Blue Dolphin Reports Improved Third Quarter 2015 Results

November 23, 2015 3:36 PM

HOUSTON, TX–(Marketwired – Nov 23, 2015) – Blue Dolphin Energy Company (“Blue Dolphin”) (OTCQX: BDCO), an independent refiner and marketer of refined petroleum products in the Eagle Ford Shale, reported net income for the third quarter of 2015 of $1.3 million, or income of $0.12 per share, compared to $0.8 million, or income of $0.08 per share, for the same quarter in 2014. Refinery operations adjusted earnings before interest, income taxes and depreciation (“EBITDA”), a non-GAAP financial measure, totaled $3.8 million for the third quarter of 2015 compared to $2.9 million for the third quarter of 2014. Total adjusted EBITDA totaled $4.2 million compared to $2.5 million for same comparative periods. Refinery operating income for the third quarter of 2015 totaled $2.1 million compared to $1.5 million for the third quarter of 2014.

Net income for the first nine months of 2015 was $5.1 million, or income of $0.49 per share, compared to net income of $8.4 million, or income of $0.81 per share, for the first nine months in 2014. Refinery operations adjusted EBITDA totaled $15.5 million for the first nine months of 2015 compared to $13.8 million for the first nine months of 2014. Total adjusted EBITDA totaled $15.2 million compared to $12.9 million for the same comparative periods. Refinery operating income for the first nine months of 2015 totaled $10.0 million compared to $10.7 million for the first nine months of 2014.

Refinery Operations

For the third quarter of 2015, the Nixon Facility processed 1,109,411 barrels (“bbls”), or 12,752 barrels per day (“bpd”), of crude oil and condensate compared to 849,402 bbls, or 10,890 bpd, of crude oil and condensate for the third quarter of 2014. For the same comparative periods, the Nixon Facility produced 1,084,246 bbls, or 12,463 bpd, of refined petroleum products compared to 831,771 bbls, or 10,664 bpd. The capacity utilization rate for refinery throughput for the third quarter of 2015 was 85.0% compared to 72.6% for the third quarter of 2014. The capacity utilization rate for refinery production for the third quarter of 2015 was 83.1% compared to 71.1% for the third quarter of 2014. Total refinery throughput, total refinery production, and capacity utilization rates increased as a result of: (i) less downtime in the third quarter of 2015 compared to the third quarter of 2014, (ii) debottlenecking efforts in the third quarter of 2015, and (iii) completion of refurbishment of key components of the naphtha stabilizer and depropanizer units late in the third quarter of 2015, all of which contributed to an increase in average refinery throughput for the Current Quarter.

Use of Non-GAAP Financial Measures

To supplement our actual results in accordance with generally accepted accounting principles (“GAAP”) for the applicable periods, Blue Dolphin also uses the non-GAAP financial measures noted above. These non-GAAP financial measures are reconciled to GAAP-based results below. These non-GAAP financial measures should not be considered an alternative for GAAP results. The adjustments are provided to enhance an overall understanding of Blue Dolphin’s financial performance for the applicable periods and are indicators management believes are relevant and useful. These performance measures may differ from similar calculations used by other companies within the petroleum industry, thereby limiting their usefulness as a comparative measure.

Below are the definitions of non-GAAP performance measures used by management within this press release:

EBITDA reflects earnings before: (i) interest income (expense), (ii) income taxes, and (iii) depreciation and amortization. Refinery operations EBITDA reflects EBITDA for our refinery operations business segment. Total EBITDA reflects EBITDA for our refinery operations and pipeline transportation business segments, as well as corporate and other;
Adjusted EBITDA reflects EBITDA plus the Joint Marketing Agreement Profit Share (the “JMA Profit Share”). The JMA Profit Share represents the GEL TEX Marketing, LLC (“GEL”) Profit Share plus the GEL Performance Fee for the period pursuant to the Joint Marketing Agreement. Refinery operations adjusted EBITDA reflects adjusted EBITDA for our refinery operations business segment. Total adjusted EBITDA reflects adjusted EBITDA for our refinery operations and pipeline transportation business segments, as well as corporate and other; and
Refinery operating income reflects refined petroleum product sales less direct operating costs (including cost of refined products sold and refinery operating expenses) and the JMA Profit Share, which is an indirect operating expense.

