Blue Dolphin Announces Second Quarter 2014 Financial Results

News provided by

Blue Dolphin Energy Company

Aug 14, 2014, 08:00 ET

HOUSTON, Aug. 14, 2014 /PRNewswire/ -- Blue Dolphin Energy Company ("Blue Dolphin") announced financial results for the quarter ended June 30, 2014.

For the three months ended June 30, 2014 (the "Second Quarter 2014"), Blue Dolphin reported net income of $1,438,557, or an income of $0.14 per share, compared to a net loss of $5,107,010, or a loss of $0.49 per share, for the three months ended June 30, 2013 (the "Second Quarter 2013").  Net income for the Second Quarter 2014 was primarily attributable to more favorable refining margins and improved product mix related to jet fuel production. Total revenue from operations for the Second Quarter 2014 was $102,783,935 compared to total revenue from operations of $104,389,873 for the Second Quarter 2013.  The nearly 2% decrease in total revenue from operations was primarily the result of operating 6 fewer days in the Second Quarter 2014 compared to the Second Quarter 2013.

For the six months ended June 30, 2014 (the "Six Months 2014"), Blue Dolphin reported net income of $7,632,830, or an income of $0.73 per share, compared to a net loss of $5,870,341, or a loss of $0.56 per share, for the six months ended June 30, 2013 (the "Six Months 2013").  Net income for the Six Months 2014 was primarily attributable to more favorable refining margins and improved product mix related to jet fuel production. Total revenue from operations for the Six Months 2014 was $223,214,117 compared to total revenue from operations of $213,634,528 for the Six Months 2013.  The more than 4% increase in total revenue from operations in the Six Months 2014 compared to the Six Months 2013 was primarily the result of increased total refinery throughput.

Financial Highlights:

  • Total Earnings before Interest, Income Taxes and Depreciation ("EBITDA") increased $6,592,449 to $2,096,895 for the Second Quarter 2014 from a negative EBITDA of $4,495,554 for the Second Quarter 2013; total EBITDA increased $13,758,645 to $9,108,776 for the Six Months 2014 from a negative EBITDA of $4,649,869 for the Six Months 2013;
  • Net Income increased $6,545,567 to $1,438,557 for the Second Quarter 2014 from a net loss of $5,107,010 for the Second Quarter 2013; net income increased $13,503,171 to $7,632,830 for the Six Months 2014 from a net loss of $5,870,341 for the Six Months 2013; and
  • Cash Flow from Operations increased $8,501,451 to $5,345,737 for the Six Months 2014 from a negative cash flow from operations of $3,155,714 for the Six Months 2013.

Business Segments:

Blue Dolphin has two reportable business segments: (i) "Refinery Operations" and (ii) "Pipeline Transportation."  Business activities related to Blue Dolphin's "Refinery Operations" business segment are conducted at the crude oil and condensate processing facility located on a 56-acre site in Nixon, Wilson County, Texas (the "Nixon Facility").  Operations at the Nixon Facility also involve the storage and terminaling of petroleum under third-party lease agreements.  Business activities related to Blue Dolphin's "Pipeline Transportation" business segment are primarily conducted in the U.S. Gulf of Mexico through pipeline assets and leasehold interests in oil and gas properties.  Blue Dolphin's "Refinery Operations" business segment represents more than 99% of total operations.

Operational Update:

The Nixon Facility operated for 84 days in the Second Quarter 2014 compared to 90 days in the Second Quarter 2013.  For the same periods, average throughput at the Nixon Facility was 11,527 barrels per day ("bpd"), or 77% of operating capacity, and 11,210 bpd, or 75% of operating capacity, respectively.  For the Second Quarter 2014, feedstock runs at the Nixon Facility, which represents barrels of crude oil processed, totaled 968,259 barrels ("bbls") and 1,008,857 bbls, respectively.  For the same period, refinery production totaled 949,645 bbls and 984,922 bbls, respectively.  The "Refinery Operations" business segment generated EBITDA of $2,431,714 for the Second Quarter 2014 compared to a negative EBITDA of $4,009,290 for the Second Quarter 2013.

The Nixon Facility operated for 174 days in the Six Months 2014 compared to 175 days in the Six Months 2013.  For the same periods, average throughput at the Nixon Facility was 11,841 barrels per day ("bpd"), or 79% of operating capacity, and 11,358 bpd, or 76% of operating capacity, respectively.  For the Six Months 2014, feedstock runs at the Nixon Facility, which represents barrels of crude oil processed, totaled 2,060,267 barrels ("bbls") and 1,987,662 bbls, respectively.  For the same period, refinery production totaled 2,023,283 bbls and 1,943,228 bbls, respectively.  The "Refinery Operations" business segment generated EBITDA of $9,721,803 for the Six Months 2014 compared to a negative EBITDA of $3,623,110 for the Six Months 2013.

