Delaware
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73-1268729
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
|
o
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Smaller reporting company
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þ
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(Do not check if a smaller reporting company)
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PART I. FINANCIAL INFORMATION | |||||
ITEM 1. | 3 | ||||
3 | |||||
4 | |||||
5 | |||||
6 | |||||
ITEM 2. | 31 | ||||
ITEM 3. | 42 | ||||
ITEM 4. | 42 | ||||
PART II. OTHER INFORMATION | |||||
ITEM 1. | 43 | ||||
ITEM 1A. | 43 | ||||
ITEM 2. | 43 | ||||
ITEM 3. | 43 | ||||
ITEM 4. | 43 | ||||
ITEM 5. | 43 | ||||
ITEM 6. | 44 | ||||
45 |
March 31, 2013
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December 31, 2012
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|||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
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$ | 88,059 | $ | 420,896 | ||||
Restricted cash
|
27,348 | 89,593 | ||||||
Accounts receivable, net
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10,510,790 | 15,398,755 | ||||||
Prepaid expenses and other current assets
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208,959 | 228,314 | ||||||
Deposits
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1,245,910 | 1,236,447 | ||||||
Inventory
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3,789,792 | 2,300,692 | ||||||
Total current assets
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15,870,858 | 19,674,697 | ||||||
Total property and equipment, net
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36,063,523 | 35,862,085 | ||||||
Debt issue costs, net
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523,885 | 532,335 | ||||||
Other assets
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- | 9,463 | ||||||
Trade name
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303,346 | 303,346 | ||||||
TOTAL ASSETS
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$ | 52,761,612 | $ | 56,381,926 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
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$ | 16,292,668 | $ | 19,171,013 | ||||
Accounts payable, related party
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2,178,061 | 1,594,021 | ||||||
Note payable
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9,348,518 | 43,941 | ||||||
Asset retirement obligations, current portion
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90,601 | - | ||||||
Accrued expenses and other current liabilities
|
895,202 | 725,238 | ||||||
Interest payable, current portion
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637,551 | 640,352 | ||||||
Long-term debt, current portion
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1,485,000 | 1,816,960 | ||||||
Total current liabilities
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30,927,601 | 23,991,525 | ||||||
Long-term liabilities:
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||||||||
Asset retirement obligations, net of current portion
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855,823 | 921,260 | ||||||
Long-term debt, net of current portion
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4,960,584 | 13,989,517 | ||||||
Long-term interest payable, net of current portion
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910,071 | 858,784 | ||||||
Total long-term liabilities
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6,726,478 | 15,769,561 | ||||||
TOTAL LIABILITIES
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37,654,079 | 39,761,086 | ||||||
STOCKHOLDERS' EQUITY
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||||||||
Common stock ($0.01 par value, 20,000,000 shares authorized, 10,571,629 and 10,563,297
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105,717 | 105,633 | ||||||
shares issued at March 31, 2013 and December 31, 2012, respectively)
|
||||||||
Additional paid-in capital
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36,574,059 | 36,524,142 | ||||||
Accumulated deficit
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(20,772,243 | ) | (20,008,935 | ) | ||||
Treasury stock, 150,000 and 0 shares, respectively, at cost
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(800,000 | ) | - | |||||
Total stockholders' equity
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15,107,533 | 16,620,840 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 52,761,612 | $ | 56,381,926 |
Three Months Ended March 31, | ||||||||
2013
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2012
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|||||||
REVENUE FROM OPERATIONS
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||||||||
Refined product sales
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$ | 109,171,507 | $ | 45,770,963 | ||||
Pipeline operations
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73,148 | 69,910 | ||||||
Oil and gas sales
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- | 6,056 | ||||||
Total revenue from operations
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109,244,655 | 45,846,929 | ||||||
COST OF OPERATIONS
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||||||||
Cost of refined products sold
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106,322,661 | 45,641,226 | ||||||
Refinery operating expenses
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2,745,209 | 1,062,751 | ||||||
Pipeline operating expenses
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45,371 | 109,618 | ||||||
Lease operating expenses
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26,901 | 19,338 | ||||||
General and administrative expenses
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484,564 | 525,587 | ||||||
Depletion, depreciation and amortization
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328,788 | 255,753 | ||||||
Abandonment expense
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27,451 | - | ||||||
Accretion expense
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25,164 | 21,561 | ||||||
Total cost of operations
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110,006,109 | 47,635,834 | ||||||
Loss from operations
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(761,454 | ) | (1,788,905 | ) | ||||
OTHER INCOME (EXPENSE)
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||||||||
Net tank rental revenue
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278,350 | 93,955 | ||||||
Interest and other income
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835 | 1,650 | ||||||
Interest expense
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(281,063 | ) | (233,517 | ) | ||||
Total other expense
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(1,878 | ) | (137,912 | ) | ||||
Loss from continuing operations before income taxes
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(763,331 | ) | (1,926,817 | ) | ||||
Tax expense
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||||||||
Current
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- | (30,563 | ) | |||||
Deferred
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- | - | ||||||
Income tax expense
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- | (30,563 | ) | |||||
Loss from continuing operations, net of tax
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(763,331 | ) | (1,957,380 | ) | ||||
Loss from discontinued operations, net of tax
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- | (12,514 | ) | |||||
Net loss
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$ | (763,331 | ) | $ | (1,969,894 | ) | ||
Basic loss per common share
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||||||||
Continuing operations
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$ | (0.07 | ) | $ | (0.21 | ) | ||
Discontinued operations
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$ | - | $ | - | ||||
Basic loss per common share
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$ | (0.07 | ) | $ | (0.21 | ) | ||
Diluted loss per common share
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||||||||
Continuing operations
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$ | (0.07 | ) | $ | (0.21 | ) | ||
Discontinued operations
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$ | - | $ | - | ||||
Diluted loss per common share
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$ | (0.07 | ) | $ | (0.21 | ) | ||
Weighted average number of common shares outstanding:
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||||||||
Basic
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10,510,334 | 9,476,748 | ||||||
Diluted
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10,510,334 | 9,476,748 |
Three Months Ended March 31,
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||||||||
2013
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2012
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|||||||
OPERATING ACTIVITIES
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||||||||
Net loss
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$ | (763,331 | ) | $ | (1,969,894 | ) | ||
Loss from discontinued operations
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- | 12,514 | ||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||
Depletion, depreciation and amortization
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328,788 | 252,898 | ||||||
Unrealized loss on derivatives
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52,050 | - | ||||||
Amortization of debt issue costs
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8,450 | 8,449 | ||||||
Amortization of intangible assets
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9,463 | 2,855 | ||||||
Accretion expense
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25,164 | 21,561 | ||||||
Abandonment costs incurred
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27,451 | (110 | ) | |||||
Common stock issued for services
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50,000 | 20,000 | ||||||
Changes in operating assets and liabilities (net of effects of acquisition in 2012)
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||||||||
Restricted cash
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62,245 | (151 | ) | |||||
Accounts receivable
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4,087,965 | (15,923,454 | ) | |||||
Prepaid expenses and other current assets
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19,355 | (57,513 | ) | |||||
Deposits
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(9,463 | ) | (667,421 | ) | ||||
Inventory
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(1,489,100 | ) | (554,441 | ) | ||||
Accounts payable, accrued expenses and other liabilities
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(2,739,371 | ) | 16,010,675 | |||||
Accounts payable, related party
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584,040 | 1,253,764 | ||||||
Net cash provided by (used in) operating activities - continuing operations
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253,705 | (1,590,268 | ) | |||||
Net cash provided by operating activities - discontinued operations
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- | 11,909 | ||||||
Net cash provided by (used in) operating activities
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253,705 | (1,578,359 | ) | |||||
INVESTING ACTIVITIES
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||||||||
Capital expenditures
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(530,226 | ) | (1,349,332 | ) | ||||
Cash acquired on acquisition
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- | 1,674,594 | ||||||
Net cash provided by (used in) investing activities
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(530,226 | ) | 325,262 | |||||
FINANCING ACTIVITIES
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||||||||
Proceeds from issuance of debt
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- | 2,364,012 | ||||||
Payments on long-term debt
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(60,876 | ) | (2,916 | ) | ||||
Proceeds from notes payable
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15,031 | - | ||||||
Payments on notes payable
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(10,472 | ) | - | |||||
Net cash provided by (used in) financing activities
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(56,316 | ) | 2,361,096 | |||||
Net increase (decrease) in cash and cash equivalents
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(332,837 | ) | 1,107,999 | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
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420,896 | 1,822 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
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$ | 88,059 | $ | 1,109,821 | ||||
Supplemental Information:
|
||||||||
Non-cash operating activities
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||||||||
Reduction in accounts receivable in exchange for treasury stock received
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$ | 800,000 | $ | - | ||||
Non-cash investing and financing activities
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||||||||
Related party payable converted to equity
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$ | - | $ | 993,732 | ||||
Acquisition of Blue Dolphin at fair value, inclusive
|
||||||||
of cash acquired of $1,674,594
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$ | - | $ | 18,046,154 | ||||
Shares issued for services
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$ | 50,000 | $ | 40,000 |
(1)
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Organization
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●
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Lazarus Energy, LLC (“LE”), a Delaware limited liability company (petroleum processing assets);
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●
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Lazarus Refining & Marketing, LLC (“LRM”), a Delaware limited liability company (petroleum storage and terminaling);
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●
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Blue Dolphin Pipe Line Company, a Delaware corporation (pipeline operations);
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●
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Blue Dolphin Petroleum Company, a Delaware corporation (exploration and production activities);
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●
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Blue Dolphin Services Co., a Texas corporation (administrative services);
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●
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Blue Dolphin Exploration Company (“BDEX”), a Delaware corporation (exploration and production investment); and
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●
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Petroport, Inc., a Delaware corporation (inactive).