Forward-Looking Statements

This press release contains forward-looking statements. You can generally identify forward-looking statements by our use of forward-looking terminology such as “outlook,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” “should,” or “will,” or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. For a discussion of risk factors which may affect our results, please see the risk factors and other disclosures included in our most recent Annual Report on Form 10-K, any subsequently filed Quarterly Reports on Form 10-Q, and our other Securities and Exchange Commission (“SEC”) filings. These risks may cause our actual results, performance, or achievements to differ materially from any future results, performance, or achievements expressed or implied by these forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. Blue Dolphin disclaims any intention or obligation to update publicly or revise its forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

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 15,000 bpd 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.

Blue Dolphin Energy Company & Subsidiaries

Financial and operational data presented in this press release is unaudited except as otherwise noted. The consolidated balance sheets, consolidated statements of income and consolidated statements of cash flows should be read in conjunction with Blue Dolphin’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2015.


Consolidated Balance Sheets

		September 30,			December 31,
		2015			2014

ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	1,518,359		$	1,293,233
Restricted cash			5,834,197			1,008,514
Accounts receivable			7,833,519			8,340,303
Prepaid expenses and other current assets			1,045,893			771,458
Deposits			420,176			68,498
Inventory			5,620,827			3,200,651
Deferred tax assets, current portion, net			2,892,459			–
	Total current assets		25,165,430			14,682,657

Total property and equipment, net			46,054,365			37,371,075
Restricted cash, noncurrent			11,277,441			–
Surety bonds			1,667,000			1,642,000
Debt issue costs, net			1,296,480			479,737
Trade name			303,346			303,346
Deferred tax assets, net			387,824			5,928,342
	Total long-term assets		60,986,456			45,724,500
TOTAL ASSETS		$	86,151,886		$	60,407,157

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable		$	16,459,787		$	12,370,179
Accounts payable, related party			–			1,174,168
Asset retirement obligations, current portion			38,644			85,846
Accrued expenses and other current liabilities			2,005,206			2,783,704
Interest payable, current portion			57,140			56,039
Long-term debt, current portion			1,631,539			1,245,476
Deferred tax liabilities, net			–			168,236
	Total current liabilities		20,192,316			17,883,648
Long-term liabilities:
Asset retirement obligations, net of current portion			1,928,371			1,780,924
Deferred revenues and expenses			561,864			691,525
Long-term debt, net of current portion			28,948,021			10,808,803
Long-term interest payable, net of current portion			1,430,371			1,274,789
	Total long-term liabilities		32,868,627			14,556,041

TOTAL LIABILITIES			53,060,943			32,439,689

Commitments and contingencies (Note 21)

STOCKHOLDERS’ EQUITY
Common stock ($0.01 par value, 20,000,000 shares authorized;10,603,802 and 10,599,444 shares issued at September 30, 2015 and December 31, 2014, respectively)			106,038			105,995
Additional paid-in capital			36,738,737			36,718,781
Accumulated deficit			(2,953,832	)		(8,057,308	)
Treasury stock, 150,000 shares at cost			(800,000	)		(800,000	)
	Total stockholders’ equity		33,090,943			27,967,468
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	86,151,886		$	60,407,157

Consolidated Statements of Income

			Three Months Ended September 30,						Nine Months Ended September 30,
			2015			2014			2015			2014

REVENUE FROM OPERATIONS
	Refined petroleum product sales		$	54,924,070		$	87,846,757		$	174,830,292		$	310,938,981
	Tank rental revenue			286,892			282,516			860,676			847,548
	Pipeline operations			45,925			56,900			119,882			178,793
		Total revenue from operations		55,256,887			88,186,173			175,810,850			311,965,322
COST OF OPERATIONS
	Cost of refined products sold			48,415,627			82,781,856			151,604,774			289,819,720
	Refinery operating expenses			2,953,528			2,496,514			8,420,650			8,092,738
	Joint Marketing Agreement profit share			1,435,376			1,094,383			4,812,674			2,334,487
	Pipeline operating expenses			63,099			50,100			170,582			139,542
	Lease operating expenses			(1,143	)		7,041			20,271			21,037
	General and administrative expenses			312,365			253,437			1,058,267			1,049,981
	Depletion, depreciation and amortization			414,837			393,871			1,217,005			1,175,643
	Accretion expense			52,720			53,731			158,655			158,264
		Total cost of operations		53,646,409			87,130,933			167,462,878			302,791,412
Income from operations				1,610,478			1,055,240			8,347,972			9,173,910
OTHER INCOME (EXPENSE)
	Easement, interest and other income			724,349			1,813			856,816			253,745
	Interest expense			(382,191	)		(214,407	)		(1,322,562	)		(675,586	)
	Loss on disposal of property and equipment			–			(4,400	)		–			(4,400	)
		Total other income (expense)		342,158			(216,994	)		(465,746	)		(426,241	)

