency with production. So we do not see that going forward at this time.

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Jeffrey Doppelt, [8]

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My only thought on that is that the political environment is favorable for that, and the future outlook may be favorable. And I don't know if anybody is looking for somebody to come in and make a major investment to complete it. But that's something you guys will have to decide, but that's my thought on that.

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Operator [9]

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(Operator Instructions) The next question is from [David Rothschild,] a private investor.

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Unidentified Participant, [10]

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Yes, I was looking in your earnings release here. You mentioned here your debt was $258 million as of November 1. What was the debt level? Or I mean I think that was the end of the third quarter. What was the debt a year ago? Just want to know how much you paid down the last year.

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D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [11]

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Yes. So we've paid down approximately $15 million in debt from the year-end of last year.

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Unidentified Participant, [12]

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From year-end or from a year ago?

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

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From year-end at the end of 2018. So debt was approximately $265 million about a year ago.

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Operator [14]

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This concludes the question-and-answer session. I would like to turn the conference back over to Mark Hurley, CEO, for any closing remarks. Sorry, there's a couple of questions that have just lined up. The next question is from [Tom Forbes,] private investor.

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Unidentified Participant, [15]

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Yes. My question is, what would you estimate the per unit value of the shares or the units if the company were to be sold in, what you believe is market value?

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D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [16]

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Well, [Tom,] I appreciate the call. I mean that's anybody's -- we would just be speculating just like anybody on what that potentially could be. As Mark noted, what we're really focused on is improving our asset base, underlying cash flows, getting our balance sheet in an improved position for our ability to grow. And if we are successful on those fronts, we believe we'll be able to unlock some decent value here.

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Operator [17]

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The next question comes from [Jeff Bailey] with [Blueknight].

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Unidentified Participant, [18]

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A couple of accounting questions for Andy first. Andy, on the asset impairment line that looked a little small. Why is that not 12 million x 0.09 x 0.25. Why is that not a $0.25 million for the asset impairment line? Isn't that part of the interest cost on the -- based on push down accounting for the Ergon put?

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D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [19]

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Yes. We had pushed down accounting related to the Ergon put, but it was pretty modest over the quarter. We had some ins and outs. I think as we stated last quarter from an interest perspective, which impacts our impairments for the put, that's roughly $400,000 per year -- per quarter. But we did have some offsets as well related to the put value. And so that's approximately recognized on our balance sheet at the moment as a continued liability at around $12 million.

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Unidentified Participant, [20]

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Yes. And my understanding was that based on push down accounting, the quarterly interest cost would be reflected in that asset impairment line. And so just doing the calculation I just mentioned, that would come out to $250,000. So you're saying there were some offsets to that this quarter?

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D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [21]

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That's right. That's right.

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Unidentified Participant, [22]

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Okay. What can we expect going forward?

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D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [23]

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Again, on a quarterly basis without any potential revisions to the estimates from an interest standpoint, you can still expect $400,000 per quarter related to that put.

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Unidentified Participant, [24]

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Okay. Have you guys articulated any timing as far as paying off the Ergon put?

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D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [25]

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In our prepared remarks today, I had mentioned that we due to our liquidity position and where we sit with our leverage, we feel we're in a position to pay that put off in the near term in cash. Now near term, could be at the beginning of next year.

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Unidentified Participant, [26]

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Okay. But -- so first half of 2020, is that fair to assume all else equal?

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D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [27]

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That is fair.

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Unidentified Participant, [28]

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Okay. And then as we project the overhead, as we project general and administrative going forward as kind of a blunt object, can we take 2018 G&A multiply by 0.8, and then that would be the amount going forward roughly for 2020? Or do you have any other insights you could offer on the G&A going forward?

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D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [29]

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Yes. I think my recommendation there is to take our current quarter that we just reported, that's detailed in our earnings release and then just annualize that for a good estimate for next year.

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [30]

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I mean keep in mind, [Jeff,] that we're still going through next year's planning cycle. And we've got a couple of things in the hopper and so we really haven't gotten into next year guidance at all. But I do think Andy's guide -- that Andy's view on the G&A is a good one. So...

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Unidentified Participant, [31]

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Yes. So you're projecting, I mean nobody's going to hold you to this, but maybe even $3 million, $2.5 million in G&A savings 2020 over 2019?

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

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Yes. I would say that's probably a decent estimate of between $10 million and $12 million.

