Blue Dolphin Reports Third Quarter Financial Results And Provides Nixon Facility Operational Update

News provided by

Blue Dolphin Energy Company

Nov 16, 2012, 06:29 ET

HOUSTON, Nov. 16, 2012 /PRNewswire/ -- Blue Dolphin Energy Company ("Blue Dolphin") announced condensed consolidated financial results for the three and nine months ended September 30, 2012.

Blue Dolphin's primary asset is a crude oil processing facility located in Nixon, Texas (the "Nixon Facility"), which began operations on a reduced basis in February 2012.  The Nixon Facility operated for a total of 90 days for the three months ended September 30, 2012 and for a total of 238 days for the nine months ended September 30, 2012.  During the three months ended September 30, 2012, average throughput increased to approximately 10,500 bpd, or 70% of operating capacity, compared to approximately 8,900 bpd, or 59% of operating capacity, during the three months ended June 30, 2012.  Management anticipates that throughput levels at the Nixon Facility may approach operating capacity in the first half of 2013.  The Nixon Facility had no operations during the three and nine months ended September 30, 2011.

For the three months ended September 30, 2012, Blue Dolphin reported a net loss of $762,761 on total revenue of $104,094,137.  For the nine months ended September 30, 2012, Blue Dolphin reported a net loss of $10,130,493 on total revenue of $234,926,203.  The net loss for the three months ended September 30, 2012 included:

  • An impairment and an allowance for doubtful accounts receivable totaling $4,180,159, which related to Blue Dolphin's 7% undivided interest in the North Sumatra Basin – Langsa Field offshore Indonesia (the "Indonesian Interest"); and
  • an abandonment expense of $539,996 associated with plugging and abandonment costs for High Island A-7. The amount recognized reflects the amount incurred less the amount reserved for the abandonment retirement obligation liability, which was $141,643. We will record additional plugging and abandonment costs as information becomes available to substantiate actual and/or probable costs.

During the three months ended September 30, 2012, Blue Dolphin experienced negative cash flow from operations of $28,017, which was a substantial improvement compared to negative cash flow from operations of $3,017,262 during the three months ended June 30, 2012.  The liquidity improvement quarter over quarter was primarily the result of higher product sales margins.  Refining margins were relatively stable throughout the current quarter, allowing the Nixon Facility to generate positive operating income each month within the three months ended September 30, 2012 and an EBITDA of $5,064,868 for the three months ended September 30, 2012.

In November 2012, Blue Dolphin Exploration Company ("BDEX"), a wholly owned subsidiary of Blue Dolphin, entered into a Sale and Purchase Agreement (the "SPA") with Blue Sky Langsa Limited ("Blue Sky") whereby Blue Sky agreed to purchase the Indonesian Interest.  Based on the SPA, which is effective October 31, 2012, Blue Sky will acquire the Indonesian Interest for: (i) $800,000 if transaction closing occurs in December 2012 or (ii) $1.0 million if transaction closing occurs in February 2013.  As a result of the SPA, Blue Dolphin adjusted the value of the Indonesian Interest to $800,000, which resulted in an impairment charge of $3,858,427 for the three months ended September 30, 2012.   Blue Dolphin also recorded an allowance for doubtful accounts receivable of $321,732 for the three months ended September 30, 2012.  The allowance is associated with non-payment of accounts receivable for crude oil liftings revenue by Blue Sky related to the Indonesian Interest.

Blue Dolphin acquired Lazarus Energy, LLC ("LE") from Lazarus Energy Holdings, LLC in a reverse acquisition effective February 15, 2012.  Under reverse acquisition accounting, LE (the legal subsidiary) has been treated as the accounting parent (acquirer) and Blue Dolphin (the legal parent) has been treated as the accounting subsidiary (acquiree).  Accordingly, the financial statements subsequent to the date of the transaction are presented as the continuation of LE.

Blue Dolphin Energy Company (OTCQX: BDCO) is engaged in crude oil and condensate processing, as well as the gathering and transportation and the exploration and production of oil and natural gas. For additional company information, visit Blue Dolphin's corporate website at http://www.blue-dolphin-energy.com.

