Energy Prospectus

BlueKnight's Q4 results beat my forecast and they have more than enough DCF coverage to pay quarterly dividend on their preferred units that are in our High Yield Income Portfolio. The preferred units (BKEPP) are safer because those quarterly distributions must be up-to-date before any distributions can be made to the common units (BKEP). There is more risk but more upside in the common units.
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Fourth quarter 2020 distributable cash flow was $13.3 million compared to $11.0 million for the same period in 2019. The 21% increase was attributable to improved business performance and lower cash interest expense. The calculated coverage ratio on all distributions was 1.64 times for fourth quarter 2020 versus 1.36 times for the same period in 2019.

Full year 2020 distributable cash flow was $49.6 million compared to $39.3 million in 2019, representing a $10.3 million, or 26% increase year-over-year. The calculated coverage ratio on all distributions was 1.53 times for full year 2020 versus 1.22 times in 2019.

At December 31, 2020, total debt was $252.6 million. Blueknight’s leverage ratio, which included $1.7 million in outstanding letters of credit, was 3.83 times versus 4.05 times for the same period in 2019.

As of March 4, 2021, total debt was $99.9 million following repayment of cash proceeds from the Crude Oil Transaction, representing a pro-forma leverage ratio of approximately 2.0 times. < After the sale of their crude oil division, the company is in GREAT SHAPE.

2021 OUTLOOK

For 2021, Blueknight expects infrastructure and highway construction demand for its asphalt terminalling business to be comparable with the prior year with a more favorable outlook beyond 2021 over the medium and long-term driven by the expectation of a more comprehensive infrastructure funding bill. As a result, Blueknight expects its Adjusted EBITDA from continuing operations to be in-line with 2020, excluding any expected corporate synergies of $1.5 million to $2.5 million related to the Crude Oil Transaction. These earnings are supported by:

Geographically-diverse and industry-leading asphalt terminalling portfolio

95% take-or-pay fixed fee revenue

Predominately investment-grade customer base

Weighted average remaining contract term of approximately six years

Total maintenance capital expenditures in 2021 are expected to be between $5.5 million and $6.5 million. Blueknight expects to use internally generated cash flow to fund 2021 distributions and is targeting a full year coverage ratio of 1.2 times or greater on all distributions.

At 1.2 times coverage ratio and what seems like flat revenue guidance seems like there isn't room for a distribution increase? Does this decrease your valuation?

Meant to say flat Ebita not revenue.

Distributions on BKEPP are fixed, which is why I like them over BKEP. I do not expect distributions to BKEP holders to be raised this year. I need to spend more time on BKEP to adjust my valuation, but it should be in the $3.50 to $4.00 range for the common units.

Keep in mind that for the companies in our High Yield Income Portfolio the primary thing that I am looking for is their ability to maintain their high dividends/distributions. For that requirement BKEPP gets an A+ since cash distributions on the preferred units MUST BE UP-TO-DATE before any distributions can be paid out to common unit holders.

I do think their forecast of 1.2 X DCF coverage in 2021 is very conservative. DCF coverage was 1.64 X in Q4 2020.

Gain on this sale will be recorded in Q1 2021
Blueknight Closes Sale of Crude Oil Terminalling Business and Completes Transition to Pure-Play Infrastructure Terminalling Company
3/1/21
TULSA, Okla. - Blueknight Energy Partners, L.P. ("Blueknight" or the "Partnership") (Nasdaq: BKEP and BKEPP) announced today that it has closed its previously-announced sale of its crude oil terminalling segment to Enbridge, Inc. (NYSE: ENB) for a purchase price of $132 million, subject to customary post-closing adjustments and excluding crude oil linefill and inventory.

Including the previously-announced sale of its crude oil pipeline and trucking segments, both of which closed in February 2021, Blueknight has successfully completed an exit of its crude oil business, strategically positioning the Partnership as a pure-play terminalling company focused on infrastructure and transportation end-markets.

"Exiting our crude oil businesses has been a top priority for Blueknight since early 2020," said Andrew Woodward, Chief Executive Officer. "Now with a more focused strategy and business model, coupled with an improved leverage profile and available liquidity, we believe we are well-positioned to identify and capture growth opportunities and benefit from long-term positive investment trends in U.S. infrastructure."

Total cash consideration for the combined crude oil terminalling, pipeline, and trucking transactions was approximately $164 million, including estimated crude oil linefill and inventory and is subject to customary post-closing adjustments. Net proceeds, after transaction costs, will be used initially to reduce borrowings outstanding under the Partnership's revolving credit facility and for general partnership purposes.

Blueknight Energy Partners has added a new presentation to its website: Blueknight March 2021 Investor Presentation