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Unidentified Participant, [33]

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Okay. And then in the adjusted EBITDA number in the press release, there's the footnote under other that talks about $443,000 in transaction costs. I mean that number looks kind of largish. Is that -- was the general partner/Ergon side? Is that included, did the MLP pick that up? In other words, is that -- are those the deal expenses for both sides of the transaction that are covered by the MLP?

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

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So that is -- what you referenced is related to the take private offer from Ergon, but that's only our portion of the fees that primarily reflects the conflicts committee hiring their own adviser and legal counsel. So just the last portion.

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Unidentified Participant, [35]

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Okay. And then 2 bigger questions. As far as the Cushing goes, I mean, obviously, the throughput is an awesome number. Is a lot of that due to the blending of the WTL (sic) [WTI]? And how sustainable do you think that throughput number is?

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [36]

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I think it's -- we think it's sustainable. It really goes to the types of customers you have in the facility and what their strategies are. And we're fortunate to have some customers who are very active in the market and doing a lot of blending of WTI and other grades. And so that's what you see reflected in the throughput and the processing fees.

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Unidentified Participant, [37]

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Okay. So would you say that a significant portion of the wonderful increase in the throughput was due to blending of the lighter WTI coming out?

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [38]

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It's due to 2 things. It's fees associated with blending crude and its fees associated with just moving crude through the facility. So the more active the customer is blending and buying and selling the higher the throughput and the higher those fees.

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Unidentified Participant, [39]

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Right, right. Okay. And then we've been talking about future plans for Cushing for almost a year now. And so I'm wondering if you would articulate to investors, we've -- the discussion has kind of been on [to --] different marketing to get essentially different clients for the Cushing storage as well as perhaps some sort of structural enhancement to the storage, namely like there was -- the pipeline was obviously an effort in that direction. And so I'm kind of wondering what the plans are going forward on the marketing front? And then if you could just kind of broadly talk about what you see as far as opportunities on a more structural level for your Cushing storage?

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

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Yes. So on the storage, what we're looking for are customers who have a strategic need for the storage. It could be because they are marketers and blenders and are very active customers. It could be refiners who have a need to integrate storage into their value chain, could be a producer who has a need for parking barrels in Cushing that are coming out of their production fields. So it's those kinds of customers that we want to grow. And we're having -- we've had a number of those conversations and are still having a number of those conversations. So those are -- that's the direction we want to go with Cushing.

As far as the marketing piece, our marketing operation is actually very small. It's not something that creates -- we don't create a lot of value purely from the marketing piece itself. We have a small marketing operation to facilitate some volume onto our pipelines. And so we don't see that changing, but it's not a -- it's not one of our key activities I would say other than to facilitate volume.

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Unidentified Participant, [41]

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In previous calls, you -- go ahead.

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [42]

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No, go ahead.

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Unidentified Participant, [43]

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In previous calls, you talked about potentially enhancing the appeal of the Cushing storage to joint ventures or potentially other structural projects. We didn't hear that this quarter. Have your plans with Cushing changed? Have the dynamics in the marketplace changed? Can you talk about that?

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [44]

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No. We didn't specifically mention joint ventures, but those are the kind of things we're looking at. When we talk about strategic relationships and strategic partners -- could very well turn into a joint venture in some cases.

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Operator [45]

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The next question comes from [John Lydecker] with [Birch Partners].

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Unidentified Analyst, [46]

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Congrats on a good quarter. We have danced around this a little bit, but let me just ask a similar question in a different sort of way. In terms of your future sources of growth, do you think they're more organic or related to potential acquisitions?

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

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Well, I think they're both, but I think it's probably the thing that we -- the kind of transactions we like to do or are the -- some of the transactions that we have done in the past, particularly around our asphalt business. Last year, we did a transaction in Muskogee, Oklahoma. Prior year, we did -- we acquired some terminals in -- on the East Coast. Year before that, we did one in Wyoming. And so we really like those because they're immediately accretive. It fits into our footprint very well. And so I would say that's at the forefront of what we would like to do. We wouldn't steer away from those like inorganic projects but we prefer to do the acquisition things that we've done in the past.

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Unidentified Analyst, [48]

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Talk a little bit more about what the market is for those sorts of acquisitions now. What are you seeing? What are the possibilities?

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [49]

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Well, I mean we see these come along. They come to us in a couple of ways. One, there could be a business that puts itself on the sales block or puts assets up for sale. And these are things that are broadly communicated and we join a group of other potential buyers for these assets. We did one of those fairly recently. The ones we prefer, however, are things that we find just through relationships and normal communications and opportunities that counterparties bring to us and just fits with us and fits with them. And really, that's where the Muskogee transaction came about. That's where our Wyoming transaction came about. And so these are things that we find in the normal course of business, and we'll be very active in looking for those.