Certain of the statements included in this press release, which express a belief, expectation or intention, as well as those regarding future financial performance or results, or which are not historical facts, are "forward-looking" statements as that term is defined in the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.  These forward-looking statements are not guarantees of future performance or events and such statements involve a number of risks, uncertainties and assumptions, including but not limited to: significant dependent relationship with Genesis and its affiliates; key supplier failure; loss of market share with or by a key customer; failure to comply with forbearance agreements relating to long-term indebtedness under which Blue Dolphin is in default; continued declines in throughput volumes and production rates from Blue Dolphin's U.S. Gulf of Mexico leasehold properties; 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 twelve month period ended December 31, 2011.  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

Condensed Consolidated Balance Sheets








September 30, 2012

December 31, 2011













 ASSETS 



 CURRENT ASSETS 



 Cash and cash equivalents 

$               139,273

$                    1,822

 Restricted cash 

192,813

192,004

 Accounts receivable, net 

8,054,630

-

 Prepaid expenses and other current assets  

174,146

58,713

 Deposits 

1,236,447

473,026

 Inventory 

4,901,895

4,533,961

 Total current assets 

14,699,204

5,259,526



 Property, plant and equipment, net 

44,817,447

32,307,929



 Debt issue costs, net 

540,784

566,133

 Other assets  

11,367

10,468

 Trade name  

303,346

-

 Goodwill  

1,445,720

-



 TOTAL ASSETS 

$          61,817,868

$           38,144,056



 LIABILITIES AND STOCKHOLDERS' EQUITY 








 CURRENT LIABILITIES 



 Accounts payable  

$          14,161,594

$             4,841,859

 Accounts payable, related party 

1,281,936

908,139

 Note payable 

47,965

46,318

 Accrued expenses and other current liabilities 

716,123

744,921

 Interest payable, current portion 

827,777

995,916

 Long-term debt, current portion 

1,816,903

1,839,501

 Total current liabilities 

18,852,298

9,376,654



 Long-term liabilities: 



 Asset retirement obligations 

896,096

-

 Long-term debt, net of current portion 

16,552,638

12,455,102

 Long-term interest payable, net of current portion 

806,356

650,214

 Total long-term liabilities 

18,255,090

13,105,316



 TOTAL LIABILITIES 

37,107,388

22,481,970



 Commitments and contingencies 








 STOCKHOLDERS' EQUITY 



 Common stock ($0.01 par value, 20,000,000 shares authorized, 10,545,690 and 8,426,456 

105,457

84,265

 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively) 



 Additional paid-in capital 

36,459,819

17,302,124

 Accumulated deficit 

(11,854,796)

(1,724,303)

 Total stockholders' equity 

24,710,480

15,662,086



 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  

$          61,817,868

$           38,144,056

See accompanying notes to condensed consolidated financial statements in Blue Dolphin's quarterly report on Form 10-Q for the three and nine months ended September 30, 2012.

BLUE DOLPHIN ENERGY COMPANY & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)







Three Months Ended September 30,

Nine Months Ended September 30,









2012

2011

2012

2011







REVENUE FROM OPERATIONS







Refined product sales

$ 103,738,982

$              -

$ 233,926,241

$              -

Pipeline operations

117,712

-

312,098

-

Oil and gas sales

237,443

-

687,864

-







Total revenue from operations

104,094,137

-

234,926,203

-







COST OF OPERATIONS







Cost of refined products sold 

96,160,575

-

229,853,030

-

Refinery operating expenses

2,559,456

-

5,862,121

-

Pipeline operating expenses

107,534

-

344,654

-

Lease operating expenses

351,462

-

852,137

-

General and administrative expenses

442,132

213,221

1,702,439

504,161

Depletion, depreciation and amortization

497,382

4,306

1,295,738

12,920

Abandonment expense

539,996

-

539,996

-

Impairment of oil and gas properties

3,858,427


3,858,427

-

Bad debt expense

321,732


321,732

-

Accretion expense

39,276

-

104,736

-







Total cost of operations

104,877,972

217,527

244,735,010

517,081







Loss from operations

(783,835)

(217,527)

(9,808,807)

(517,081)







OTHER INCOME (EXPENSE)







Net tank rental revenue

81,365

87,036

256,684

783,490

Interest and other income

16,439

345

20,354

6,734

Interest expense

(74,227)

(11,622)

(583,077)

(35,994)

Total other income (expense)

23,577

75,759

(306,039)

754,230







Income (loss) before income taxes

(760,258)

(141,768)

(10,114,846)

237,149
















Income tax expense

(2,503)

-

(15,647)

-







Net income (loss)

$      (762,761)

$ (141,768)

$ (10,130,493)

$  237,149







Income (loss) per common share:







Basic

$            (0.07)

$       (0.02)

$            (0.99)

$        0.03

Diluted

$            (0.07)

$       (0.02)

$            (0.99)

$        0.03







Weighted average number of common shares outstanding:







Basic

10,545,690

8,426,456

10,191,980

8,426,456

Diluted

10,545,690

8,426,456

10,191,980

8,426,456

See accompanying notes to condensed consolidated financial statements in Blue Dolphin's quarterly report on Form 10-Q for the three and nine months ended September 30, 2012.

