Blueknight Energy Partners, L.P. Announces Fourth Quarter and Full Year 2012 Results

  Blueknight Energy Partners, L.P. Announces Fourth Quarter and Full Year 2012
  Results

Business Wire

OKLAHOMA CITY -- March 13, 2013

Blueknight Energy Partners, L.P. (“BKEP” or the “Partnership”) (NASDAQ: BKEP
and BKEPP), a midstream energy company focused on providing integrated
services for companies engaged in the production, distribution and marketing
of crude oil, asphalt and other petroleum products, today announced adjusted
EBITDA of $13.1 million for the fourth quarter of 2012 as compared to $18.6
million for the same period in 2011. Adjusted EBITDA for the twelve months
ended December 31, 2012 was $61.4 million as compared to adjusted EBITDA of
$65.2 million for the year ended December 31, 2011. An explanation of adjusted
EBITDA, including a reconciliation of such measure to net income, is provided
in the section of this release entitled “Non-GAAP Financial Measures.”

The Partnership reported net income of $5.5 million on total revenues of $46.9
million for the three months ended December 31, 2012, compared to net income
of $7.6 million on total revenues of $45.6 million for the three months ended
December 31, 2011. For the twelve months ended December 31, 2012, the
Partnership reported net income of $31.6 million on total revenues of $182.4
million, compared to net income of $33.5 million on total revenues of $176.7
million for the twelve months ended December 31, 2011.

The Partnership's financial results for twelve months ended December 31, 2011
were impacted bynon-cash gains of approximately $22.1 million related to the
change in estimated fair market value of the embedded derivative related to
convertible debentures redeemed in the fourth quarter of 2011 and the rights
offering liability settled in the fourth quarter of 2011.

The Partnership previously announced a fourth quarter 2012 cash distribution
of $0.1150 per common unit, a 2.2% increase over the previous quarter’s
distribution, and a $0.17875 distribution per preferred unit which were paid
on February 14, 2013 on all outstanding common and preferred units to
unitholders of record at the close of business on February 4, 2013. Additional
information regarding the Partnership’s results of operations will be provided
in the Partnership’s Annual Report on Form 10-K for the year ended December
31, 2012, to be filed with the Securities and Exchange Commission on March 14,
2013.

“Overall, we are encouraged by the increase in crude oil transportation
revenues even though adjusted EBITDA decreased quarter over quarter and year
over year,” commented Blueknight’s CEO Mark Hurley. “Decreased crude oil
storage rates at our terminal operation in Cushing associated with our planned
transition to longer-term agreements impacted adjusted EBITDA. In addition,
one-time costs relating to executive personnel changes and increased repair
and maintenance expenses in our pipeline and asphalt business segments also
affected our adjusted EBITDA for the quarter and full year.”

Hurley continued, “Increased cash flow from operations allowed us to increase
our common unit distribution for the second consecutive quarter demonstrating
our commitment to providing consistent returns to our unitholders. Moreover,
we are making considerable progress on the Arbuckle pipeline project for
ExxonMobil’s subsidiary XTO. Our recent announcements on the Pecos River
pipeline projects, including the proposed north extension, now in an open
season process, are being well received by operators and producers. Entering
2013, we are optimistic about the business as we continue to execute against
the 90-day plan outlined last quarter. Over the long term, we will focus on
completing our current and announced projects in a timely and efficient manner
while we prospect for high growth projects to increase our capacity and
presence in the most active drilling areas in the country.”

Results of Operations

The following table summarizes the financial results for the three and twelve
months ended December 31, 2011 and 2012 (in thousands except per unit data):

                                                    
                               Three months ended      Twelve months ended
                               December 31,            December 31,
                               2011        2012       2011         2012
                               (unaudited)
Service revenue:
Third party revenue            $ 32,870     $ 33,398   $ 132,618     $ 134,242
Related party revenue           12,712     13,536    44,089      48,153
Total revenue                   45,582     46,934    176,707     182,395
Expenses:
Operating                        30,272       34,333     117,851       126,262
General and administrative      3,246      6,187     17,311      19,795
Total expenses                  33,518     40,520    135,162     146,057
Gain on sale of assets          1,154      1,985     3,008       7,250
Operating income                13,218     8,399     44,553      43,588
Other (income) expenses:
Interest expense (net of
capitalized interest of          5,614        2,828      32,898        11,705
$3,802, $21, and $150,
respectively)
Change in fair value of
embedded derivative within       —            —          (20,224 )     —
convertible debt
Change in fair value of         (45    )    —         (1,883  )    —
rights offering liability
Income before income taxes      7,649      5,571     33,762      31,883
Provision for income taxes      68         54        287         318
Net income (loss)              $ 7,581     $ 5,517    $ 33,475     $ 31,565
Allocation of net income for
calculation of earnings per
unit:
General partner interest in    $ 158        $ 115      $ 912         $ 774
net income (loss)
Preferred interest in net      $ 5,322      $ 5,391    $ 16,446      $ 21,564
income
Accretion of discount on
increasing rate preferred      $ 2,243      $ —        $ 2,243       $ —
units
Beneficial conversion
feature attributable to        $ 10,198     $ —        $ 43,259      $ 1,853
preferred units
Beneficial conversion
feature attributable to        $ (6,892 )   $ —        $ (6,892  )   $ —
repurchase of preferred
units
Gain on extinguishment
attributable to redemption
of convertible debt,           $ (2,375 )   $ —        $ (2,375  )   $ —
recorded as a capital
transaction
Income (loss) available to     $ (1,073 )   $ 11       $ (20,118 )   $ 7,374
limited partners
                                                                     
