Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Blueknight Energy Partners, L.P. | bkep20210121_8k.htm |
Exhibit 99.1
Blueknight Energy Partners, L.P.
Unaudited Pro Forma Condensed Consolidated Financial Statements
Introduction
On December 20, 2020, BKEP Crude, L.L.C and BKEP Supply and Marketing LLC, each a wholly-owned subsidiary of Blueknight Energy Partners, L.P. (“the Partnership”), entered into a definitive agreement to sell the Partnership’s crude oil pipeline business by means of a sale of all of the equity interests in certain subsidiaries of the Partnership and certain supply and marketing contracts for a total purchase price of $20.0 million, subject to customary adjustments and excluding crude oil linefill and inventory (the “Divestiture”). The Partnership closed the Divestiture on February 1, 2021. The Divestiture qualifies as discontinued operations as it represents a strategic shift that will have a major effect on the Partnership’s operations and financial results.
The unaudited pro forma condensed consolidated financial data of the Partnership was derived from historical condensed consolidated financial statements. The unaudited pro forma condensed consolidated balance sheet assumes the Divestiture occurred on September 30, 2020. The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2020, and the years ended December 31, 2019 and 2018, give effect to the Divestiture as if it occurred as of January 1, 2018. The following unaudited pro forma condensed consolidated financial information should be read in conjunction with the Partnership’s historical financial statements and accompanying notes.
The pro forma adjustments are based on the best information available and assumptions that management believes are factually supportable and reasonable; however, such adjustments are subject to change. In addition, such adjustments are estimates. The unaudited pro forma condensed consolidated financial information is for illustrative and informational purposes only and is not intended to reflect what the Partnership’s consolidated financial position and results of operations would have been had the Divestiture occurred on the dates indicated and is not necessarily indicative of the Partnership’s future consolidated financial position and results of operations.
The pro forma adjustments remove the Divestiture’s consolidated assets, liabilities and results of operations and also give effect to adjustments to reflect the cash proceeds and use of such proceeds from the Divestiture. The Partnership expects to use the cash proceeds to repay outstanding borrowings under its revolving credit facility.
| BLUEKNIGHT ENERGY PARTNERS, L.P. | |||||||||||||||||
| UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||||||||||
| AS OF SEPTEMBER 30, 2020 | |||||||||||||||||
| (in thousands, except unit data) | |||||||||||||||||
|
Historical(a) |
Crude Oil Pipeline Divestiture(b) |
Transaction Accounting Adjustments |
Unaudited Pro Forma Balance Sheet |
||||||||||||||
|
ASSETS |
|||||||||||||||||
|
Current assets: |
|||||||||||||||||
|
Cash and cash equivalents |
$ | 972 | $ | 21,700 | $ | (21,700 | ) |
(c) |
$ | 972 | |||||||
|
Accounts receivable, net |
15,039 | (10,783 | ) | - | 4,256 | ||||||||||||
|
Receivables from related parties, net |
1,006 | - | - | 1,006 | |||||||||||||
|
Other current assets |
7,783 | (1,255 | ) | - | 6,528 | ||||||||||||
|
Total current assets |
24,800 | 9,662 | (21,700 | ) | 12,762 | ||||||||||||
|
Property, plant and equipment, net |
222,881 | (59,244 | ) | - | 163,637 | ||||||||||||
|
Goodwill |
6,728 | - | - | 6,728 | |||||||||||||
|
Debt issuance costs, net |
1,591 | - | - | 1,591 | |||||||||||||
|
Operating lease assets |
9,009 | (102 | ) | - | 8,907 | ||||||||||||
|
Intangible assets, net |
12,029 | (2,084 | ) | - | 9,945 | ||||||||||||
|
Other noncurrent assets |
1,047 | (329 | ) | - | 718 | ||||||||||||
|
Total assets |
$ | 278,085 | $ | (52,097 | ) | $ | (21,700 | ) | $ | 204,288 | |||||||
|
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT) |
|||||||||||||||||
|
Current liabilities: |
|||||||||||||||||