 BLUE DOLPHIN ENERGY COMPANY & SUBSIDIARIES 

 CONDENSED CONSOLIDATED CASH FLOW STATEMENT (Unaudited) 



Nine Months Ended September 30,



2012

2011

OPERATING ACTIVITIES


   Net income (loss)

$ (10,130,493)

$     237,149

   Adjustments to reconcile net income (loss) to net cash


provided by (used in) operating activities:


Depletion, depreciation and amortization

1,287,173

12,920

Impairment of oil and gas properties

3,858,427

-

Unrealized loss (gain) on derivatives

(21,470)

-

Amortization of debt issue costs

25,349

25,349

Amortization of intangible assets

8,565

-

Accretion expense

104,736

-

Abandonment costs incurred

(141,099)

-

Common stock issued for services

119,000

-

Bad debt expense

321,732

-

Changes in operating assets and liabilities (net of effects of acquisition in 2012)


Restricted cash

(810)

34,067

Accounts receivable

(7,852,717)

(3,740)

Prepaid expenses and other current assets

119,529

(8,804)

Deposits

(763,421)

(68,407)

Inventory

(312,766)

8,366

Accounts payable, accrued expenses and other liabilities

8,057,321

290,245

Accounts payable, related party

2,275,665

125,682

Net cash provided by (used in) operating activities

(3,045,279)

652,827


INVESTING ACTIVITIES


Advance of loan receivable

-

-

Exploration and development costs

-

-

Capital expenditures

(2,568,449)

(1,067,558)

Cash acquired on acquisition 

1,674,594

-

Net cash used in investing activities

(893,855)

(1,067,558)


FINANCING ACTIVITIES


Proceeds from issuance of debt

4,788,623

452,308

Payments on long term debt

(713,686)

(31,922)

Proceeds from notes payable

24,548

-

Payments on notes payable

(22,900)

(5,034)

-

-

Net cash provided by financing activities

4,076,585

415,352

Net increase (decrease) in cash and cash equivalents

137,451

621


CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

1,822

733

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$       139,273

$         1,354


Supplemental Information:


Non-cash investing and financing activities:


Financing of insurance premiums

$         82,560

$                -

Related party payable converted to equity 

$       993,732

$                -

Issuance of stock for acquisition of Blue Dolphin at fair value, inclusive 


of cash acquired of $1,674,594

$  18,046,154

$                -

Accrued services payable converted to common stock

$         20,000

$                -

See accompanying notes to condensed consolidated financial statements in Blue Dolphin's quarterly report on Form 10-Q for the three and nine months ended September 30, 2012.

Management uses earnings before interest expense, income taxes and depreciation ("EBITDA"), a non-GAAP financial measure, to assess the operating results and effectiveness of Blue Dolphin's business segments, which consist of its consolidated businesses and investments.  Management believes EBITDA is useful to Blue Dolphin's investors because it allows them to evaluate Blue Dolphin's operating performance using the same performance measure analyzed internally by management.  EBITDA is adjusted for:  (i) items that do not impact Blue Dolphin's income or loss from continuing 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 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.  Management understands that EBITDA may not be comparable to measurements used by other companies.  Additionally, EBITDA should be considered in conjunction with net income (loss) and other performance measures such as operating cash flows.

Blue Dolphin is engaged in three lines of business:  (i) ownership of crude oil and condensate processing assets, (ii) pipeline transportation services to producers/shippers and (iii) oil and gas exploration and production.  Blue Dolphin's primary operating asset is the Nixon Facility.  Blue Dolphin also operates oil and natural gas pipelines in the Gulf of Mexico region and holds oil and natural gas leasehold interests in the U.S. Gulf of Mexico and Indonesia; however, these operations are considered non-core to Blue Dolphin's business.

Following is a reconciliation of EBITDA (by business segment) for the three months ended September 30, 2012, and at September 30, 2012.

Three Months Ended September 30, 2012


Segment




Crude Oil


Oil and Gas




and
Condensate

Pipeline

Exploration
&

Corporate & 


Processing

Transportation

Production

Other(1)

Total

Revenues

$ 103,738,982

$       117,712

$    237,443

$              -

$ 104,094,137

Operation cost(2)

98,755,479

211,114

5,253,900

160,097

104,380,590

Other non-interest income

81,365

-

-

-

81,365

EBITDA

$     5,064,868

$       (93,402)

$ (5,016,457)

$  (160,097)

$       (205,088)








Depletion, depreciation and amortization







(497,382)

Other income (expense), net







(57,788)








Loss before income taxes







$       (760,258)








Capital expenditures

$      494,312

$                  -

$              -

$                -

$        494,312








Identifiable assets(3)

$  48,645,278

$  11,350,264

$   812,229

$ 1,010,097

$   61,817,868


















(1)

Includes unallocated general and administrative costs associated with corporate maintenance costs (such as director fees and legal expenses).