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(2)
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Basis of Presentation
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(3)
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Significant Accounting Policies
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(4)
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LE Acquisition
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February 15, 2012
As Intially |
Measurement
Period |
Purchase Price
Allocation (As Adjusted) |
||||||||||
Reported
|
Adjustments
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February 15, 2012
|
||||||||||
Current assets
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$ | 2,466,901 | $ | - | $ | 2,466,901 | ||||||
Oil and gas properties
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1,503,596 | 3,639,279 | 5,142,875 | |||||||||
Pipelines
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4,466,273 | 4,757,563 | 9,223,836 | |||||||||
Onshore separation and handling facilities
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325,435 | - | 325,435 | |||||||||
Land
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473,225 | - | 473,225 | |||||||||
Other property and equipment
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282,972 | - | 282,972 | |||||||||
Other long term assets
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9,463 | - | 9,463 | |||||||||
Trade name
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184,368 | 118,978 | 303,346 | |||||||||
Goodwill
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8,667,401 | (7,221,681 | ) | 1,445,720 | ||||||||
Total assets acquired
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18,379,634 | 1,294,139 | 19,673,773 | |||||||||
Current liabilities
|
333,480 | - | 333,480 | |||||||||
Asset retirement obligations
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- | 1,294,139 | 1,294,139 | |||||||||
Total liabilities assumed
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333,480 | 1,294,139 | 1,627,619 | |||||||||
Net assets acquired
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$ | 18,046,154 | $ | - | $ | 18,046,154 |
(5)
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LRM Acquisition
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(6)
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Business Segment Information
|
Three Months Ended March 31, 2013
|
||||||||||||||||||||
Segment
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||||||||||||||||||||
Oil and Gas
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||||||||||||||||||||
Refinery
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Pipeline
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Exploration &
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Corporate &
|
|||||||||||||||||
Operations
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Transportation
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Production
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Other(1)
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Total
|
||||||||||||||||
Revenues
|
$ | 109,171,507 | $ | 73,148 | $ | - | $ | - | $ | 109,244,655 | ||||||||||
Less: Operation cost(2)
|
(109,063,677 | ) | (96,835 | ) | (57,664 | ) | (459,146 | ) | (109,677,321 | ) | ||||||||||
Other non-interest income
|
278,350 | - | - | - | 278,350 | |||||||||||||||
EBITDA
|
$ | 386,180 | $ | (23,686 | ) | $ | (57,664 | ) | $ | (459,146 | ) | |||||||||
Depletion, depreciation and amortization
|
(328,788 | ) | ||||||||||||||||||
Other income (expense), net
|
(280,228 | ) | ||||||||||||||||||
Loss from continuing operations,
|
||||||||||||||||||||
before income taxes
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$ | (763,331 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | - | ||||||||||||||||||
Capital expenditures
|
$ | 530,226 | $ | - | $ | - | $ | - | $ | 530,226 | ||||||||||
Identifiable assets(3)
|
$ | 50,131,322 | $ | 1,628,612 | $ | 33,773 | $ | 967,906 | $ | 52,761,612 |
(1)
|
Includes unallocated general and administrative costs associated with corporate maintenance costs (such as director fees and legal expenses).
|
(2)
|
General and administrative costs are allocated based on revenue. In addition, the effect of economic hedges on our refined petroleum products and crude oil inventory, which are executed by Genesis, is included within the operation cost of our Refinery Operations group. Cost of refined products sold includes a realized loss of $36,440 and an unrealized gain of $188,150.
|
(3)
|
Identifiable assets contain related legal obligations of each segment including cash, accounts receivable and payable and recorded net assets.
|
Three Months Ended March 31, 2012
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Oil and Gas
|
||||||||||||||||||||
Refinery
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Operations
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 45,770,963 | $ | 69,910 | $ | 6,056 | $ | - | $ | 45,846,929 | ||||||||||
Less: Operation cost(2)
|
(46,862,438 | ) | (195,717 | ) | (204,287 | ) | (117,639 | ) | (47,380,081 | ) | ||||||||||
Other non-interest income
|
93,955 | - | - | - | 93,955 | |||||||||||||||
EBITDA
|
$ | (997,520 | ) | $ | (125,807 | ) | $ | (198,231 | ) | $ | (117,639 | ) | ||||||||
Depletion, depreciation and amortization
|
(255,753 | ) | ||||||||||||||||||
Other income (expense), net
|
(231,867 | ) | ||||||||||||||||||
Loss from continuing operations,
|
||||||||||||||||||||
before income taxes
|
$ | (1,926,817 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | (12,514 | ) | |||||||||||||||||
Capital expenditures
|
$ | 1,349,332 | $ | - | $ | - | $ | - | $ | 1,349,332 | ||||||||||
Identifiable assets(3)
|
$ | 56,220,025 | $ | 12,567,746 | $ | 5,605,448 | $ | 1,123,919 | $ | 75,517,138 |
(1)
|
Includes unallocated general and administrative costs associated with corporate maintenance costs (such as director fees and legal expenses).
|
(2)
|
General and administrative costs are allocated based on revenue.
|
(3)
|
Identifiable assets contain related legal obligations of each segment including cash, accounts receivable and payable and recorded net assets.
|
(7)
|
Fair Value Measurement
|
Level 1
|
Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
Level 2
|
Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data.
|
Level 3
|
Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable and cannot be corroborated by market data or other entity-specific inputs.
|
Fair Value Measurement at March 31, 2013 Using
|
||||||||||||||||
Financial liabilities:
|
Carrying Value as at March 31, 2013 | 'Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) |
'Significant Other Observable Inputs
(Level 2)
|
'Significant Unobservable Inputs (Level 3) | ||||||||||||
Commodity contracts
|
$ | 188,150 | $ | 188,150 | $ | - | $ | - |
(8)
|
Refined Petroleum Products and Crude Oil Inventory Risk Management
|
Notional Contract Volumes by Year of Maturity
|
||||||||||||||||
Inventory positions (futures):
|
2013
|
2014
|
2015
|
2016
|
||||||||||||
Refined petroleum products and crude oil - net short (long) positions
|
50,000 | - | - | - |
Fair Value
|
||||||||||
Liabilities Derivatives | Balance Sheets Location |
March 31, 2013
|
December 31, 2012
|
|||||||
Commodity contracts
|
Accrued expenses and other current liabilities
|
$ | 188,150 | $ | 136,100 |
Gain (Loss) Recognized
|
||||||||||
Derivatives | Statements of Operations Location |
March 31, 2013
|
March 31, 2012
|
|||||||
Commodity contracts | Cost of refined products sold | $ | (188,150 | ) | $ | - |
(9)
|
Concentration of Risk
|
March 31,
|
March 31,
|
|||||||
2013
|
2012
|
|||||||
Low-sulfur diesel
|
51.7 | % | 86.3 | % | ||||
Naphtha
|
26.2 | % | 7.3 | % | ||||
Atmospheric gas oil
|
22.1 | % | 6.4 | % | ||||
100.0 | % | 100.0 | % |
(10)
|
Prepaid Expenses and Other Current Assets
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Prepaid insurance
|
$ | 138,959 | $ | 185,814 | ||||
Prepaid restructuring fees
|
50,000 | - | ||||||
Employee advances
|
- | 22,500 | ||||||
Prepaid loan closing fees
|
20,000 | 20,000 | ||||||
$ | 208,959 | $ | 228,314 |
(11)
|
Deposits
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Utility deposits
|
$ | 36,500 | $ | 36,500 | ||||
Equipment deposits
|
124,526 | 124,526 | ||||||
Tax bonds
|
792,000 | 792,000 | ||||||
Purchase option deposits
|
283,421 | 283,421 | ||||||
Rent deposits
|
9,463 | - | ||||||
Deposits
|
$ | 1,245,910 | $ | 1,236,447 |
(12)
|
Inventories
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Low-sulfur diesel
|
$ | 972,943 | $ | 397,240 | ||||
Naphtha
|
2,210,804 | 1,562,055 | ||||||
Atmospheric gas oil | 587,004 | 322,356 | ||||||
Crude
|
19,041 | 19,041 | ||||||
$ | 3,789,792 | $ | 2,300,692 |
(13)
|
Property, Plant and Equipment, Net
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Refinery and facilities
|
$ | 34,384,328 | $ | 34,000,199 | ||||
Pipelines and facilities
|
1,233,811 | 1,233,811 | ||||||
Onshore separation and handling facilities
|
325,435 | 325,435 | ||||||
Land
|
577,965 | 577,965 | ||||||
Other property and equipment
|
629,424 | 577,567 | ||||||
37,150,964 | 36,714,977 | |||||||
Less: Accumulated depletion, depreciation and amortization | 2,002,938 | 1,674,151 | ||||||
35,148,025 | 35,040,826 | |||||||
Construction in Progress
|
915,497 | 821,259 | ||||||
Property, Plant and Equipment, Net
|
$ | 36,063,523 | $ | 35,862,085 |
(14)
|
Discontinued Operations
|
March 31,
|
March 31,
|
|||||||
2013
|
2012
|
|||||||
Revenue
|
$ | - | $ | 194,284 | ||||
Lease operating expenses
|
- | 182,375 | ||||||
Depletion, depreciation and amortization
|
- | 22,209 | ||||||
Accretion expense
|
- | 2,214 | ||||||
Total costs and expenses
|
- | 206,798 | ||||||
Loss from discontinued operations, net of tax
|
$ | - | $ | (12,514 | ) |
(15)
|
Accounts Payable, Related Party
|
(16)
|
Notes Payable
|
●
|
We do not, upon the Nixon Facility becoming operational, and the cessation of the payment of tank storage fees by Genesis to us, make the required minimum monthly payment to AFNB;
|
●
|
There is a default under the Refinery Loan (other than the existing default) that is not cured within 30 days subject to certain extensions;
|
●
|
There is a default under the Forbearance Agreement, the Construction and Funding Agreement, the Joint Marketing Agreement or the Crude Oil Supply and Throughput Services Agreement between LE and GEL dated August 12, 2011 (the “Crude Supply Agreement”) and such default continues for 10 days after its occurrence; or
|
●
|
LE files for bankruptcy protection or takes part in any other insolvency proceeding, seeks relief under any debtor relief law or has a receiver or similar official appointed.