And the other thing, [John,] is that we feel we have a very strong capability and competency around terminalling, right? It could be asphalt, it could be crude oil, but we would feel very comfortable getting into other lines of business, refined products, chemicals, agricultural products, any number of things. We have a footprint that spreads across the U.S., and we would not hesitate at all to go into some other product areas. And I think that will be -- it will be a key priority for us next year. It's something we'll want to explore.

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Unidentified Analyst, [50]

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Right. So I would assume the converse of that, that you're not about to build any more pipelines or attempt to?

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [51]

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We don't see that happening in the near future. No, no.

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Unidentified Analyst, [52]

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If ever?

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [53]

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Could be.

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Operator [54]

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The next question comes from [Glenn Gardipee] with [Northern Systems Capital Partners.]

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Unidentified Analyst, [55]

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Most of my questions have been answered, but I just had one. Last year, your leverage ratio was over 5, and now it's 4.24.

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D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [56]

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That's right.

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [57]

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That's right. Yes.

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Unidentified Analyst, [58]

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And you mentioned your objective is to get to 3.5. Would you say that at this time next year, you'll have achieved that? I -- just extrapolating 5 to 4.2 was about 0.8, and then it would take another 0.8 to get to the 3.5.

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D. Andrew Woodward, Blueknight Energy Partners, L.P. - CFO of Blueknight Energy Partners G.P., L.L.C. [59]

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Yes. I appreciate the question. That is a long-term goal of ours. And we feel we're making significant progress, as you noted, ending last year around 5.1x and currently at about 4.25x. So headed in the right direction. There's a lot of progress we still need to make to get to that 3.5x. And we're working, as Mark had mentioned, on a few opportunities that could potentially help us get there, but it'd be too early for me to say that we would be able to get there by the end of next year. Our plan is -- over the next few months is to more -- is to work our forecast a little bit more and then be able to provide the market in more formal terms, our guidance for next year, which would include what we expect to be from an EBITDA -- from a leverage standpoint.

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Unidentified Analyst, [60]

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Okay. And one other question. In the early part of the year, you mentioned that you might be quite active on an acquisition basis in the fourth quarter. From your comments today, I assume that there will be nothing going on between now and year-end?

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [61]

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No, not necessarily. I mean -- I think our comments around acquisitions are that we want to get the balance sheet in a place where we can self-fund any kind of acquisition that we want to do. And we're always looking out for them, right? And so I don't see anything imminent as far as acquisitions are concerned. But I do think you'll see us getting more active, and we'll be constantly looking for opportunities. So it would not be a surprise if one of those surfaced, but nothing imminent.

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Unidentified Analyst, [62]

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Okay. Congratulations on the good quarter.

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [63]

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Thank you, [Glenn.] Appreciate your questions.

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Operator [64]

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The next question comes from Andrew Kustas with White Pine Investments.

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Andrew Kustas;White Pine Investments, [65]

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Great quarter. Real quick, I know third quarter is generally great for the asphalt business. Any color on how it's shaping up for the fourth quarter and beyond?

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [66]

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Yes. So like you said, our business is fairly stable and consistent for the entire year, outside of what you mentioned on the asphalt side. That is that during the summer months, we do tend to get a pick up of additional revenue as volumes pick up in that particular space. And so you certainly saw that occur in the third quarter of this year. I would say as long as weather cooperates, which it has, the slower start of the year, folks can still have projects in the hopper and we expect them to continue to make up lost time from earlier in the year in the fourth quarter. But as you know, fourth quarter will be, from an asphalt standpoint, a bit softer than what you saw in the current quarter.

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Operator [67]

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This concludes the question-and-answer session. I would like to turn the conference back over to Mark Hurley, CEO, for any closing remarks.

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Mark A. Hurley, Blueknight Energy Partners, L.P. - CEO of Blueknight Energy Partners G.P., L.L.C. [68]

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Yes. First of all, I just want to thank all of you for giving us your time and your interest today. We really appreciate it. We think we had really a fantastic quarter. We think we're having a good year. And so we're very optimistic about the business both this year and next year. And as always, if there are questions that did not get answered or you want to talk to Andy or I, we are generally available. So thank you very much.

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Operator [69]

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Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.