Crude Oil Pipeline Services – Crude Oil Trucking and Producer Field Services
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2016 Citi MLP/Midstream Infrastructure Conference August 17 – 18, 2016 The Smart Move in Energy Private and Confidential (NASDAQ: BKEP & BKEPP ) Legal Disclaimer Forward-Looking Statements This presentation includes forward-looking statements. Statements included in this presentation that are not historical facts (including, without limitation, any statements about future financial and operating results, guidance, projected or forecasted financial results, objectives, project timing, expectations and intentions and other statements that are not historical facts) are forward-looking statements. Such forward-looking statements are subject to various risks and uncertainties. These risks and uncertainties include, among other things, satisfaction of the closing conditions to the transactions described herein, the Partnership's ability to pay future distributions, uncertainties relating to the Partnership’s debt levels and restrictions in its credit facility, its exposure to the credit risk of our 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. This presentation also contains the non-GAAP financial measures of adjusted EBITDA, distributable cash flow and total operating margin, excluding depreciation and amortization. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization, non-cash equity-based compensation, asset impairment charges, gains related to investments and fees related to the Ergon transactions. Distributable cash flow is defined as adjusted EBITDA, plus or minus cash proceeds from sale of investments, cash paid for interest, maintenance capital expenditures, cash paid for taxes, and cash paid for fees related to the Ergon transactions. Operating margin, excluding depreciation and amortization, is defined as revenues from related parties and external customers less operating expenses, excluding depreciation and amortization. The use of adjusted EBITDA, distributable cash flow and total operating margin, excluding depreciation and amortization, should not be considered as alternatives to GAAP measures such as operating income, net income or cash flows from operating activities. Adjusted EBITDA, distributable cash flow and total operating margin, excluding depreciation and amortization are presented because the Partnership believes they provide additional information with respect to its business activities and are used as supplemental financial measures 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. Private and Confidential 2 (NASDAQ: BKEP & BKEPP ) Partnership Overview Private and Confidential 3 (NASDAQ: BKEP & BKEPP ) Partnership Overview • Blueknight Energy Partners, L.P. (“BKEP”) is a publicly traded master limited partnership – Headquartered in Oklahoma City, Oklahoma; established in 2007 – General Partner currently owned equally by Vitol and Charlesbank Capital Partners • Our strategically located assets position us to be a leading provider of midstream services in the energy industry. We provide services to our customers by focusing on four operational areas: – Asphalt Terminalling Services – Crude Oil Terminalling and Storage Services – Crude Oil Pipeline Services – Crude Oil Trucking and Producer Field Services Private and Confidential 4 (NASDAQ: BKEP & BKEPP ) Common and Preferred Units Common Units Preferred Units Market NASDAQ NASDAQ Symbol BKEP BKEPP Outstanding 37,049,876 30,147,624 Yield at 8/11/16 10.0% 9.6% Distribution $0.145/unit for quarter ended June 30, 2016 $0.715/unit annual distribution Comment 1.8% increase over 2015 second quarter Convertible to common units on a distribution 1-1 basis under certain conditions Market Capital/Enterprise $437.2MM/$716.2MM Value (1) (combined for Common and Preferred Units) (1) Market value as of August 11, 2016. Enterprise value calculation utilizes balance sheet data as of June 30, 2016 Private and Confidential 5 (NASDAQ: BKEP & BKEPP ) Current Ownership Charlesbank Capital Partners Vitol Holding B.V. CB-Blueknight, LLC Blueknight Energy Holding, Inc. 50.0% 50.0% Ownership Ownership Interest Interest Blueknight GP Holding, LLC (DE) 13.4% Limited 13.4% Limited Partner Interest Partner Interest 100.0% Indirect Ownership Interest Blueknight Energy Partners G.P., L.L.C. (DE) Public Unitholders 1.7% General Partner Interest 71.5% Limited Blueknight