|
(17)
|
Accrued Expenses and Other Current Liabilities
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Excise taxes
|
$ | 254,549 | $ | 292,303 | ||||
Salaries
|
109,717 | 134,501 | ||||||
Turnaround expenses
|
141,406 | - | ||||||
Transportation
|
- | 69,551 | ||||||
Other payable
|
37,605 | - | ||||||
Property taxes
|
13,500 | - | ||||||
Insurance
|
57,492 | - | ||||||
Unrealized hedging loss
|
188,150 | 136,100 | ||||||
Unearned revenue
|
92,783 | 92,783 | ||||||
$ | 895,202 | $ | 725,238 |
(18)
|
Asset Retirement Obligations
|
Asset retirment obligations as of December 31, 2012
|
$ | 921,260 | ||
Accretion expense
|
25,164 | |||
946,424 | ||||
Less: current portion of asset retirement obligations
|
90,601 | |||
Asset retirement obligations, long-term balance
|
||||
at March 31, 2013
|
$ | 855,823 |
(19)
|
Long-Term Debt
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Refinery Loan
|
$ | - | $ | 9,298,183 | ||||
Notre Dame Debt
|
1,300,000 | 1,300,000 | ||||||
Construction Funding
|
5,145,584 | 5,206,175 | ||||||
Captial Leases
|
- | 2,119 | ||||||
6,445,584 | 15,806,477 | |||||||
Less: Current portion of long-term debt
|
1,485,000 | 1,816,960 | ||||||
$ | 4,960,584 | $ | 13,989,517 |
(20)
|
Leases
|
(21)
|
Treasury Stock
|
(22)
|
Income Taxes
|
(23)
|
Commitments and Contingencies
|
●
|
Crude Supply Agreement -- Pursuant to the Crude Supply Agreement, GEL is the exclusive supplier of crude oil to the Nixon Facility. We are not permitted to buy crude oil from any other source without GEL’s express written consent. GEL supplies crude oil to LE at cost plus freight expense and any costs associated with GEL’s hedging. All crude oil supplied to LE pursuant to the Crude Supply Agreement is paid for pursuant to the terms of the Joint Marketing Agreement as described below. In addition, GEL has a first right of refusal to use three storage tanks at the Nixon Facility during the term of the Crude Supply Agreement. Subject to certain termination rights, the Crude Supply Agreement has an initial term of three years, expiring on August 12, 2014. After the expiration of its initial term, the Crude Supply Agreement automatically renews for successive one year terms unless either party notifies the other party of its election to terminate the Crude Supply Agreement within 90 days of the expiration of the then current term.
|
●
|
Construction and Funding Agreement -- Pursuant to the Construction and Funding Agreement, LE engaged Milam to provide construction services on a turnkey basis in connection with the construction, installation and refurbishment of certain equipment at the Nixon Facility (the “Project”). Milam has continued to make advances in excess of their obligation, for certain construction and operating costs at the Nixon Facility. All amounts advanced to LE pursuant to the terms of the Construction and Funding Agreement bear interest at a rate of 6% per annum. In March 2012 (the month after initial operation of the Nixon Facility occurred), LE began paying Milam, in accordance with the provisions of the Joint Marketing Agreement, a minimum monthly payment of $150,000 (the “Base Construction Payment”) as repayment of interest and amounts advanced to LE under the Construction and Funding Agreement. If, however, the Gross Profits of LE (as defined below) in any given month (calculated as the revenue from the sale of products from the Nixon Facility minus the cost of crude oil) are insufficient to make this payment, then there is a deficit amount, which shall accrue interest (the “Deficit Amount”). If there is a Deficit Amount, then 100% of the gross profits in subsequent calendar months will be paid to Milam until the Deficit Amount has been satisfied in full and all previous $150,000 monthly payments have been made.
The Construction and Funding Agreement places restrictions on LE, which prohibit LE from: incurring any debt (except debt that is subordinated to amounts owed to Milam or GEL); selling, discounting or factoring its accounts receivable or its negotiable instruments outside the ordinary course of business while no default exists; suffering any change of control or merging with or into another entity; and certain other conditions listed therein. As of the date hereof, Milam can terminate the Construction and Funding Agreement for a breach or upon termination of the Refinery Loan Forbearance Agreement. If Milam terminates the Construction and Funding Agreement, then: (i) Milam and LE are required to execute a forbearance agreement, the form of which has been previously agreed to, pursuant to which LE will pay Milam a fee of $150,000 per month in order to maintain the forbearance (such amount shall be credited against the amount owed) for a period of six months (during which time Milam will agree not to foreclose pursuant to the Construction and Funding Agreement and, thus, LE has the right to find financing to pay off such amounts), (ii) Milam shall be entitled to receive payment in full for all obligations owed under the Construction and Funding Agreement, (iii) all liens in favor of Milam will remain in full force and effect until released in accordance with the terms of the Construction and Funding Agreement and (iv) upon repayment of all obligations owed to Milam pursuant to the terms of the forbearance agreement executed by Milam and LE, LE shall have no further obligations to Milam or its affiliates under the Construction and Funding Agreement;
|
●
|
Joint Marketing Agreement -- The Joint Marketing Agreement sets forth the terms of the agreement between LE and GEL pursuant to which the parties will market and sell the output produced at the Nixon Facility and share the Gross Profits (as defined below) from such sales. Pursuant to the Joint Marketing Agreement, GEL is responsible for all product transportation scheduling. LE is responsible for entering into contracts with customers for the purchase and sale of output produced at the Nixon Facility and handling all billing and invoicing relating to the same. However, all payments for the sale of output produced at the Nixon Facility will be made directly to GEL as collection agent and all customers must satisfy GEL’s customer credit approval process. Subject to certain amendments and clarifications (as described below), the Joint Marketing Agreement also provides for the sharing of “Gross Profits” (defined as the total revenue from the sale of output from the Nixon Facility minus the cost of crude oil pursuant to the Crude Supply Agreement) as follows:
|
(a)
|
First, prior to the date on which Milam has recouped all amounts advanced to LE under the Construction and Funding Agreement (the “Investment Threshold Date”), the Base Construction Payment of $150,000 shall be paid to GEL (for remittance to Milam) each calendar month to satisfy amounts owed under the Construction and Funding Agreement, with a catch-up in subsequent months if there is a Deficit Amount until such Deficit Amount has been satisfied in full.
|
(b)
|
Second, prior to and as of the Investment Threshold Date, LE is entitled to receive weekly payments to cover direct expenses in operating the Nixon Facility (the “Operations Payments”) in an amount not to exceed $750,000 per month plus the amount of any Accounting Fees. If Gross Profits are less than $900,000, then LE’s Operations Payments shall be reduced to equal to the difference between the Gross Profits for such monthly period and the proceeds discussed in (a) above; if Gross Profits are negative, then LE does not get an Operations Payment and the negative balance becomes a Deficit Amount which is added to the total due and owing under the Construction Funding Agreement and such Deficit Amount must be satisfied before any allocation of Gross Profit in the future may be made to LE.
|
(c)
|
Third, prior to the Investment Threshold Date and subject to the payment of the Base Construction Payment by LE and the Operations Payments by GEL, pursuant to (a) and (b) above, an amount shall be paid to GEL from Gross Profits equal to transportation costs, tank storage fees (if applicable), financial statement preparation fees (collectively, the “GEL Expense Items”), after which GEL shall be paid 80% of the remaining Gross Profits (any percentage of Gross Profits distributed to GEL, the “GEL Profit Share”) and LE shall be paid 20% of the remaining Gross Profits (any percentage of Gross Profits distributed to LE, the “LE Profit Share”); provided, however, that in the event that there is a forbearance payment of Gross Profits required by LE under a forbearance agreement with a bank, then 50% of the LE Profit Share shall be directly remitted by GEL to the bank on LE’s behalf until such forbearance amount is paid in full; and provided further that, if there is a Deficit Amount due under the Construction and Funding Agreement and a forbearance payment of Gross Profits that would otherwise be due and payable to the bank for such period, then GEL shall receive 80% of the Gross Profit and 10% shall be payable to the bank and LE shall not receive any of the LE Profit Share until such time as the Deficit Amount is reduced to zero.
|
(d)
|
Fourth, after the Investment Threshold Date and after the payment to GEL of the GEL Expense Items, 30% of the remaining Gross Profit up to $600,000 (the “Threshold Amount”) shall be paid to GEL as the GEL Profit Share and LE shall be paid 70% of the remaining Gross Profit as the LE Profit Share. Any amount of remaining Gross Profit that exceeds the Threshold Amount for such calendar month shall be paid to GEL and LE in the following manner: (i) GEL shall be paid 20% of the remaining Gross Profits over the Threshold Amount as the GEL Profit Share and (ii) LE shall be paid 80% of the remaining Gross Profits over the Threshold Amount as the LE Profit Share.
|
(e)
|
After the Threshold Date, if GEL sustains losses, it can recoup those losses by a special allocation of 80% of Gross Profits until such losses are covered in full, after which the prevailing Gross Profits allocation shall be reinstated.
|
●
|
Amendments and Clarifications to the Joint Marketing Agreement -- The Joint Marketing Agreement was amended and clarified to allow GEL to provide LE with Operations Payments during months in which LE incurred Deficit Amounts.
|
(a)
|
In July and August 2012, we entered into amendments to the Joint Marketing Agreement whereby GEL and Milam agreed that Deficit Amounts would be added to our obligation amount under the Construction and Funding Agreement. In addition, the parties agreed to amend the priority of payments to reflect that, to the extent that there are available funds in a particular month, AFNB shall be paid one-tenth of such funds, provided that we will not participate in available funds until Deficit Amounts added to the Construction and Funding Agreement are paid in full.
|
(b)
|
In December 2012, GEL made Operations Payments and other payments to or on behalf of LE in which the aggregate amount exceeded the amount payable to LE in the month of December 2012 under the Joint Marketing Agreement (the “Overpayment Amount”). In December 2012, we entered into an amendment to the Joint Marketing Agreement whereby GEL and Milam agreed that Gross Profits payable to LE would be redirected to GEL as payment for the Overpayment Amount until such Overpayment Amount has been satisfied in full. Such redistributions shall not reduce the distributions of Gross Profit that GEL or Milam are otherwise entitled to under the Joint Marketing Agreement.