(2)

General and administrative costs are allocated based on revenue.  In addition, the effect of the economic hedges on refined products, executed by Genesis Energy, LLC ("Genesis"), is included within operation cost of Blue Dolphin's Crude Oil and Condensate Processing group.  Cost of refined products sold includes a realized loss of $325,654 and an unrealized gain of $148,453 for the three months ended September 30, 2012.

(3)

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


Following is a reconciliation of EBITDA (by business segment) for the three months ended September 30, 2011, and at September 30, 2011:

Three Months Ended September 30, 2011


Segment




Crude Oil


Oil and Gas




and Condensate

Pipeline

Exploration &

Corporate & 


Processing

Transportation

Production

Other(1)

Total

Revenues

$                  -

$               -

$             -

$              -

$                    -

Operation cost(2)

213,221

-

-

-

213,221

Other non-interest income

87,036

-

-

-

87,036

EBITDA

$     (126,185)

$               -

$             -

$              -

$       (126,185)








Depletion, depreciation and amortization







(4,306)

Other income (expense), net







(11,277)








Loss before income taxes







$       (141,768)








Capital expenditures

$      561,888

$              -

$             -

$              -

$         561,888








Identifiable assets(3)

$  30,837,718

$               -

$             -

$              -

$    30,837,718


















(1)

Includes unallocated general and administrative costs associated with corporate maintenance costs (such as director fees and legal expenses).

(2)

General and administrative costs are allocated based on revenue.

(3)

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

Following is a reconciliation of EBITDA (by business segment) for the nine months ended September 30, 2012, and at September 30, 2012:

Nine Months Ended September 30, 2012


Segment




Crude Oil


Oil and Gas




and Condensate

Pipeline

Exploration &

Corporate
&




Processing

Transportation

Production

Other(1)

Total

Revenues

$ 233,926,241

$ 312,098

$ 687,864

$  -

$ 234,926,203

Operation cost(2)

235,987,724

648,334

6,146,698

656,516

243,439,272

Other non-interest income

256,684

-

-

-

256,684

EBITDA

$ (1,804,799)

$ (336,236)

$ (5,458,834)

$ (656,516)

$ (8,256,385)








Depletion, depreciation and amortization







(1,295,738)

Other income (expense), net







(562,723)








Loss before income taxes







$ (10,114,846)








Capital expenditures

$ 2,568,449

$ -

$ -

$ -

$ 2,568,449








Identifiable assets(3)

$ 48,645,278

$ 11,350,264

$ 812,229

$ 1,010,097

$ 61,817,868


















(1)

Includes unallocated general and administrative costs associated with corporate maintenance costs (such as director fees and legal expenses).

(2)

General and administrative costs are allocated based on revenue.  In addition, the effect of the economic hedges on refined products, executed by Genesis, is included within operation cost of Blue Dolphin's Crude Oil and Condensate Processing group.  Cost of refined products sold includes a realized loss of $327,256 and an unrealized gain of $21,470 for the nine months ended September 30, 2012.

(3)

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


Following is a reconciliation of EBITDA (by business segment) for the nine months ended September 30, 2011, and at September 30, 2011:

Nine Months Ended September 30, 2011


Segment




Crude Oil


Oil and Gas




and Condensate

Pipeline

Exploration &

Corporate & 


Processing

Transportation

Production

Other(1)

Total

Revenues

$                 -

$                -

$                -

$             -

$                  -

Operation cost(2)

504,161

-

-

-

504,161

Other non-interest income

783,490

-

-

-

783,490

EBITDA

$      279,329

$                -

$                -

$             -

$       279,329








Depletion, depreciation and amortization







(12,920)

Other income (expense), net







(29,260)








Income before income taxes







$       237,149








Capital expenditures

$   1,067,558

$                -

$                -

$             -

$    1,067,558








Identifiable assets(3)

$ 30,837,718

$                -

$                -

$             -

$  30,837,718








(1)

Includes unallocated general and administrative costs associated with corporate maintenance costs (such as director fees and legal expenses).

(2)

General and administrative costs are allocated based on revenue.

(3)

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

SOURCE Blue Dolphin Energy Company