Non-GAAP Financial Measures:

This press release and its attachments include EBITDA, a financial measures defined as non-GAAP by the Securities and Exchange Commission (the "SEC").  EBITDA is adjusted for:  (i) items that do not impact Blue Dolphin's income or loss from operations, such as the impact of accounting changes, (ii) income taxes and (iii) interest expense (or income).  Management excludes interest expense (or income) and other expenses or income not pertaining to the operations of Blue Dolphin's business segments from this measure so that investors may evaluate Blue Dolphin's current operating results without regard to Blue Dolphin's financing methods or capital structure.

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

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

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

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

Blue Dolphin Energy Company & Subsidiaries


Consolidated Balance Sheets (Unaudited)




June 30,

December 31,

2014

2013








 ASSETS 



 CURRENT ASSETS 



 Cash and cash equivalents 

$            1,441,199

$               434,717

 Restricted cash 

1,004,497

327,388

 Accounts receivable 

8,136,853

13,487,106

 Prepaid expenses and other current assets  

299,979

333,683

 Deposits 

861,713

1,219,660

 Inventory 

7,501,537

4,686,399

 Total current assets 

19,245,778

20,488,953



 Total property and equipment, net 

36,237,745

36,388,666

 Surety bonds 

850,000

-

 Debt issue costs, net 

481,636

498,536

 Trade name  

303,346

303,346

 TOTAL ASSETS 

$          57,118,505

$          57,679,501



 LIABILITIES AND STOCKHOLDERS' EQUITY 








 CURRENT LIABILITIES 



 Accounts payable  

$          16,829,706

$          20,783,541

 Accounts payable, related party 

2,263,719

3,659,340

 Notes payable 

1,949,401

11,884

 Asset retirement obligations, current portion 

64,981

107,388

 Accrued expenses and other current liabilities 

2,138,781

1,600,444

 Interest payable, current portion 

50,348

40,272

 Long-term debt, current portion 

427,176

2,215,918

 Total current liabilities 

23,724,112

28,418,787



 Long-term liabilities: 



 Asset retirement obligations, net of current portion 

1,893,764

1,490,273

 Deferred revenues and expenses 

777,966

-

 Long-term debt, net of current portion 

9,731,190

13,889,349

 Long-term interest payable, net of current portion 

1,169,931

1,767,381

 Total long-term liabilities 

13,572,851

17,147,003



 TOTAL LIABILITIES 

37,296,963

45,565,790



 STOCKHOLDERS' EQUITY 



 Common stock ($0.01 par value, 20,000,000 shares authorized;10,596,218 and 10,580,973 



 shares issued at June 30, 2014 and December 31, 2013, respectively) 

105,963

105,810

 Additional paid-in capital 

36,698,813

36,623,965

 Accumulated deficit 

(16,183,234)

(23,816,064)

 Treasury stock, 150,000 shares at cost 

(800,000)

(800,000)

 Total stockholders' equity 

19,821,542

12,113,711



 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  

$          57,118,505

$          57,679,501



See notes to consolidated financial statements in Blue Dolphin's

quarterly report on Form 10-Q for the three and six months ended June 30, 2014. 







Blue Dolphin Energy Company & Subsidiaries


Consolidated Statements of Operations (Unaudited)




Three Months Ended June 30,

Six Months Ended June 30,

2014

2013

2014

2013







REVENUE FROM OPERATIONS







Refined product sales

$      102,716,073

$     104,312,768

$     223,092,224

$     213,484,275

Pipeline operations

67,862

77,105

121,893

150,253

Total revenue from operations

102,783,935

104,389,873

223,214,117

213,634,528







COST OF OPERATIONS







Cost of refined products sold 

97,862,361

105,871,717

208,277,968

212,194,378

Refinery operating expenses

2,641,205

2,724,644

5,596,224

5,469,853

Pipeline operating expenses

61,713

36,408

89,442

81,779

Lease operating expenses

6,820

14,390

13,996

41,291

General and administrative expenses

427,060

461,539

796,544

946,103

Depletion, depreciation and amortization

391,167

331,727

781,772

660,515

Abandonment expense

-

23,901

-

51,352

Accretion expense

53,731

31,177

104,533

56,340







Total cost of operations

101,444,057

109,495,503

215,660,479

219,501,611







Income (loss) from operations

1,339,878

(5,105,630)