|
(c)
|
In February 2013, Milam paid a vendor $64,357.50 (the “Settlement Payment”), which represented amounts outstanding by LE for services rendered at the Nixon Facility plus the vendor’s legal fees. In addition, Milam and GEL incurred legal fees and expenses related to settling the matter. In a letter agreement between LE, GEL and Milam dated February 21, 2013, the parties agreed to modify the Joint Marketing Agreement such that, from and after January 1, 2013, the Gross Profit shall be distributed first to GEL, prior to any other distributions or payments to the parties to the Joint Marketing Agreement until GEL has received aggregate distributions as provided in the December 2012 Letter Agreement plus the Settlement Payment and Milam and GEL incurred legal fees and expenses.
|
(d)
|
In February 2013, GEL agreed to advance to LE the funds necessary to pay for the actual costs incurred for the scheduled maintenance turnaround at the Nixon Facility and capital expenditures relating to an electronic product meter, lab equipment and certain piping in an amount equal to the actual costs of the refinery turnaround and capital expenditures, not to exceed $840,000 in the aggregate. In a letter agreement between LE, GEL and Milam dated February 21, 2013, the parties agreed that all amounts advanced by GEL or its affiliates to LE pursuant to the letter agreement shall constitute obligations under the Construction and Funding Agreement.
|
(24)
|
Earnings Per Share
|
Three Months Ended March 31,
|
||||||||
2013
|
2012
|
|||||||
Loss from continuing operations, net of tax
|
$ | (763,331 | ) | $ | (1,957,380 | ) | ||
Loss from discontinued operations, net of tax
|
- | (12,514 | ) | |||||
Net loss
|
(763,331 | ) | (1,969,894 | ) | ||||
Basic and diluted loss per common share
|
||||||||
Continuing operations
|
$ | (0.07 | ) | $ | (0.21 | ) | ||
Discontinued operations
|
$ | - | $ | - | ||||
Basic and diluted loss per common share
|
$ | (0.07 | ) | $ | (0.21 | ) | ||
Basic and Diluted
|
||||||||
Weighted average number of shares of common stock outstanding and potential dilutive shares of common stock
|
10,510,334 | 9,476,748 |
(25)
|
Stock Options
|
Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Life
|
Aggregate Intrinsic Value
|
|||||||||||||
Options outstanding at December 31, 2012
|
14,642 | $ | - | |||||||||||||
Options granted
|
- | $ | - | |||||||||||||
Options exercised
|
- | $ | - | |||||||||||||
Options exercised or cancelled
|
- | $ | - | |||||||||||||
Options outstanding at March 31, 2013
|
14,642 | $ | 19.67 | 0.6 | $ | - | ||||||||||
Options exercisable at March 31, 2013
|
14,642 | $ | 19.67 | 0.6 | $ | - |
●
|
the potential reorganization of Blue Dolphin from a publicly traded “C” corporation to a publicly traded master limited partnership;
|
●
|
fluctuations of crude oil inventory costs and refined petroleum products inventory prices and their effect on our refining margins;
|
●
|
our dependence on Genesis Energy, LLC (“Genesis”) and its affiliates for financing, sources of crude oil inventory and marketing of our refined petroleum products;
|
●
|
the positive or negative effects of Genesis’ hedging of our refined petroleum products and crude oil inventory;
|
●
|
our dependence on Lazarus Energy Holdings, LLC ("LEH") for management of the Nixon Facility and our other operations;
|
●
|
dependence on a small number of customers for a large percentage of our revenues;
|
●
|
our ability to generate sufficient funds from operations or obtain financing from other sources;
|
●
|
declaration of an event of default related to our long-term indebtedness;
|
●
|
failure to comply with other forbearance agreements relating to our long-term indebtedness;
|
●
|
potential downtime of the Nixon refinery for maintenance and repairs;
|
●
|
access to less than desired levels of crude oil for processing at our crude oil and condensate processing facility located in Nixon, Texas;
|
●
|
operating hazards such as fires and explosions;
|
●
|
insurance coverage limitations;
|
●
|
environmental costs and liabilities associated with our operations;
|
●
|
retention of key personnel;
|
●
|
performance of third-party operators of our oil and gas properties;
|
●
|
costs of abandoning our pipelines and oil and gas properties;
|
●
|
local and regional events that may negatively affect our assets;
|
●
|
competition from larger companies;
|
●
|
acquisition expenses and integration difficulties; and
|
●
|
compliance with environmental and other regulations, including greenhouse gas emissions regulations, the effects of the Renewable Fuels Standard program and oxygenate blending requirements.
|
Three Months Ended March 31,
|
||||||||
2013
|
2012
|
|||||||
Nixon Facility
|
||||||||
Operating days
|
85 | 60 | ||||||
Total refinery throughput(1)
|
||||||||
bbls
|
978,805 | 391,509 | ||||||
bpd
|
11,515 | 6,525 | ||||||
Capacity utilization rate
|
77 | % | 44 | % | ||||
Total refinery production
|
||||||||
bbls
|
958,306 | 384,152 | ||||||
bpd
|
11,274 | 6,403 | ||||||
Capacity utilization rate
|
75 | % | 43 | % |
(1)
|
Total refinery throughput includes crude oil and other feedstocks.
|
●
|
the Crude Oil Supply and Throughput Services Agreement by and between GEL and LE dated August 12, 2011 (the “Crude Supply Agreement”);
|
●
|
the Construction and Funding Contract by and between LE and Milam Services, Inc., an affiliate of Genesis (“Milam”), dated August 12, 2011 (the “Construction and Funding Agreement”); and
|
●
|
the Joint Marketing Agreement by and between GEL and LE dated August 12, 2011 (as subsequently amended, the “Joint Marketing Agreement”).
|
●
|
Crude Supply Agreement -- Pursuant to the Crude Supply Agreement, GEL is the exclusive supplier of crude oil to the Nixon Facility. We are not permitted to buy crude oil from any other source without GEL’s express written consent. GEL supplies crude oil to LE at cost plus freight expense and any costs associated with GEL’s hedging. All crude oil supplied to LE pursuant to the Crude Supply Agreement is paid for pursuant to the terms of the Joint Marketing Agreement as described below. In addition, GEL has a first right of refusal to use three storage tanks at the Nixon Facility during the term of the Crude Supply Agreement. Subject to certain termination rights, the Crude Supply Agreement has an initial term of three years, expiring on August 12, 2014. After the expiration of its initial term, the Crude Supply Agreement automatically renews for successive one year terms unless either party notifies the other party of its election to terminate the Crude Supply Agreement within 90 days of the expiration of the then current term.
|
●
|
Construction and Funding Agreement -- Pursuant to the Construction and Funding Agreement, LE engaged Milam to provide construction services on a turnkey basis in connection with the construction, installation and refurbishment of certain equipment at the Nixon Facility (the “Project”). Milam has continued to make advances in excess of their obligation, for certain construction and operating costs at the Nixon Facility. All amounts advanced to LE pursuant to the terms of the Construction and Funding Agreement bear interest at a rate of 6% per annum. In March 2012 (the month after initial operation of the Nixon Facility occurred), LE began paying Milam, in accordance with the provisions of the Joint Marketing Agreement, a minimum monthly payment of $150,000 (the “Base Construction Payment”) as repayment of interest and amounts advanced to LE under the Construction and Funding Agreement. If, however, the Gross Profits of LE (as defined below) in any given month (calculated as the revenue from the sale of products from the Nixon Facility minus the cost of crude oil) are insufficient to make this payment, then there is a deficit amount, which shall accrue interest (the “Deficit Amount”). If there is a Deficit Amount, then 100% of the gross profits in subsequent calendar months will be paid to Milam until the Deficit Amount has been satisfied in full and all previous $150,000 monthly payments have been made.
The Construction and Funding Agreement places restrictions on LE, which prohibit LE from: incurring any debt (except debt that is subordinated to amounts owed to Milam or GEL); selling, discounting or factoring its accounts receivable or its negotiable instruments outside the ordinary course of business while no default exists; suffering any change of control or merging with or into another entity; and certain other conditions listed therein. As of the date hereof, Milam can terminate the Construction and Funding Agreement for a breach or upon termination of the Refinery Loan Forbearance Agreement. If Milam terminates the Construction and Funding Agreement, then: (i) Milam and LE are required to execute a forbearance agreement, the form of which has been previously agreed to, pursuant to which LE will pay Milam a fee of $150,000 per month in order to maintain the forbearance (such amount shall be credited against the amount owed) for a period of six months (during which time Milam will agree not to foreclose pursuant to the Construction and Funding Agreement and, thus, LE has the right to find financing to pay off such amounts), (ii) Milam shall be entitled to receive payment in full for all obligations owed under the Construction and Funding Agreement, (iii) all liens in favor of Milam will remain in full force and effect until released in accordance with the terms of the Construction and Funding Agreement and (iv) upon repayment of all obligations owed to Milam pursuant to the terms of the forbearance agreement executed by Milam and LE, LE shall have no further obligations to Milam or its affiliates under the Construction and Funding Agreement;
|
●
|
Joint Marketing Agreement -- The Joint Marketing Agreement sets forth the terms of the agreement between LE and GEL pursuant to which the parties will market and sell the output produced at the Nixon Facility and share the Gross Profits (as defined below) from such sales. Pursuant to the Joint Marketing Agreement, GEL is responsible for all product transportation scheduling. LE is responsible for entering into contracts with customers for the purchase and sale of output produced at the Nixon Facility and handling all billing and invoicing relating to the same. However, all payments for the sale of output produced at the Nixon Facility will be made directly to GEL as collection agent and all customers must satisfy GEL’s customer credit approval process. Subject to certain amendments and clarifications (as described below), the Joint Marketing Agreement also provides for the sharing of “Gross Profits” (defined as the total revenue from the sale of output from the Nixon Facility minus the cost of crude oil pursuant to the Crude Supply Agreement) as follows:
|
(a)
|
First, prior to the date on which Milam has recouped all amounts advanced to LE under the Construction and Funding Agreement (the “Investment Threshold Date”), the Base Construction Payment of $150,000 shall be paid to GEL (for remittance to Milam) each calendar month to satisfy amounts owed under the Construction and Funding Agreement, with a catch-up in subsequent months if there is a Deficit Amount until such Deficit Amount has been satisfied in full.