Income before income taxes				1,952,636			838,246			7,882,226			8,747,669

Income tax expense				(688,403	)		(22,199	)		(2,778,750	)		(298,792	)

Net income			$	1,264,233		$	816,047		$	5,103,476		$	8,448,877


Income per common share
Basic			$	0.12		$	0.08		$	0.49		$	0.81
Diluted			$	0.12		$	0.08		$	0.49		$	0.81

Weighted average number of common shares outstanding:
Basic				10,453,802			10,446,218			10,451,168			10,439,684
Diluted				10,453,802			10,446,218			10,451,168			10,439,684

Consolidated Statements of Cash Flows

				Nine Months Ended September 30,

				2015			2014
OPERATING ACTIVITIES
	Net income			$	5,103,476		$	8,448,877
	Adjustments to reconcile net income to net cash
	provided by operating activities:
		Depletion, depreciation and amortization			1,217,005			1,175,643
		Unrealized loss on derivatives			362,750			26,150
		Deferred taxes			2,479,823			–
		Amortization of debt issue costs			517,652			25,350
		Accretion expense			158,655			158,264
		Common stock issued for services			19,999			75,001
		Loss on disposal of assets			–			4,400
	Changes in operating assets and liabilities
		Accounts receivable			506,784			2,058,624
		Prepaid expenses and other current assets			(274,435	)		152,655
		Deposits and other assets			(1,711,073	)		(490,838	)
		Inventory			(2,420,176	)		(2,879,729	)
		Accounts payable, accrued expenses and other liabilities			2,916,973			(5,144	)
		Accounts payable, related party			(1,174,168	)		(1,857,964	)
			Net cash provided by operating activities		7,703,265			6,891,289

INVESTING ACTIVITIES
	Capital expenditures				(9,900,295	)		(1,145,720	)
	Change in restricted cash for investing activities				(13,021,438	)		–
		Net cash used in investing activities			(22,921,733	)		(1,145,720	)

FINANCING ACTIVITIES
	Proceeds from issuance of debt				25,000,000			–
	Payments on long-term debt				(9,474,720	)		(6,103,131	)
	Proceeds from notes payable				3,000,000			2,000,000
	Payments on notes payable				–			(216,182	)
	Change in restricted cash for financing activities				(3,081,686	)		(678,498	)
		Net cash provided by (used in) financing activities			15,443,594			(4,997,811	)
Net increase in cash and cash equivalents					225,126			747,758

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD					1,293,233			434,717
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	1,518,359		$	1,182,475

Supplemental Information:
Non-cash operating activities
	Surety bond funded by seller of pipeline interest			$	–		$	850,000
Non-cash investing and financing activities:
	New asset retirement obligations			$	–		$	300,980
	Financing of capital expenditures via capital lease			$	–		$	536,635
Interest paid				$	959,665		$	1,211,773
Income taxes paid				$	139,500		$	231,552

Reconciliation of Adjusted EBITDA and EBITDA to Net Income


	Three Months Ended September 30, 2015												Three Months Ended September 30, 2014
	Segment												Segment
	Refinery			Pipeline			Corporate &						Refinery			Pipeline			Corporate &
	Operations			Transportation			Other			Total			Operations			Transportation			Other			Total
Revenue from operations	$	55,210,962		$	45,925		$	–			55,256,887		$	88,129,273		$	56,900		$	–		$	88,186,173
Less: cost of operations¹		(51,444,705	)		(114,675	)		(236,816	)		(51,796,196	)		(85,261,533	)		(110,872	)		(274,674	)		(85,647,079	)
Other non-interest income²		–			62,500			660,000			722,500			–			–			–			–
Adjusted EBITDA		3,766,257			(6,250	)		423,184			4,183,191			2,867,740			(53,972	)		(274,674	)		2,539,094
Less: JMA Profit Share³		(1,435,376	)		–			–			(1,435,376	)		(1,094,383	)		–			–			(1,094,383	)
EBITDA	$	2,330,881		$	(6,250	)	$	423,184		$	2,747,815		$	1,773,357		$	(53,972	)	$	(274,674	)	$	1,444,711

Depletion, depreciation and amortization											(414,837	)											(393,871	)
Interest expense, net											(380,342	)											(212,594	)

Income before income taxes											1,952,636												838,246

Income tax expense											(688,403	)											(22,199	)