Basic and diluted net income   $ (0.05  )   $ —        $ (0.61   )   $ 0.32
(loss) per common unit
Basic and diluted net income   $ —          $ —        $ (0.52   )   $ —
(loss) per subordinated unit
                                                                     
Weighted average common
units outstanding - basic        22,567       22,671     22,059        22,668
and diluted
Weighted average
subordinated units               —            —          8,817         —
outstanding - basic and
diluted
                                                                     

Non-GAAP Financial Measures

This press release contains the non-GAAP financial measure of adjusted EBITDA.
Adjusted EBITDA is defined as earnings before interest, income taxes,
depreciation, amortization, impairment, gain on sale of assets, and other
miscellaneous non-cash items, including changes in the fair values of the
embedded derivative within convertible debt and the rights offering liability.
The use of adjusted EBITDA should not be considered as an alternative to GAAP
measures such as net income or cash flows from operating activities. Adjusted
EBITDA is presented because the Partnership believes it provides additional
information with respect to its business activities and is used as a
supplemental financial measure by management and external users of the
Partnership’s financial statements, such as investors, commercial banks and
others, to assess, among other things, the Partnership’s operating performance
and return on capital as compared to those of other companies in the midstream
energy sector, without regard to financing or capital structure.

The following table presents a reconciliation of adjusted EBITDA to net income
for the periods shown (in thousands):

                                                   
                            Three months ended        Twelve months ended
                            December 31,              December 31,
                            2011        2012         2011         2012
Net income (loss)           $ 7,581      $ 5,517      $ 33,475      $ 31,565
Interest expense              5,614        2,828        32,898        11,705
Income taxes                  68           54           287           318
Depreciation and              5,709        5,956        22,775        23,129
amortization
Asset impairment charge       867          773          867           1,942
Gain on sale of assets        (1,155 )     (1,985 )     (3,008  )     (7,250 )
Change in fair value of
embedded derivative           —            —            (20,224 )     —
within convertible debt
Change in fair value of      (45    )    —          (1,883  )    —      
rights offering liability
Adjusted EBITDA             $ 18,639    $ 13,143    $ 65,187     $ 61,409 
                                                                    

Investor Conference Call

The Partnership will hold a conference call on Thursday, March 14, 2013 at
1:30 p.m. CDT (2:30 p.m. EDT) to discuss fourth quarter and full year 2012
results. The conference call can be accessed through the Investors section of
the Partnership’s Web site at http://investor.bkep.com/presentations or by
telephone at 1-877-317-6789. International locations may dial-in by calling
1-412-317-6789.

Participants should dial in five to ten minutes prior to the scheduled start
time. An audio replay will be available on the Web site for at least 30 days,
and a recording will be available by phone for 30 days. To hear the replay,
call 1-877-344-7529 in the U.S. or call 1-412-317-0088 from international
locations. The pass code for both is 10026277.

Forward-Looking Statements

This release includes forward-looking statements. Statements included in this
release that are not historical facts (including, without limitation, any
statements concerning plans and objectives of management for future operations
or economic performance or assumptions related thereto) are forward-looking
statements. Such forward-looking statements are subject to various risks and
uncertainties. These risks and uncertainties include, among other things,
uncertainties relating to the Partnership’s debt levels and restrictions in
our credit facility, the Partnership’s exposure to the credit risk of its
third-party customers, the Partnership’s future cash flows and operations,
future market conditions, current and future governmental regulation, future
taxation and other factors discussed in the Partnership’s filings with the
Securities and Exchange Commission. If any of these risks or uncertainties
materializes, or should underlying assumptions prove incorrect, actual results
or outcomes may vary materially from those expected. The Partnership
undertakes no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.

About Blueknight Energy Partners, L.P.

BKEP owns and operates a diversified portfolio of complementary midstream
energy assets consisting of approximately 7.8 million barrels of crude oil
storage located in Oklahoma and Texas, approximately 6.6 million barrels of
which are located at the Cushing Oklahoma Interchange, approximately 1,264
miles of crude oil pipeline located primarily in Oklahoma and Texas,
approximately 280 crude oil transportation and oilfield services vehicles
deployed in Kansas, Colorado, New Mexico, Oklahoma and Texas and approximately
7.2 million barrels of combined asphalt product and residual fuel oil storage
located at 44 terminals in 22 states. BKEP provides integrated services for
companies engaged in the production, distribution and marketing of crude oil,
asphalt and other petroleum products. BKEP is headquartered in Oklahoma City,
Oklahoma. For more information, visit the Partnership’s Web site at
www.bkep.com.

Contact:

BKEP
Investor Relations, 918-237-4032
investor@bkep.com
or
Media Contact:
Brent Gooden, 405-715-3232 or 405-818-1900
 
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