|
(b)
|
Second, prior to and as of the Investment Threshold Date, LE is entitled to receive weekly payments to cover direct expenses in operating the Nixon Facility (the “Operations Payments”) in an amount not to exceed $750,000 per month plus the amount of any accounting fees. If Gross Profits are less than $900,000, then LE’s Operations Payments shall be reduced to equal to the difference between the Gross Profits for such monthly period and the proceeds discussed in (a) above; if Gross Profits are negative, then LE does not get an Operations Payment and the negative balance becomes a Deficit Amount which is added to the total due and owing under the Construction Funding Agreement and such Deficit Amount must be satisfied before any allocation of Gross Profit in the future may be made to LE.
|
(c)
|
Third, prior to the Investment Threshold Date and subject to the payment of the Base Construction Payment by LE and the Operations Payments by GEL, pursuant to (a) and (b) above, an amount shall be paid to GEL from Gross Profits equal to transportation costs, tank storage fees (if applicable), financial statement preparation fees (collectively, the “GEL Expense Items”), after which GEL shall be paid 80% of the remaining Gross Profits (any percentage of Gross Profits distributed to GEL, the “GEL Profit Share”) and LE shall be paid 20% of the remaining Gross Profits (any percentage of Gross Profits distributed to LE, the “LE Profit Share”); provided, however, that in the event that there is a forbearance payment of Gross Profits required by LE under a forbearance agreement with a bank, then 50% of the LE Profit Share shall be directly remitted by GEL to the bank on LE’s behalf until such forbearance amount is paid in full; and provided further that, if there is a Deficit Amount due under the Construction and Funding Agreement and a forbearance payment of Gross Profits that would otherwise be due and payable to the bank for such period, then GEL shall receive 80% of the Gross Profit and 10% shall be payable to the bank and LE shall not receive any of the LE Profit Share until such time as the Deficit Amount is reduced to zero.
|
(d)
|
Fourth, after the Investment Threshold Date and after the payment to GEL of the GEL Expense Items, 30% of the remaining Gross Profit up to $600,000 (the “Threshold Amount”) shall be paid to GEL as the GEL Profit Share and LE shall be paid 70% of the remaining Gross Profit as the LE Profit Share. Any amount of remaining Gross Profit that exceeds the Threshold Amount for such calendar month shall be paid to GEL and LE in the following manner: (i) GEL shall be paid 20% of the remaining Gross Profits over the Threshold Amount as the GEL Profit Share and (ii) LE shall be paid 80% of the remaining Gross Profits over the Threshold Amount as the LE Profit Share.
|
(e)
|
After the Threshold Date, if GEL sustains losses, it can recoup those losses by a special allocation of 80% of Gross Profits until such losses are covered in full, after which the prevailing Gross Profits allocation shall be reinstated.
|
●
|
Amendments and Clarifications to the Joint Marketing Agreement -- The Joint Marketing Agreement was amended and clarified to allow GEL to provide LE with Operations Payments during months in which LE incurred Deficit Amounts.
|
(a)
|
In July and August 2012, we entered into amendments to the Joint Marketing Agreement whereby GEL and Milam agreed that Deficit Amounts would be added to our obligation amount under the Construction and Funding Agreement. In addition, the parties agreed to amend the priority of payments to reflect that, to the extent that there are available funds in a particular month, AFNB shall be paid one-tenth of such funds, provided that we will not participate in available funds until Deficit Amounts added to the Construction and Funding Agreement are paid in full.
|
(b)
|
In December 2012, GEL made Operations Payments and other payments to or on behalf of LE in which the aggregate amount exceeded the amount payable to LE in the month of December 2012 under the Joint Marketing Agreement (the “Overpayment Amount”). In December 2012, we entered into an amendment to the Joint Marketing Agreement whereby GEL and Milam agreed that Gross Profits payable to LE would be redirected to GEL as payment for the Overpayment Amount until such Overpayment Amount has been satisfied in full. Such redistributions shall not reduce the distributions of Gross Profit that GEL or Milam are otherwise entitled to under the Joint Marketing Agreement.
|
(c)
|
In February 2013, Milam paid a vendor $64,357.50 (the “Settlement Payment”), which represented amounts outstanding by LE for services rendered at the Nixon Facility plus the vendor’s legal fees. In addition, Milam and GEL incurred legal fees and expenses related to settling the matter. In a letter agreement between LE, GEL and Milam dated February 21, 2013, the parties agreed to modify the Joint Marketing Agreement such that, from and after January 1, 2013, the Gross Profit shall be distributed first to GEL, prior to any other distributions or payments to the parties to the Joint Marketing Agreement until GEL has received aggregate distributions as provided in the December 2012 Letter Agreement plus the Settlement Payment and Milam and GEL incurred legal fees and expenses.
|
(d)
|
In February 2013, GEL agreed to advance to LE the funds necessary to pay for the actual costs incurred for the scheduled maintenance turnaround at the Nixon Facility and capital expenditures relating to an electronic product meter, lab equipment and certain piping in an amount equal to the actual costs of the refinery turnaround and capital expenditures, not to exceed $840,000 in the aggregate. In a letter agreement between LE, GEL and Milam dated February 21, 2013, the parties agreed that all amounts advanced by GEL or its affiliates to LE pursuant to the letter agreement shall constitute obligations under the Construction and Funding Agreement.
|
Three Months Ended March 31, 2013
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Oil and Gas
|
||||||||||||||||||||
Refinery
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Operations
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 109,171,507 | $ | 73,148 | $ | - | $ | - | $ | 109,244,655 | ||||||||||
Less: Operation cost(2)
|
(109,063,677 | ) | (96,835 | ) | (57,664 | ) | (459,146 | ) | (109,677,321 | ) | ||||||||||
Other non-interest income
|
278,350 | - | - | - | 278,350 | |||||||||||||||
EBITDA
|
$ | 386,180 | $ | (23,686 | ) | $ | (57,664 | ) | $ | (459,146 | ) | $ | (154,316 | ) | ||||||
Depletion, depreciation and amortization
|
(328,788 | ) | ||||||||||||||||||
Other income (expense), net
|
(280,228 | ) | ||||||||||||||||||
Loss from continuing operations,
|
||||||||||||||||||||
before income taxes
|
$ | (763,331 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | - | ||||||||||||||||||
Capital expenditures
|
$ | 530,226 | $ | - | $ | - | $ | - | $ | 530,226 | ||||||||||
Identifiable assets(3)
|
$ | 50,131,322 | $ | 1,628,612 | $ | 33,773 | $ | 967,906 | $ | 52,761,612 |
(1)
|
Includes unallocated general and administrative costs associated with corporate maintenance costs (such as director fees and legal expenses).
|
(2)
|
General and administrative costs are allocated based on revenue. In addition, the effect of economic hedges on our refined petroleum products and crude oil inventory, which are executed by Genesis, is included within the operation cost of our Refinery Operations. Cost of refined products sold includes a realized loss of $36,440 and an unrealized gain of $52,050.
|
(3)
|
Identifiable assets contain related legal obligations of each segment including cash, accounts receivable and payable and recorded net assets.
|
Three Months Ended March 31, 2012
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Oil and Gas
|
||||||||||||||||||||
Refinery
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Operations
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 45,770,963 | $ | 69,910 | $ | 6,056 | $ | - | $ | 45,846,929 | ||||||||||
Less: Operation cost(2)
|
(46,862,438 | ) | (195,717 | ) | (204,287 | ) | (117,639 | ) | (47,380,081 | ) | ||||||||||
Other non-interest income
|
93,955 | - | - | - | 93,955 | |||||||||||||||
EBITDA
|
$ | (997,520 | ) | $ | (125,807 | ) | $ | (198,231 | ) | $ | (117,639 | ) | $ | (1,439,197 | ) | |||||
Depletion, depreciation and amortization
|
(255,753 | ) | ||||||||||||||||||
Other income (expense), net
|
(231,867 | ) | ||||||||||||||||||
Loss from continuing operations,
|
||||||||||||||||||||
before income taxes
|
$ | (1,926,817 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | (12,514 | ) | |||||||||||||||||
Capital expenditures
|
$ | 1,349,332 | $ | - | $ | - | $ | - | $ | 1,349,332 | ||||||||||
Identifiable assets(3)
|
$ | 56,220,025 | $ | 12,567,746 | $ | 5,605,448 | $ | 1,123,919 | $ | 75,517,138 |
(1)
|
Includes unallocated general and administrative costs associated with corporate maintenance costs (such as director fees and legal expenses).
|
(2)
|
General and administrative costs are allocated based on revenue.
|
(3)
|
Identifiable assets contain related legal obligations of each segment including cash, accounts receivable and payable and recorded net assets.
|
For Three Months Ended March 31,
|
||||||||
2013
|
2012
|
|||||||
Cash flow from operations
|
||||||||
Adjusted loss from continuing operations
|
$ | (261,965 | ) | $ | (1,651,727 | ) | ||
Adjusted loss from discontinued operations
|
- | 11,909 | ||||||
Change in assets and current liabilities
|
515,670 | 61,459 | ||||||
Total cash flow from operations
|
253,705 | (1,578,359 | ) | |||||
Cash inflows (outflows)
|
||||||||
Proceeds from issuance of debt
|
15,031 | 2,364,012 | ||||||
Payments on long term debt
|
(60,876 | ) | (2,916 | ) | ||||
Cash acquired on Acquisition
|
- | 1,674,594 | ||||||
Capital expenditures
|
(530,226 | ) | (1,349,332 | ) | ||||
Payments on note payble
|
(10,472 | ) | - | |||||
Total cash inflows (outflows)
|
(586,542 | ) | 2,686,358 | |||||
Total change in cash flows
|
$ | (332,837 | ) | $ | 1,107,999 |
(a)
|
Exhibits:
|
|
The following exhibits are filed herewith: | ||
Letter Agreement between Lazarus Energy, LLC, GEL TEX Marketing, LLC and Milam Services, Inc. dated February 21, 2013.
|
||
Letter Agreement between Lazarus Energy, LLC, GEL TEX Marketing, LLC and Milam Services, Inc. dated February 21, 2013.