7,553,638

(5,867,083)







OTHER INCOME (EXPENSE)







Tank rental and easement revenue

365,850

278,349

773,366

556,699

Interest and other income

14,378

977

43,598

1,812

Interest expense

(207,379)

(280,706)

(461,179)

(561,769)

Total other income (expense)

172,849

(1,380)

355,785

(3,258)







Income (loss) before income taxes

1,512,727

(5,107,010)

7,909,423

(5,870,341)







Income tax expense, current

(74,170)

-

(276,593)

-







Net income (loss)

$          1,438,557

$        (5,107,010)

$         7,632,830

$        (5,870,341)
















Income (loss) per common share







Basic

$                   0.14

$                 (0.49)

$                  0.73

$                 (0.56)







Diluted

$                   0.14

$                 (0.49)

$                  0.73

$                 (0.56)







Weighted average number of common shares outstanding:







Basic

10,441,695

10,421,629

10,436,363

10,465,736

Diluted

10,441,695

10,421,629

10,436,363

10,465,736







  See notes to consolidated financial statements in Blue Dolphin's       

quarterly report on Form 10-Q for the three and six months ended June 30, 2014.

Blue Dolphin Energy Company & Subsidiaries


Consolidated Statements of Cash Flows (Unaudited)




Six Months Ended June 30,





2014

2013

OPERATING ACTIVITIES



   Net income (loss)

$

7,632,830

$

(5,870,341)

   Adjustments to reconcile net income (loss) to net cash



provided by (used in) operating activities:



Depletion, depreciation and amortization

781,772

660,515

Unrealized loss on derivatives

(44,400)

(215,300)

Amortization of debt issue costs

16,900

16,900

Amortization of intangible assets

-

9,463

Accretion expense

104,533

56,340

Abandonment costs incurred

-

51,352

Common stock issued for services

75,001

50,000

Changes in operating assets and liabilities



Restricted cash

(677,109)

62,226

Accounts receivable

5,350,253

6,416,559

Prepaid expenses and other current assets

33,704

(36,072)

Deposits and other assets

(492,053)

(4,213)

Inventory

(2,815,138)

(1,033,422)

Accounts payable, accrued expenses and other liabilities

(3,224,935)

(4,233,122)

Accounts payable, related party

(1,395,621)

913,401

Net cash provided by operating activities

5,345,737

(3,155,714)



INVESTING ACTIVITIES



Capital expenditures

(329,871)

(887,970)

Proceeds from sale of assets

-

201,000

Net cash used in investing activities

(329,871)

(686,970)



FINANCING ACTIVITIES



Proceeds from issuance of debt

-

3,705,191

Payments on long-term debt

(5,946,901)

(60,876)

Proceeds from notes payable

2,000,000

15,032

Payments on notes payable

(62,483)

(56,740)

Net cash used in financing activities

(4,009,384)

3,602,607

Net decrease in cash and cash equivalents

1,006,482

(240,077)



CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

434,717

420,896

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

1,441,199

$

180,819



Supplemental Information:



Non-cash operating activities



Reduction in accounts receivable in exchange for treasury stock received

$

-

$

800,000

Surety bond funded by seller of pipeline interest

$

850,000

$

-

Non-cash investing and financing activities:



New asset retirement obligations

$

300,980

$

-

Accrued services payable converted to common stock

$

-

$

50,000

Interest paid

$

1,048,553

$

521,837



See notes to consolidated financial statements in Blue Dolphin's

quarterly report on Form 10-Q for the three and six months ended June 30, 2014.


Blue Dolphin Energy Company & Subsidiaries


GAAP to Non-GAAP Reconciliation -- EBITDA




Three Months Ended June 30, 2014



Segment













Refinery

Pipeline

Corporate & 



Operations

Transportation

Other

Total

Revenues

 ` 

$

67,862

$

-

$

67,862

Operation cost(1)(2)(3)

(100,566,876)

(122,263)

(363,751)

(101,052,890)

Other non-interest income

282,517

83,333

-

365,850

EBITDA

$

(100,284,359)

$

28,932

$

(363,751)

$

(100,619,178)







Depletion, depreciation and amortization






(391,167)

Other income (expense), net






(193,001)







Income before income taxes






$

(101,203,346)







Capital expenditures

$

270,693

$

-

$

-

$

270,693







Identifiable assets(4)

$

53,458,327

$

3,132,068

$

528,110

$

57,118,505

(1)

"Refinery Operations" and "Pipeline Transportation" include an allocation of general and administrative expenses based on respective revenue.

