• Operating income of $6.5 million for the three months ended June 30, 2017, compared to an operating loss of $15.3 million for the same period in 2016.
• Net loss and operating income for the three months ended June 30, 2016, were impacted by an impairment expense of $22.6 million, primarily related to the cancellation of the Knight Warrior East Texas Eaglebine/Woodbine crude oil pipeline project.
• Adjusted earnings before interest, taxes, depreciation, amortization (“Adjusted EBITDA”) was $19.2 million for the three months ended June 30, 2017, as compared to $16.2 million for the same period in 2016, an increase of 18.5%.
• Distributable cash flow was $12.7 million for the three months ended June 30, 2017, as compared to $9.2 million for the same period in 2016, an increase of 38.0%. Distributable cash flow for the three months ended June 30, 2016, was impacted by $0.3 million of fees related to the Ergon transactions. Adjusted EBITDA and distributable cash flow, including a reconciliation of such measures to net income, are explained in the section of this release entitled “Non-GAAP Financial Measures.”
• Second quarter 2017 distribution coverage ratio was 1.03.

Comments from BKEP CEO Mark Hurley:

“Our asphalt terminalling services segment continues to hit on all cylinders in spite of wetter-than-normal conditions in many areas of the country in which we operate facilities. Operating margin for the segment increased $3.3 million or 28% quarter-over-quarter before taking into consideration depreciation and amortization. Steady customer demand and the addition of nine terminals from Ergon in October 2016 helped drive the strong results. As we look ahead, we anticipate an even stronger third quarter when we traditionally see increased activity. Our strategy to grow by expanding our terminalling footprint, particularly in the asphalt segment, is clearly paying dividends.

“Our crude oil terminalling and storage segment performed about as expected during the first half of the year. Our business at Cushing remains fully contracted and inventories remain well above the 5-year average. Our crude oil trucking and field services segment continues to be hampered by a sustained, lower-price crude oil environment and flatter forward curve resulting in increased competition and lower margins for existing volumes. Our crude oil pipeline segment results are affected by an out of service pipeline due to the wash-out of a riverbed in 2016. However, we have a clear path forward to restarting this line and we expect to resume service in the 4th quarter of this year. In addition, results in this segment for the three months ended June 30, 2016, included two significant items – we recorded an impairment expense of $22.6 million, mostly related to the cancellation of the Knight Warrior East Texas Eaglebine/Woodbine crude oil pipeline project, and we recognized $1.6 million in sales of crude oil arising from accumulated product loss allowances.

“We amended and upsized our revolving credit facility during the second quarter. We increased commitments by $50.0 million and extended our maturity date to May 11, 2022. The amended credit facility gives us more flexibility to capitalize on opportunities aimed at creating long-term value for our unitholders. Additionally, we also closed on the divestiture of two non-core assets – our East Texas crude oil pipeline and terminal assets and our 30% ownership of Advantage Pipeline. We received cash proceeds of approximately $30.1 million from the sale of these two assets and are actively working to reinvest these proceeds in future growth projects. The gain of $4.2 million on the divestitures of the Advantage Pipeline and East Texas system were partially offset by expense of $0.8 million related to the disposal and sale of other assets during the quarter.

“During our first quarter earnings discussion, we mentioned areas of strategic focus for 2017. I am pleased to report we are making progress in each of these areas:

• Focus resources on the completion of our crude oil condensate project and increase utilization of our crude transportation assets – both pipeline and trucking. As mentioned, we anticipate completion of our condensate project and expect to have it in service by the end of the year. We also expect to recapture volume along our Mid-Continent pipeline and increase the overall efficiency and operating margin of our transportation assets.
• Continue to identify and execute strategic growth projects including potential future acquisitions of additional product terminals or synergistic crude oil pipeline assets. As we continue to evaluate a number of complimentary acquisitions, we are optimistic we will be successful on one or more of the projects during the second half of the year.
• Continue to maintain a solid financial position and balance sheet. The current uncertain geopolitical environment and the overall MLP equity market continues to be quite challenging; however, we believe we are positioned to navigate through the market and sustain a reasonable balance between growth and overall financial strength.

“As we focus on these strategic areas, we know our top priority as a management team is to increase long-term value for our unitholders regardless of the prevailing market conditions. That is our goal and it is what drives our decisions. Our fully diluted distribution coverage for the second quarter of 2017 was 1.03 times versus a coverage of 0.82 times for the same quarter in 2016. Our leverage ratio for the second quarter of 2017 was 4.17 times, and we maintained our common unit distribution at $0.1450 for the quarter.”

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