|
||
Jonathan P. Carroll Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
|
||
Tommy L. Byrd Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
|
||
Jonathan P. Carroll Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
|
||
Tommy L. Byrd Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
|
||
101.INS
|
XBRL Instance Document.
|
|
101.SCH
|
XBRL Taxonomy Schema Document.
|
|
101.CA
|
XBRL Calculation Linkbase Document.
|
|
101.LAB
|
XBRL Label Linkbase Document.
|
|
101.PRE
|
XBRL Presentation Linkbase Document.
|
|
101.DEF
|
XBRL Definition Linkbase Document.
|
By: BLUE DOLPHIN ENERGY COMPANY
|
|||
Date: May 15, 2013
|
By:
|
/s/ JONATHAN P. CARROLL
|
|
Jonathan P. Carroll
Chief Executive Officer, President,
Assistant Treasurer and Secretary
(Principal Executive Officer)
|
|||
Date: May 15, 2013
|
By:
|
/s/ TOMMY L. BYRD
|
|
Tommy L. Byrd
Interim Chief Financial Officer,
Treasurer and Assistant Secretary
(Principal Financial Officer)
|
|
Re:
|
Letter Agreement Regarding Distribution to Recover Payment made to Settle Claims
|
GEL TEX MARKETING, LLC, A Delaware
limited liability company
|
||||
By:
|
/s/ STEVE NATHANSON
|
|||
Name:
|
Steve Nathanson
|
|||
Title:
|
President and COO
|
|||
MILAM SERVICES, INC., A Delaware
corporation
|
||||
By:
|
/s/ STEVE NATHANSON
|
|||
Name:
|
Steve Nathanson
|
|||
Title:
|
President and COO
|
|||
LAZARUS ENERGY LLC, a Delaware limited liability company
|
||||
By:
|
/s/ JONATHAN P. CARROLL
|
|||
Name:
|
Jonathan P. Carroll
|
|||
Title:
|
President
|
|||
GEL TEX MARKETING, LLC, A Delaware
limited liability company
|
||||
By:
|
/s/ STEVE NATHANSON
|
|||
Name:
|
Steve Nathanson
|
|||
Title:
|
President and COO
|
|||
MILAM SERVICES, INC., A Delaware
corporation
|
||||
By:
|
/s/ STEVE NATHANSON
|
|||
Name:
|
Steve Nathanson
|
|||
Title:
|
President and COO
|
|||
LAZARUS ENERGY LLC, a Delaware limited liability company
|
||||
By:
|
/s/ JONATHAN P. CARROLL
|
|||
Name:
|
Jonathan P. Carroll
|
|||
Title:
|
President
|
|||
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Blue Dolphin Energy Company (the “Registrant”).
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;
|
5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: May 15, 2013
|
By:
|
/s/ JONATHAN P. CARROLL
|
|
Jonathan P. Carroll
|
|||
Chief Executive Officer, President Assistant Treasurer and Secretary
|
|||
(Principal Executive Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Blue Dolphin Energy Company (the “Registrant”).
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;
|
5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: May 15, 2013
|
By:
|
/s/ TOMMY L. BYRD
|
|
Tommy L. Byrd
|
|||
Interim Chief Financial Officer, Treasurer and Assistant Secretary
|
|||
(Principal Financial Officer)
|
Date: May 15, 2013
|
By:
|
/s/ JONATHAN P. CARROLL
|
|
Jonathan P. Carroll
|
|||
Chief Executive Officer, President Assistant Treasurer and Secretary
|
|||
(Principal Executive Officer)
|
Date: May 15, 2013
|
By:
|
/s/ TOMMY L. BYRD
|
|
Tommy L. Byrd
|
|||
Interim Chief Financial Officer, Treasurer and Assistant Secretary
|
|||
(Principal Financial Officer)
|
11. Deposits (Tables)
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposits Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposit balances | Deposit balances consisted of the following:
|
7. Fair Value Measurement (Details Narrative) (USD $)
|
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Fair Value Measurement Details Narrative | ||
Fair value of longer term debt | $ 15,743,767 | $ 15,806,477 |
3. Significant Accounting Policies (Details Narrative) (USD $)
|
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Dec. 31, 2012
|
|
Accounting Policies [Abstract] | |||
Restricted cash | $ 27,348 | $ 89,593 | |
Perecentage of revenue from major customers | 81.00% | ||
Three major customers Accounts Recievable | 7,500,000 | ||
Accumulated amortization | 152,095 | 143,645 | |
Uninsured balances | 0 | 170,896 | |
Amortization expense | 8,450 | 8,450 | |
Debt issuance costs | 523,885 | 532,335 | |
Non-cash impairment charge | $ 1,445,720 | ||
Impairment charge representation in goodwill | 100.00% |
19. Long-Term Debt (Details) (USD $)
|
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Debt Disclosure [Abstract] | ||
Refinery Loan | $ 9,298,183 | |
Notre Dame Debt | 1,300,000 | 1,300,000 |
Construction and Funding Agreement | 5,145,584 | 5,206,175 |
Captial Leases | 2,119 | |
Total | 6,445,584 | 15,806,477 |
Less: Current portion of long-term debt | 1,485,000 | 1,816,960 |
Long term debt | $ 4,960,584 | $ 13,989,517 |
8. Refined Petroleum Products and Crude Oil Inventory Risk Management (Details) (Refined products - net short (long) positions)
|
Mar. 31, 2013
|
---|---|
Refined products - net short (long) positions
|
|
Volume in Thousands of barrels | |
Notional Contract Volumes 2013 | 50,000 |
Notional Contract Volumes 2014 | |
Notional Contract Volumes 2015 | |
Notional Contract Volumes 2016 |
25. Stock Options (Details Narrative) (USD $)
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Issuance of restricted common stock expense | $ 50,000 |
24. Earnings Per Share (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share | The following table provides reconciliation between basic and diluted loss per share on a continuing and discontinued operations basis:
|
4. LE Acquisition (Tables)
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provisional price allocation for net assets acquired |
|
21. Treasury Stock (Details Narrative)
|
Mar. 31, 2013
|
---|---|
Treasury Stock Details Narrative | |
Treasury stock | 150,000 |
8. Refined Petroleum Products and Crude Oil Inventory Risk Management (Details 2) (Commodity Contracts, USD $)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Commodity Contracts
|
||
Cost of refined products sold | $ (188,150) |
24. Earnings per share (Details) (USD $)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Earnings Per Share [Abstract] | ||
Income (loss) from continuing operations, net of tax | $ (763,331) | $ (1,957,380) |
Loss from discontinued operations, net of tax | (12,514) | |
Net income (loss) | $ (763,331) | $ (1,969,894) |
Basic and diluted earnings (loss) per common share | ||
Continuing operations | $ (0.07) | $ (0.21) |
Discontinued operations | ||
Basic and diluted earnings (loss) per common share | $ (0.07) | $ (0.21) |
Basic and diluted | ||
Weighted average number of shares of common stock outstanding and potential dilutive shares of common stock | 10,510,334 | 9,476,748 |
25. Stock Options (Details) (USD $)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Dec. 31, 2012
|
|
Shares | ||
Options outstanding at December 31, 2012 | 14,642 | |
Options granted | ||
Options exercised | ||
Options expired or cancelled | ||
Options outstanding at March 31, 2013 | 14,642 | |
Options exercisable at March 31, 2013 | 14,642 | 14,642 |
Weighted Average Exercise Price | ||
Options outstanding at December 31, 2012 | ||
Options granted | ||
Options exercised | ||
Options expired or cancelled | ||
Options outstanding at March 31, 2013 | $ 19.67 | |
Options exercisable at March 31, 2013 | $ 19.67 | |
Weighted Average Remaining Contractual Life | ||
Options outstanding at March 31, 2013 | 21 days | |
Options exercisable at March 31, 2013 | 21 days | |
Aggregate Intrinisic Value | ||
Options outstanding at March 31, 2013 | ||
Options exercisable at March 31, 2013 |
19. Long-Term Debt (Details Narrative) (USD $)
|
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Debt Disclosure [Abstract] | ||
Refinery loan accrued interest | $ 178,646 | $ 250,070 |
Notre Dame debt accrued interest | 910,071 | 858,784 |
Construction funding accrued interest | 457,568 | 386,695 |
Capital leases | $ 1,835 | $ 2,119 |
Effective rate | 5.50% |
19. Long-Term Debt
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt |
Our long-term debt consists of notes payable, construction financing and capital leases, as follows:
Notre Dame Debt. LE obtained a loan in the original amount of $8,000,000 from Notre Dame Investors, Inc., which is currently held by John Kissick (the Notre Dame Debt). The Notre Dame Debt, which is currently in default, accrues interest at the default rate of 16% and is secured by a subordinated lien on the Nixon Facility and general assets of LE. Interest was accrued on the note in the amount of $910,071 and $858,784 at March 31, 2013 and December 31, 2012, respectively. There are no financial covenants associated with the Notre Dame Debt.
In August 2011, LE, Milam and John Kissick, entered into an intercreditor and subordination agreement under which Mr. Kissick, as a subordinated lien holder on the Nixon Facility, agreed to (i) subordinate his lien to the liens of Milam under the Construction and Funding Agreement and (ii) forebear his rights under the note evidencing the Notre Dame Debt for so long as amounts are outstanding on the Refinery Loan and any senior construction funding obligations. Furthermore, in August 2011, Mr. Kissick confirmed, acknowledged and agreed not to institute a suit or other proceeding against LE to foreclose upon any liens that have been established pursuant to the Notre Dame Debt or exercise any other rights or remedies pursuant to the promissory note evidencing the Notre Dame Debt under applicable law or otherwise so long as the Joint Marketing Agreement, which expires in August 2014, is in effect and has not been terminated.
Construction and Funding Agreement. In August 2011, Milam committed funding for the completion of the Nixon Facilitys refurbishment and start-up operations. We started making payments under the Construction and Funding Agreement in the first quarter of 2012. All amounts advanced under the Construction and Funding Agreement bear interest at a rate of 6% annually. Interest was accrued on the Construction and Funding Agreement in the amount of $457,568 and $386,695 at March 31, 2013 and December 31, 2012, respectively. There are no financial covenants associated with this obligation.