(2)

"Refinery Operations" includes the effect of economic hedges on our refined petroleum products and crude oil inventory. Cost of refined products sold within operation cost includes a realized loss of $398,639 and an unrealized gain of $171,500.

(3)

"Corporate and Other" includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees and legal expense.

(4)

Identifiable assets contain related legal obligations of each business segment including cash, accounts receivable and recorded net assets.

Three Months Ended June 30, 2013



Segment













Refinery

Pipeline

Corporate & 



Operations

Transportation

Other

Total

Revenues

$

104,312,768

$

77,105

$

-

$

104,389,873

Operation cost(1)(2)(3)

(108,600,407)

(164,461)

(398,908)

(109,163,776)

Other non-interest income

278,349

-

-

278,349

EBITDA

$

(4,009,290)

$

(87,356)

$

(398,908)

$

(4,495,554)







Depletion, depreciation and amortization






(331,727)

Other income (expense), net






(279,729)
















Income before income taxes






$

(5,107,010)







Capital expenditures

$

357,744

$

-

$

-

$

357,744







Identifiable asset(4)

$

47,519,385

$

1,639,318

$

778,160

$

49,936,863









(1) 

"Refinery Operations" and "Pipeline Transportation" include an allocation of general and administrative expenses based on respective revenue.

(2)

"Refinery Operations" includes the effect of economic hedges on our refined petroleum products and crude oil inventory.  Cost of refined products sold within operation cost includes a realized loss of $212,001 and an unrealized gain of $267,350.

(3)

"Corporate and Other" includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees and legal expense.

(4) 

Identifiable assets contain related legal obligations of each business segment including cash, accounts receivable and recorded net assets.

Six Months Ended June 30, 2014



Segment













Refinery

Pipeline

Corporate & 



Operations

Transportation

Other

Total

Revenues

$

223,092,224

$

121,893

$

-

$

223,214,117

Operation cost(1)(2)(3)

(213,935,454)

(244,773)

(698,480)

(214,878,707)

Other non-interest income

565,033

208,333

-

773,366

EBITDA

$

9,721,803

$

85,453

$

(698,480)

$

9,108,776







Depletion, depreciation and amortization






(781,772)

Other income (expense), net






(417,581)







Income before income taxes






$

7,909,423







Capital expenditures

$

329,871

$

-

$

-

$

329,871







Identifiable assets(4)

$

53,458,327

$

3,132,068

$

528,110

$

57,118,505









(1) 

"Refinery Operations" and "Pipeline Transportation" include an allocation of general and administrative expenses based on respective revenue.

(2) 

"Refinery Operations" includes the effect of economic hedges on our refined petroleum products and crude oil inventory. Cost of refined products sold within operation cost includes a realized loss of $453,109 and an unrealized gain of $44,400.

(3) 

"Corporate and Other" includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees and legal expense.

(4) 

Identifiable assets contain related legal obligations of each business segment including cash, accounts receivable and recorded net assets.

Six Months Ended June 30, 2013



Segment













Refinery

Pipeline

Corporate & 



Operations

Transportation

Other

Total

Revenues

$

213,484,275

$

150,253

$

-

$

213,634,528

Operation cost(1)(2)(3)

(217,664,084)

(318,960)

(858,052)

(218,841,096)

Other non-interest income

556,699

-

-

556,699

EBITDA

$

(3,623,110)

$

(168,707)

$

(858,052)

$

(4,649,869)







Depletion, depreciation and amortization






(660,515)

Other income (expense), net






(559,957)







Loss before income taxes






$

(5,870,341)







Capital expenditures

$

887,970

$

-

$

-

$

887,970







Identifiable assets(4)

$

47,519,385

$

1,639,318

$

778,160

$

49,936,863









(1) 

"Refinery Operations" and "Pipeline Transportation" include an allocation of general and administrative expenses based on respective revenue.

(2)

"Refinery Operations" includes the effect of economic hedges on our refined petroleum products and crude oil inventory.  Cost of refined products sold within operation cost includes a realized loss of $248,441 and an unrealized gain of $215,300.

(3)

"Corporate and Other" includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees and legal expense.

(4) 

Identifiable assets contain related legal obligations of each business segment including cash, accounts receivable and recorded net assets.

SOURCE Blue Dolphin Energy Company