Net income										$	1,264,233											$	816,047

	Nine Months Ended September 30, 2015												Nine Months Ended September 30, 2014
	Segment												Segment
	Refinery			Pipeline			Corporate &						Refinery			Pipeline			Corporate &
	Operations			Transportation			Other			Total			Operations			Transportation			Other			Total
Revenue from operations	$	175,690,968		$	119,882		$	–		$	175,810,850		$	311,786,529		$	178,793		$	–		$	311,965,322
Less: cost of operations¹		(160,208,576	)		(296,291	)		(928,331	)		(161,433,198	)		(297,956,882	)		(355,645	)		(973,154	)		(299,285,681	)
Other non-interest income²		–			187,500			660,000			847,500			–			208,333			–			208,333
Adjusted EBITDA		15,482,392			11,091			(268,331	)		15,225,152			13,829,647			31,481			(973,154	)		12,887,974
Less: JMA Profit Share³		(4,812,674	)		–			–			(4,812,674	)		(2,334,487	)		–			–			(2,334,487	)
EBITDA	$	10,669,718		$	11,091		$	(268,331	)	$	10,412,478		$	11,495,160		$	31,481		$	(973,154	)	$	10,553,487

Depletion, depreciation and amortization											(1,217,005	)											(1,175,643	)
Interest expense, net											(1,313,247	)											(630,175	)

Income before income taxes											7,882,226												8,747,669

Income tax expense											(2,778,750	)											(298,792	)

Net income										$	5,103,476											$	8,448,877

¹	Operation cost within the Refinery Operations and Pipeline Transportation segments includes related general, administrative, and accretion expenses. Operation cost within Corporate and Other includes general and administrative expenses associated with corporate maintenance costs, such as accounting fees, director fees, and legal expense.
²	Other non-interest income reflects FLNG Land II, Inc., a Delaware corporation (“FLNG”), easement revenue and recognition of a one-time gain of $660,000 related to settlement proceeds from a nearly two decades-old case involving Jack J. Grynberg and several defendants in the oil and gas industry, including Blue Dolphin Pipe Line Company (the “Grynberg Matter”). See “Part 1, Item 1. Financial Statements – Note (21) Commitments and Contingencies – FLNG Master Easement Agreement and Grynberg Settlement Agreement” of Blue Dolphin’s Form 10-Q for the quarterly period ended September 30, 2015 as filed with the SEC for further discussion related to FLNG and the Grynberg Matter.
³	The JMA Profit Share represents the GEL Profit Share plus the GEL Performance Fee for the period pursuant to the Joint Marketing Agreement. See “Part 1, Item 1. Financial Statements – Note (21) Commitments and Contingencies” and “Part 1, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Relationship with Genesis” of Blue Dolphin’s Form 10-Q for the quarterly period ended September 30, 2015 as filed with the SEC for further discussion related to the Joint Marketing Agreement.

Reconciliation of Refinery Operating Income to Refined Petroleum Product Sales,
Cost of Refined Petroleum Products Sold, Refinery Operating Expenses and JMA Profit Share

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014

Total refined petroleum product sales	$	54,924,070		$	87,846,757		$	174,830,292		$	310,938,981
Less: Cost of refined petroleum products sold		(48,415,627	)		(82,781,856	)	$	(151,604,774)			(289,819,720	)
Less: Refinery operating expenses		(2,953,528	)		(2,496,514	)		(8,420,650	)		(8,092,738	)
Refinery operating income before JMA Profit Share		3,554,915			2,568,387			14,804,868			13,026,523
Less: JMA Profit Share		(1,435,376	)		(1,094,383	)		(4,812,674	)		(2,334,487	)

Refinery operating income	$	2,119,539		$	1,474,004		$	9,992,194		$	10,692,036

Total refined petroleum product sales (bbls)		1,035,275			823,399			2,958,865			2,818,270

For a reconciliation of refined petroleum product sales to total revenue from operations for our consolidated operations, refer to the consolidated statements of income contained within this press release.

Refinery Throughput and Production Data

		Three Months Ended September 30,				Nine Months Ended September 30,
		2015		2014		2015		2014

Operating Days		87		78		257		252
Downtime		5		14		16		21

Total refinery throughput
	bbls	1,109,411		849,402		3,086,749		2,909,669
	bpd	12,752		10,890		12,011		11,546

Total refinery production
	bbls	1,084,246		831,771		3,024,579		2,855,054
	bpd	12,463		10,664		11,769		11,330

Capacity utilization rate
	refinery throughput	85.0	%	72.6	%	80.1	%	77.0	%
	refinery production	83.1	%	71.1	%	78.5	%	75.5	%

Note:

The difference between total refinery throughput (volume processed as input) and total refinery production (volume processed as output) represents refinery fuel and energy use.

Contact

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

Blue Dolphin Reports Improved Third Quarter 2015 Results

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