|
Accounts payable |
$ | 2,281 | (345 | ) | - | 1,936 | |||||||||||
|
Accounts payable to related parties |
837 | - | - | 837 | |||||||||||||
|
Accrued crude oil purchases |
3,668 | (3,668 | ) | - | - | ||||||||||||
|
Accrued crude oil purchases to related parties |
7,425 | (7,425 | ) | - | - | ||||||||||||
|
Accrued interest payable |
318 | - | - | 318 | |||||||||||||
|
Accrued property taxes payable |
3,451 | (825 | ) | - | 2,626 | ||||||||||||
|
Unearned revenue |
3,874 | (30 | ) | - | 3,844 | ||||||||||||
|
Unearned revenue with related parties |
2,910 | - | - | 2,910 | |||||||||||||
|
Accrued payroll |
4,794 | (433 | ) | - | 4,361 | ||||||||||||
|
Current operating lease liability |
1,827 | (15 | ) | - | 1,812 | ||||||||||||
|
Other current liabilities |
2,802 | (686 | ) | - | 2,116 | ||||||||||||
|
Total current liabilities |
34,187 | (13,427 | ) | - | 20,760 | ||||||||||||
|
Long-term unearned revenue with related parties |
4,224 | - | - | 4,224 | |||||||||||||
|
Other long-term liabilities |
927 | (134 | ) | - | 793 | ||||||||||||
|
Noncurrent operating lease liability |
7,221 | (78 | ) | - | 7,143 | ||||||||||||
|
Long-term debt |
260,592 | - | (21,700 | ) |
(c) |
238,892 | |||||||||||
|
Commitments and contingencies |
|||||||||||||||||
|
Partners’ capital(deficit): |
|||||||||||||||||
|
Common unitholders (41,198,088 units issued and outstanding) |
349,160 | (37,849 | ) | - | 310,702 | ||||||||||||
|
Preferred unitholders (35,125,202 units issued and outstanding) |
253,923 | - | - | 253,923 | |||||||||||||
|
General partner interest (1.6% interest with 1,225,409 general partner units outstanding) |
(632,149 | ) | (609 | ) | - | (632,149 | ) | ||||||||||
|
Total partners’ capital (deficit) |
(29,066 | ) | (38,458 | ) | - | (67,524 | ) | ||||||||||
|
Total liabilities and partners’ capital (deficit) |
$ | 278,085 | $ | (52,097 | ) | $ | (21,700 | ) | $ | 204,288 | |||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
| BLUEKNIGHT ENERGY PARTNERS, L.P. | |||||||||||||||||
| UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||||||||||
| FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 | |||||||||||||||||
| (in thousands, except unit data) | |||||||||||||||||
|
Historical(a) |
Crude Oil Pipeline Divestiture(b) |
Transaction Accounting Adjustments |
Unaudited Pro Forma |
||||||||||||||
|
Service revenue: |
|||||||||||||||||
|
Third-party revenue |
$ | 39,935 | $ | (1,286 | ) | $ | 4,364 |
(d) |
$ | 43,013 | |||||||
|
Related-party revenue |
12,945 | - | - | 12,945 | |||||||||||||
|
Lease revenue: |
|||||||||||||||||
|
Third-party revenue |
27,051 | - | - | 27,051 | |||||||||||||
|
Related-party revenue |
19,239 | - | - | 19,239 | |||||||||||||
|
Product sales revenue: |
|||||||||||||||||
|
Third-party revenue |
119,068 | (119,068 | ) | - | - | ||||||||||||
|
Total revenue |
218,238 | (120,354 | ) | 4,364 | 102,248 | ||||||||||||
|
Costs and expenses: |
|||||||||||||||||
|
Operating expense |
73,066 | (10,149 | ) | - | 62,917 | ||||||||||||
|
Operating expense, intercompany |
- | (4,364 | ) | 4,364 |
(d) |
- | |||||||||||
|
Cost of product sales |
41,133 | (41,133 | ) | - | - | ||||||||||||
|
Cost of product sales from related party |
63,671 | (63,671 | ) | - | - | ||||||||||||
|
General and administrative expense |
11,008 | (295 | ) | - | 10,713 | ||||||||||||
|
Asset impairment expense |
6,417 | (2,821 | ) | - | 3,596 | ||||||||||||
|
Total costs and expenses |
195,295 | (122,433 | ) | 4,364 | 77,226 | ||||||||||||
|
Gain (loss) on disposal of assets |
426 | (56 | ) | - | 370 | ||||||||||||
|
Operating income |
23,369 | 2,023 | - | 25,392 | |||||||||||||
|
Other income (expenses): |
|||||||||||||||||
|
Other income |
969 | - | - | 969 | |||||||||||||
|
Interest expense |
(8,586 | ) | 179 | 491 |
(e) |
(7,916 | ) | ||||||||||
|
Income before income taxes |
15,752 | 2,202 | 491 | 18,445 | |||||||||||||
|
Provision for income taxes |
8 | - | - | 8 | |||||||||||||
|
Net income |
$ | 15,744 | $ | 2,202 | $ | 491 | $ | 18,437 | |||||||||
|
Allocation of net income (loss) for calculation of earnings per unit: |
|||||||||||||||||