Energy Partners, L.P. (DE) Partner Interest 100.0% Ownership Interest BKEP Operating Subsidiaries Private and Confidential 6 (NASDAQ: BKEP & BKEPP ) Diversified Operations Asphalt Terminal Crude Oil Terminalling and Network (61.5%) Storage (27.9%) – 8.2 million barrels of – 6.6 million barrels of asphalt and residual Cushing, OK storage fuel oil storage – 0.2 million barrels of – 45 terminals across Longview, TX storage 23 states – Operate 1.0 million barrel Cushing, OK terminal for – Largest TransMontaigne independently owned asphalt terminal network Crude Oil Pipeline Services (7.0%) Crude Oil Trucking & Producer Field – 3 primary gathering and Services (3.6%) transportation pipelines – Approximately 240 crude – Operate and own 30% of transports and service West Texas Pecos River trucks that complement the Pipeline (Advantage pipeline gathering and Pipeline) transportation business – Total length of 985 miles – Producer services include – Recently announced gas gathering pipeline Note: This map is deemed reliable but provided “as is” without any representation of accuracy, timeliness, reliability or completeness. These map Oklahoma condensate maintenance and water documents do not Represent a legal survey of the land and are for graphical purposes only. project services. – Acquired the 75 mile Red – Primary geographic River pipeline system and locations include Kansas, related crude oil marketing Oklahoma and Texas business in southern Oklahoma in November 2015 Note: Percentages above represent segment share of 6 months ended 6/30/16 operating margin (excluding D&A) Private and Confidential 7 (NASDAQ: BKEP & BKEPP ) Blueknight Overview Private and Confidential 8 (NASDAQ: BKEP & BKEPP ) Asphalt Services • Largest independently owned asphalt terminal network • 8.2 million barrels of asphalt and residual fuel oil storage capacity in 45 terminals across 23 states • Generate revenues by charging fees for the lease of asphalt storage and processing terminals, as well as for processing and marketing activities • Facilities are both operated and non-operated • Minimal direct exposure to commodity prices • Many terminals include multiple loading/unloading options including truck, marine and rail capabilities • Contracts are typically long-term in nature • Recently acquired terminal facilities in Dumfries, VA and Wilmington, NC – closed February 1, 2016 Private and Confidential 9 (NASDAQ: BKEP & BKEPP ) Crude Oil Terminalling & Storage Services Customer Value Creation • Provides our customers the ability to effectively manage their crude oil inventories and add significant flexibility in their marketing and operating activities Cushing Interchange • 34 crude oil storage tanks with approximately 6.6 million barrels of storage capacity with access and connectivity to all the terminals located within the Cushing Interchange • Capable of receiving and/or delivering 350,000 bpd of crude oil Longview Terminal • 238,000 barrels of storage capacity in Longview, Texas. This terminal is connected to our Longview gathering and transportation pipeline Third Party Terminal Operations • Operate 1.0 million barrel Cushing, OK terminal for TransMontaigne Note: Remaining 586,000barrels of storage capacity consists of miscellaneous storage tanks located at various points along our pipeline and gathering system Private and Confidential 10 (NASDAQ: BKEP & BKEPP ) Crude Oil Pipeline Services: Oklahoma Systems Mid-Continent Mainline System • 400-mile active pipe gathering and transportation network that gathers wellhead crude oil at a capacity of approximately 20,000 bpd • Transports crude oil to our Cushing terminal, other storage facilities and area refiners • Newly constructed 60-mile Arbuckle pipeline commenced operations in September 2013. Pipeline constructed as part of a long-term transportation agreement with XTO Energy, Inc., a subsidiary of Exxon Mobil Corporation • Acquired the 75 mile Red River pipeline system and related crude oil marketing business in southern Oklahoma in November 2015 • Suspended service in April 2016 due to a riverbed exposure. Connection made to Eagle Pipeline system and Eagle system reversed in July 2016 to restore Mid- Continent mainline system. Currently operating one mainline system Eagle North Pipeline System • 195-mile system originating in Cushing which supplied Valero's Ardmore, Oklahoma refinery through June of 2016 with a capacity