See Note (23) Commitments and Contingencies of this report for additional disclosures related to amendments to the Joint Marketing Agreement, which previously added to our obligation amount under the Construction and Funding Agreement.
Capital Leases. LE was obligated under various capital lease agreements for equipment totaling $2,119 at December 31, 2012. As the capital leases mature at various dates through February 2014, capital lease obligations totaling $1,835 were reclassified to short-term notes payable at March 31, 2013.
|
5. LRM Acquisition (Details Narrative) (USD $)
|
Mar. 31, 2013
|
---|---|
Business Combinations [Abstract] | |
Assets | $ 30,082 |
Liabilities | $ 496,716 |
14. Discontinued Operations (Tables)
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating results of discontinued operations | The following is a summary of the operating results of our discontinued operations:
|
23. Commitments and Contingencies (Details Narrative) (USD $)
|
Mar. 31, 2013
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Advances and Deficit Amounts | $ 5,145,584 |
Deficit Amount under the Construction and Funding Agreement | 851,296 |
Principal balance outstanding on the Refinery Loan | $ 9,298,183 |
9. Concentration of Risk (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentration Of Risk Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Percentages of all refined petroleum products sales to total sales | Sales by Product. All of our refined petroleum products were sold in the United States. The following table summarizes the percentages of all refined petroleum products sales to total sales:
|
6. Business Segment Information (Details Narrative) (USD $)
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Segment Reporting [Abstract] | |
Cost of refined products sold realized loss | $ 36,440 |
Cost of refined products sold unrealized gain | $ 188,150 |
17. Accrued Expenses and Other Current Liabilities (Details) (USD $)
|
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Accrued Expenses And Other Current Liabilities Details | ||
Excise taxes | $ 254,549 | $ 292,303 |
Salaries | 109,717 | 134,501 |
Turnaround expenses | 141,406 | |
Transportation | 69,551 | |
Other payable | 37,605 | |
Property taxes | 13,500 | |
Insurance | 57,492 | |
Unrealized hedging loss | 188,150 | 136,100 |
Unearned revenue | 92,783 | 92,783 |
Accrued Expenses and Other Current Liabilities, Net | $ 895,202 | $ 725,238 |
11. Deposits (Details) (USD $)
|
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Deposits Details | ||
Utility deposits | $ 36,500 | $ 36,500 |
Equipment deposits | 124,526 | 124,526 |
Tax bonds | 792,000 | 792,000 |
Purchase option deposits | 283,421 | 283,421 |
Rent deposits | 9,463 | |
Deposits | $ 1,245,910 | $ 1,236,447 |
25. Stock Options (Tables)
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Mar. 31, 2013
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options activity table | At March 31, 2013, there were a total of 14,642 shares of common stock reserved for issuance upon exercise of outstanding options under the Plan. A summary of the status of stock options granted to key employees, officers and directors, for the purchase of shares of common stock for the periods indicated, is as follows:
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3. Significant Accounting Policies
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3 Months Ended |
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Mar. 31, 2013
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Accounting Policies [Abstract] | |
Significant Accounting Policies |
The summary of significant accounting policies of Blue Dolphin is presented to assist in understanding our consolidated financial statements. The consolidated financial statements and notes are representations of our management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the consolidated financial statements.
Use of Estimates
We have made a number of estimates and assumptions related to the reporting of our consolidated assets and liabilities and to the disclosure of contingent assets and liabilities to prepare these audited consolidated financial statements in conformity with GAAP. While we believe current estimates are reasonable and appropriate, actual results could differ from those estimated.
Cash equivalents include liquid investments with an original maturity of three months or less. Cash balances are maintained in depository and overnight investment accounts with financial institutions that, at times, exceed insured limits. We monitor the financial condition of the financial institutions and have experienced no losses associated with these accounts.
Restricted Cash
Restricted cash was $27,348 and $89,593 at March 31, 2013 and December 31, 2012, respectively. These amounts relate to escrow accounts for potential environmental matters and loan repayments.
Accounts Receivable, Allowance for Doubtful Accounts and Concentrations of Credit Risk
Accounts receivable are customer obligations due under normal trade terms. The allowance for doubtful accounts represents our estimate of the amount of probable credit losses existing in our accounts receivable. We have a limited number of customers with individually large amounts due at any given date. Any unanticipated change in any one of these customers credit worthiness or other matters affecting the collectability of amounts due from such customers could have a material adverse effect on our results of operations in the period in which such changes or events occur. We regularly review all of our aged accounts receivables for collectability and establish an allowance as necessary for individual customer balances.
Concentration of Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, trade receivables and payables. We maintain our cash balances at banks located in Houston, Texas. Accounts in the United States are insured by the Federal Deposit Insurance Corporation up to $250,000. We had uninsured balances of $0 and $170,896 at March 31, 2013 and December 31, 2012, respectively.
We had four customers that accounted for approximately 81% of our total revenue for the three months ended March 31, 2013. These four customers represented approximately $7.5 million of accounts receivable at March 31, 2013.
Inventory
Our inventory primarily consists of refined petroleum products valued at lower of cost or market with costs being determined by the average cost method.
Price-Risk Management Activities
We utilize an inventory risk management policy under which Genesis Energy, LLC (Genesis) may, but is not required to, use derivative instruments as economic hedges to reduce refined petroleum products and crude oil inventory commodity price risk. We follow FASB ASC guidance for derivatives and hedging related to stand alone derivative instruments. These contracts are not subject to hedge accounting treatment under FASB ASC guidance. Accordingly, even though such hedge positions are direct contractual obligations of Genesis and not us, we nevertheless record the fair value of these Genesis hedges in our condensed consolidated balance sheet each quarter because of contractual arrangements between Genesis and us under which we are effectively exposed to the potential gains or losses. Changes in the fair value from quarter to quarter are recognized in our condensed consolidated statement of operations.
Property and Equipment
Refinery and Facilities. Additions to refinery and facilities are capitalized. Expenditures for repairs and maintenance, including maintenance turnarounds, are charged to expense as incurred. Management expects to continue making improvements to our refinery assets based on technological advances.
Refinery and facilities are carried at cost. Adjustment of the asset and the related accumulated depreciation accounts are made for refinery and facilities retirements and disposals, with the resulting gain or loss included in the statements of operations.
For financial reporting purposes, depreciation of refinery and facilities is computed using the straight-line method over the estimated useful lives of 25 years when the refinery and facilities are placed in service.
Management has evaluated the FASB ASC guidance related to asset retirement obligations (AROs) for our refinery and facilities. Management has concluded that there is no legal or contractual obligation to dismantle or remove the refinery and facilities. Further, management believes that these assets have indeterminate lives under FASB ASC guidance for estimating AROs because dates or ranges of dates upon which we would retire these assets cannot reasonably be estimated at this time. When a date or range of dates can reasonably be estimated for the retirement of these assets, we will estimate the cost of performing the retirement activities and record a liability for the fair value of that cost using present value techniques. We did not record any impairment of our refinery and facilities for the three months ended March 31, 2013 and 2012.
Oil and Gas Properties. We account for our oil and gas properties using the full-cost method of accounting, whereby all costs associated with acquisition, exploration and development of oil and gas properties, including directly related internal costs, are capitalized on a cost center basis. Amortization of such costs and estimated future development costs are determined using the unit-of-production method. Our U.S. Gulf of Mexico oil and gas properties were uneconomical for the twelve months ended December 31, 2012 due to leases being relinquished and fields being shut-in by operators. We disposed of our operations in Indonesia in 2012. The estimated fair values of our AROs related to our oil and gas properties were recorded at February 15, 2012 in connection with our acquisition of LE.
Pipelines and Facilities Assets. Pipelines and facilities assets have historically been recorded at cost. Following the impairment of our pipeline fixed assets for the twelve months ended December 31, 2012, we record pipelines and facilities assets at the lower of cost or net realizable value. Depreciation is computed using the straight-line method over estimated useful lives ranging from 10 to 22 years. In accordance with FASB ASC guidance on accounting for the impairment or disposal of long-lived assets, assets are grouped and evaluated for impairment based on the ability to identify separate cash flows generated therefrom. The estimated fair values of our AROs related to our pipeline and facilities assets were recorded at February 15, 2012 in connection with our acquisition of LE.
Construction in Progress. Construction in progress expenditures related to refurbishment activities at our petroleum refinery located in Nixon, Wilson County, Texas (the Nixon Facility) are capitalized as incurred. Depreciation begins once the asset is placed in service.
Intangibles Goodwill and Other
Goodwill. We recognized goodwill in connection with our reverse merger with LE. Goodwill has an indefinite useful life and represents the difference between the total purchase price and the fair value of assets (tangible and intangible) and liabilities at the date of acquisition is reviewed for impairment annually, and more frequently as circumstances warrant, and written down only in the period in which the recorded value of such assets exceed their fair value. We do not amortize goodwill in accordance with FASB Accounting Standards Codification (ASC) guidance related to intangibles, goodwill and other. We perform an impairment test annually.
Goodwill is tested for impairment at the reporting unit level, which is defined as an operating segment or a component of an operating segment that constitutes a business for which discrete financial information with similar economic characteristics is available and the operating results are regularly reviewed by management. Our pipeline transportation and oil and gas exploration and production business segments comprise the reporting units for goodwill impairment testing purposes.
In 2012, we adopted FASB Accounting Standards Updates (ASU) related to testing goodwill for impairment, in connection with the performance of our annual goodwill impairment testing. Under the ASU guidance, entities are provided with the option of first performing a qualitative assessment on none, some or all of its reporting units to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If after completing a qualitative analysis, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value a quantitative analysis is required.
The quantitative goodwill impairment analysis is a two-step process. We performed step one quantitative testing for our pipeline transportation and oil and gas exploration and production business segments in 2012. The first step used to identify potential impairment involves comparing each reporting units estimated fair value to its carrying value, including goodwill. During the first step, we evaluated goodwill for impairment using a business valuation method, which is calculated as of a measurement date by determining the present value of debt-free, after-tax projected future cash flows, discounted at the weighted average cost of capital of a hypothetical third party buyer. Our analysis indicated an impairment in 2012.