|
General partner interest in net income |
$ | 249 | 35 | 7 | 291 | ||||||||||||
|
Preferred interest in net income |
$ | 18,836 | - | - | 18,836 | ||||||||||||
|
Net income (loss) available to limited partners |
$ | (3,341 | ) | 2,167 | 484 | (690 | ) | ||||||||||
|
Basic and diluted net income (loss) per common unit |
$ | (0.08 | ) | $ | 0.05 | $ | 0.01 | $ | (0.02 | ) | |||||||
|
Weighted average common units outstanding - basic and diluted |
41,072 | - | - | 41,072 | |||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
| BLUEKNIGHT ENERGY PARTNERS, L.P. | |||||||||||||||||
| UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2019 | |||||||||||||||||
| (in thousands, except unit data) | |||||||||||||||||
|
Historical(a) |
Crude Oil Pipeline Divestiture(b) |
Transaction Accounting Adjustments |
Unaudited Pro Forma |
||||||||||||||
|
Service revenue: |
|||||||||||||||||
|
Third-party revenue |
$ | 61,811 | $ | (6,686 | ) | $ | 6,486 |
(d) |
$ | 61,611 | |||||||
|
Related-party revenue |
16,053 | (266 | ) | - | 15,787 | ||||||||||||
|
Lease revenue: |
|||||||||||||||||
|
Third-party revenue |
41,712 | - | - | 41,712 | |||||||||||||
|
Related-party revenue |
20,443 | - | - | 20,443 | |||||||||||||
|
Product sales revenue: |
|||||||||||||||||
|
Third-party revenue |
231,051 | (231,051 | ) | - | - | ||||||||||||
|
Total revenue |
371,070 | (238,003 | ) | 6,486 | 139,553 | ||||||||||||
|
Costs and expenses: |
|||||||||||||||||
|
Operating expense |
103,289 | (16,088 | ) | - | 87,201 | ||||||||||||
|
Operating expense, intercompany |
- | (6,486 | ) | 6,486 |
(d) |
- | |||||||||||
|
Cost of product sales |
83,319 | (83,319 | ) | - | - | ||||||||||||
|
Cost of product sales from related party |
134,162 | (134,162 | ) | - | - | ||||||||||||
|
General and administrative expense |
14,095 | (438 | ) | - | 13,657 | ||||||||||||
|
Asset impairment expense |
2,476 | - | - | 2,476 | |||||||||||||
|
Total costs and expenses |
337,341 | (240,493 | ) | 6,486 | 103,334 | ||||||||||||
|
Gain (loss) on disposal of assets |
453 | 836 | - | 1,289 | |||||||||||||
|
Operating income |
34,182 | 3,326 | - | 37,508 | |||||||||||||
|
Other income (expenses): |
|||||||||||||||||
|
Other income |
268 | - | - | 268 | |||||||||||||
|
Interest expense |
(15,975 | ) | 408 | 1,056 |
(e) |
(14,511 | ) | ||||||||||
|
Income before income taxes |
18,475 | 3,734 | 1,056 | 23,265 | |||||||||||||
|
Provision for income taxes |
63 | (4 | ) | - | 59 | ||||||||||||
|
Net income |
$ | 18,412 | $ | 3,738 | $ | 1,056 | $ | 23,206 | |||||||||
|
Allocation of net income (loss) for calculation of earnings per unit: |
|||||||||||||||||
|
General partner interest in net income |
$ | 337 | $ | 59 | $ | 17 | $ | 413 | |||||||||
|
Preferred interest in net income |
$ | 25,115 | $ | - | $ | $ | 25,115 | ||||||||||
|
Net income (loss) available to limited partners |
$ | (7,040 | ) | $ | 3,679 | $ | 1,039 | $ | (2,322 | ) | |||||||
|
Basic and diluted net income (loss) per common unit |
$ | (0.17 | ) | $ | 0.09 | $ | 0.02 | $ | (0.06 | ) | |||||||
|
Weighted average common units outstanding - basic and diluted |
40,755 | - | - | 40,755 | |||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
| BLUEKNIGHT ENERGY PARTNERS, L.P. | |||||||||||||||||
| UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2018 | |||||||||||||||||
| (in thousands, except unit data) | |||||||||||||||||
|
Historical(a) |
Crude Oil Pipeline Divestiture(b) |
Transaction Accounting Adjustments |
Unaudited Pro Forma |
||||||||||||||
|
Service revenue: |
|||||||||||||||||
|
Third-party revenue |
$ | 58,756 | $ | (6,384 | ) | $ | 5,284 |
(d) |
$ | 57,656 | |||||||
|
Related-party revenue |
22,131 | (445 | ) | - | 21,686 | ||||||||||||
|
Lease revenue: |
|||||||||||||||||
|
Third-party revenue |
42,067 | (484 | ) | - | 41,583 | ||||||||||||
|
Related-party revenue |
25,961 | - | - | 25,961 | |||||||||||||
|
Product sales revenue: |
|||||||||||||||||
|
Third-party revenue |
235,438 | (235,428 | ) | - | 10 | ||||||||||||
|
Related-party revenue |
482 | - | - | 482 | |||||||||||||
|
Total revenue |