The second step of the process involves the calculation of an implied fair value of goodwill for each reporting unit for which step one indicated impairment. The implied fair value of goodwill is determined by measuring the excess of the estimated fair value of the reporting unit over the estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss cannot exceed the carrying value of goodwill assigned to a reporting unit and the subsequent reversal of goodwill impairment losses is not permitted. The determination of fair value required us to make significant estimates and assumptions. These estimates and assumptions primarily included, but were not limited to, revenue growth and operating earnings projections, discount rates, growth rates and required capital expenditure projections. Due to the inherent uncertainty involved in making these estimates, actual results could have differed materially from our estimates. As a result of our evaluation, we recognized a non-cash impairment charge of $1,445,720 related to goodwill for the twelve months ended December 31, 2012. The impairment recognized for the twelve months ended December 31, 2012 represented 100% of goodwill.
Other Intangible Assets. We recognized trade name in connection with our reverse merger with LE. We have determined our trade name to have an indefinite useful life. We account for other intangible assets under FASB ASC guidance related to intangibles, goodwill and other. Under the guidance, intangible assets with indefinite lives are tested annually for impairment. Management performed its regular annual impairment testing of trade name following FASB ASC guidance for determining impairment. Upon completion of that testing, we determined that no impairment was necessary as of December 31, 2012.
Debt Issue Costs
We have debt issue costs related to certain of our debt. Debt issue costs are capitalized and amortized over the term of the related debt using the straight-line method, which approximates the effective interest method. When a loan is paid in full, any unamortized financing costs are removed from the related accounts and charged to operations.
Debt issue costs, net of accumulated amortization, totaled $523,885 and $532,335 at March 31, 2013 and December 31, 2012, respectively. Accumulated amortization was $152,095 and $143,645 at March 31, 2013 and December 31, 2012, respectively, and is being amortized over the life of the Refinery Loan. Amortization expense, which is included in interest expense, was $8,450 for the three months ended March 31, 2013 and 2012. See Note (16) Notes Payable of this report for additional disclosures related to the Refinery Loan.
Revenue Recognition
Refined Petroleum Products Revenue. We sell various refined petroleum products including naphtha, distillates and atmospheric gas oil. Revenue from refined product sales is recognized when title passes. Title passage occurs when refined petroleum products are sold or delivered in accordance with the terms of the respective sales agreements. Revenue is recognized when sales prices are fixed or determinable and collectability is reasonably assured.
Customer assume the risk of loss when title is transferred. Transportation, shipping and handling costs incurred are included in cost of refined petroleum products sold. Excise and other taxes that are collected from customers and remitted to governmental authorities are not included in revenue.
Tank Storage Rental Revenue. Revenue from tank storage rental is recorded on a straight line basis in accordance with the terms of the related lease agreement. The lessee is invoiced monthly for the amount of rent due for the related period.
Recognition of Oil and Gas Revenue. Sales from producing wells are recognized on the entitlement method of accounting, which defers recognition of sales when, and to the extent that, deliveries to customers exceed our net revenue interest in production. Similarly, when deliveries are below our net revenue interest in production, sales are recorded to reflect the full net revenue interest. Our imbalance liability at March 31, 2013 was not material.
Pipeline Transportation Revenue. Revenue from our pipeline operations is derived from fee-based contracts and is typically based on transportation fees per unit of volume transported multiplied by the volume delivered. Revenue is recognized when volumes have been physically delivered for the customer through the pipeline.
Income Taxes
We account for income taxes under FASB ASC guidance related to income taxes, which requires recognition of income taxes based on amounts payable with respect to the current year and the effects of deferred taxes for the expected future tax consequences of events that have been included in our financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial accounting and tax basis of assets and liabilities, as well as for operating losses and tax credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
The guidance also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income prior to the expiration of any net operating loss carryforwards. See Note (22) Income Taxes for further details.
Impairment or Disposal of Long-Lived Assets
In accordance with FASB ASC guidance on accounting for the impairment or disposal of long-lived assets, we initiate a review of our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. Recoverability of an asset is measured by comparison of its carrying amount to the expected future undiscounted cash flows expected to result from the use and eventual disposition of that asset, excluding future interest costs that would be recognized as an expense when incurred. Any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair market value. Significant management judgment is required in the forecasting of future operating results that are used in the preparation of projected cash flows and, should different conditions prevail or judgments be made, material impairment charges could be necessary.
Asset Retirement Obligations
FASB ASC guidance related to AROs requires that a liability for the discounted fair value of an asset retirement obligation be recorded in the period in which it is incurred and the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted towards its future value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized.
Management has concluded that there is no legal or contractual obligation to dismantle or remove the refinery and facilities. Further, management believes that these assets have indeterminate lives under FASB ASC guidance for estimating AROs because dates or ranges of dates upon which we would retire these assets cannot reasonably be estimated at this time. When a date or range of dates can reasonably be estimated for the retirement of these assets, we will estimate the cost of performing the retirement activities and record a liability for the fair value of that cost using present value techniques.
Future asset retirement costs include costs to dismantle, relocate or dispose of our offshore platform, pipeline systems and related onshore facilities, plugging and abandonment of wells and land and sea bed restoration costs. We develop these cost estimates for each of our assets based upon regulatory requirements, platform structure, water depth, reservoir characteristics, reservoir depth, equipment market demand, current procedures and construction and engineering consultations. Because these costs typically extend many years into the future, estimating these future costs are difficult and require management to make judgments that are subject to future revisions based upon numerous factors, including changing technology, political and regulatory environments. We review our assumptions and estimates of future abandonment costs on a quarterly basis.
Derivatives
We are exposed to commodity prices and other market risks including gains and losses on certain financial assets as a result of our refined petroleum products and crude oil inventory risk management policy. Under the refined petroleum products and crude oil inventory risk management policy, Genesis uses commodity futures contracts to mitigate the change in value for a portion of our inventory volumes subject to market price fluctuations. The physical volumes are not exchanged and these contracts are net settled with cash. We recognize all commodity hedge transactions as either current assets or current liabilities in the consolidated balance sheets and those instruments are measured at fair value. Therefore, changes in the fair value of these commodity hedging instruments are included in income in the period of change. Net gains or losses associated with these transactions are recognized within cost of products sold using mark-to-market accounting.
Computation of Earnings Per Share
We apply the provisions of FASB ASC guidance for computing earnings per share (EPS). The guidance requires the presentation of basic EPS, which excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. The guidance requires dual presentation of basic EPS and diluted EPS on the face of the unaudited consolidated statement of operations and requires a reconciliation of the numerators and denominators of basic EPS and diluted EPS. Diluted EPS is computed by dividing net income (loss) available to common stockholders by the diluted weighted average number of common stock outstanding, which includes the potential dilution that could occur if securities or other contracts to issue shares of common stock were converted to common stock that then shared in the earnings of the entity. For periods in which we have a net loss, we exclude stock options because their effect would be anti-dilutive.
The number of shares related to options, warrants, restricted stock and similar instruments included in diluted EPS (EPS) is based on the Treasury Stock Method prescribed in FASB ASC guidance for computation of EPS. This method assumes theoretical repurchase of shares using proceeds of the respective stock option or warrant exercised, and for restricted stock the amount of compensation cost attributed to future services which has not yet been recognized and the amount of current and deferred tax benefit, if any, that would be credited to additional paid-in-capital upon the vesting of the restricted stock, at a price equal to the issuers average stock price during the related earnings period. Accordingly, the number of shares includable in the calculation of EPS in respect of the stock options, warrants, restricted stock and similar instruments is dependent on this average stock price and will increase as the average stock price increases.
Stock Based Compensation
In accordance with FASB ASC guidance for stock based compensation, share-based payments to employees, including grants of restricted stock units, are measured at fair value as of the date of grant and are expensed in the consolidated statement of income over the service period (generally the vesting period).
Treasury Stock
We account for treasury stock under the cost method. When treasury stock is re-issued, the net change in share price subsequent to acquisition of the treasury stock is recognized as a component of additional paid-in-capital in our Condensed Consolidated Balance Sheets.
Business Combinations
We account for acquisitions in accordance with FASB ASC guidance for business combinations. The guidance requires consideration given, including contingent consideration, assets acquired and liabilities assumed to be valued at their fair market values at the acquisition date. The guidance further provides that: (i) in-process research and development be recorded at fair value as an indefinite-lived intangible asset; (ii) acquisition costs generally be expensed as incurred, (iii) restructuring costs associated with a business combination generally be expensed subsequent to the acquisition date; and (iv) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense.
The guidance requires that any excess of purchase price over fair value of assets acquired, including identifiable intangibles and liabilities assumed be recognized as goodwill. Any excess of fair value of acquired net assets, including identifiable intangibles assets, over the acquisition consideration results in a bargain purchase gain. Prior to recording a gain, the acquiring entity must reassess whether all acquired assets and assumed liabilities have been identified and recognized and perform re-measurements to verify that the consideration paid, assets acquired and liabilities assumed have been properly valued.
Reclassification
Certain reclassifications have been made to the prior years condensed consolidated financial statements in order to conform to the current years presentation. The most significant of these reclassifications consisted of an increase in cost of refined products sold, and a corresponding decrease in refinery operating expenses.
Recently Adopted Accounting Guidance
In July 2012, FASB amended ASC guidance related to intangibles, goodwill and other. This amendment is intended to reduce the cost and complexity of the annual impairment test for indefinite-lived intangible assets other than goodwill by providing entities an option to perform a qualitative assessment to determine whether further impairment testing is necessary. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. We adopted this guidance in 2012. The adoption did not have a material impact on our consolidated financial position, results of operations or cash flows.
New Pronouncements Issued but Not Yet Effective
We have evaluated recent accounting pronouncements that are not yet effective and determined that they do not have a material impact on our consolidated financial statements or disclosures.
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12. Inventories (Details) (USD $)
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Mar. 31, 2013
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Dec. 31, 2012
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Inventory Disclosure [Abstract] | ||
Low-sulfur diesel | $ 972,943 | $ 397,240 |
Naphtha | 2,210,804 | 1,562,055 |
Atmospheric gas oil | 587,004 | 322,356 |
Crude | 19,041 | 19,041 |
Inventories, Net | $ 3,789,792 | $ 2,300,692 |