384,835 | (242,741 | ) | 5,284 | 147,378 | ||||||||||||
|
Costs and expenses: |
|||||||||||||||||
|
Operating expense |
113,890 | (19,700 | ) | - | 94,190 | ||||||||||||
|
Operating expense, intercompany |
- | (5,284 | ) | 5,284 |
(d) |
- | |||||||||||
|
Cost of product sales |
126,776 | (126,776 | ) | - | - | ||||||||||||
|
Cost of product sales from related party |
102,469 | (102,469 | ) | - | - | ||||||||||||
|
General and administrative expense |
15,995 | (589 | ) | - | 15,406 | ||||||||||||
|
Asset impairment expense |
53,068 | (41,982 | ) | - | 11,086 | ||||||||||||
|
Total costs and expenses |
412,198 | (296,800 | ) | 5,284 | 120,682 | ||||||||||||
|
Gain (loss) on disposal of assets |
149 | (1,994 | ) | - | (1,845 | ) | |||||||||||
|
Operating income |
(27,214 | ) | 52,065 | - | 24,851 | ||||||||||||
|
Other income (expenses): |
|||||||||||||||||
|
Gain on sale of unconsolidated affiliate |
2,225 | - | - | 2,225 | |||||||||||||
|
Interest expense |
(16,860 | ) | 667 | - | (16,193 | ) | |||||||||||
|
Income before income taxes |
(41,849 | ) | 52,732 | - | 10,883 | ||||||||||||
|
Provision for income taxes |
198 | 3 | - | 201 | |||||||||||||
|
Net income |
$ | (42,047 | ) | $ | 52,729 | $ | - | $ | 10,682 | ||||||||
|
Allocation of net income (loss) for calculation of earnings per unit: |
|||||||||||||||||
|
General partner interest in net income |
$ | (512 | ) | $ | 842 | $ | - | $ | 330 | ||||||||
|
Preferred interest in net income |
$ | 25,115 | $ | - | $ | - | $ | 25,115 | |||||||||
|
Net income (loss) available to limited partners |
$ | (66,650 | ) | $ | 51,887 | $ | - | $ | (14,763 | ) | |||||||
|
Basic and diluted net income (loss) per common unit |
$ | (1.61 | ) | $ | 1.25 | $ | - | $ | (0.36 | ) | |||||||
|
Weighted average common units outstanding - basic and diluted |
40,348 | - | - | 40,348 | |||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
BLUEKNIGHT ENERGY PARTNERS, L.P.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
1. |
Basis of Presentation |
The unaudited pro forma condensed consolidated financial statements give effect to the pro forma adjustments necessary to reflect the Divestiture as if it had occurred as of January 1, 2018, in the unaudited pro forma statements of operations for the nine months ended September 30, 2020, and the years ended December 31, 2019 and 2018, and on September 30, 2020, in the unaudited pro forma balance sheet. The Partnership agreed to sell the crude oil pipeline business for $20.0 million, which was reduced by $1.5 million that was placed in an escrow account, plus $3.2 million for crude oil linefill and inventory to arrive at closing consideration of $21.7 million in cash, subject to customary post-closing adjustments. The Partnership expects to receive a portion of the escrow fund over the course of two years, but due to uncertainty of the amount to be received, a receivable is not reflected in the pro forma financials.
The Partnership’s sale of the crude oil pipeline business was accounted for as a sale of nonfinancial assets that meet the definition of a business.
|
2. |
Pro Forma Adjustments |
The unaudited pro forma condensed consolidated financial statements reflect the following adjustments:
|
(a) |
The amounts in this column represent the historical actual financial position or results for the periods presented. |
| (b) | The amounts in this column represent, for the Divestiture, actual financial position or results for the periods presented. |
|
(c) |
Represents estimated use of cash proceeds to repay long-term debt. |
|
(d) |
Represents intercompany revenues earned in a different business segment for services that can be provided to a third-party on a continuing basis and the related cost of services to that business segment. |
| (e) | Reflects interest expense reduction for the associated long-term debt repayment of $21.7 million assuming an interest rate of approximately 3.01% for the nine months ended September 30, 2020 and 4.87% for the year ended December 31, 2019, which is based on the Company’s weighted average interest rate for the respective periods and expected interest savings. |