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
|
Non-accelerated filer
|
o
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Smaller reporting company
|
þ
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(Do not check if a smaller reporting company)
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PART I. FINANCIAL INFORMATION | 3 | ||||
ITEM 1. | 3 | ||||
3 | |||||
4 | |||||
5 | |||||
6 | |||||
38 | |||||
ITEM 3. | 58 | ||||
ITEM 4. | 58 | ||||
PART II. OTHER INFORMATION | 59 | ||||
ITEM 1. | 59 | ||||
ITEM 1A. | 59 | ||||
ITEM 2. | 59 | ||||
ITEM 3. | 59 | ||||
ITEM 4. | 59 | ||||
ITEM 5. | 59 | ||||
ITEM 6. | 60 | ||||
SIGNATURES | 61 |
June 30, 2013
|
December 31, 2012
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$ | 180,819 | $ | 420,896 | ||||
Restricted cash
|
27,367 | 89,593 | ||||||
Accounts receivable
|
8,182,196 | 15,398,755 | ||||||
Prepaid expenses and other current assets
|
264,386 | 228,314 | ||||||
Deposits
|
1,240,660 | 1,236,447 | ||||||
Inventory
|
3,334,114 | 2,300,692 | ||||||
Total current assets
|
13,229,542 | 19,674,697 | ||||||
Total property and equipment, net
|
35,888,540 | 35,862,085 | ||||||
Debt issue costs, net
|
515,435 | 532,335 | ||||||
Other assets
|
- | 9,463 | ||||||
Trade name
|
303,346 | 303,346 | ||||||
TOTAL ASSETS
|
$ | 49,936,863 | $ | 56,381,926 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
|
$ | 14,753,545 | $ | 19,171,013 | ||||
Accounts payable, related party
|
2,507,422 | 1,594,021 | ||||||
Notes payable
|
46,136 | 43,941 | ||||||
Asset retirement obligations, current portion
|
85,347 | - | ||||||
Accrued expenses and other current liabilities
|
713,925 | 725,238 | ||||||
Interest payable, current portion
|
577,139 | 640,352 | ||||||
Long-term debt, current portion
|
10,741,114 | 1,816,960 | ||||||
Total current liabilities
|
29,424,628 | 23,991,525 | ||||||
Long-term liabilities:
|
||||||||
Asset retirement obligations, net of current portion
|
884,010 | 921,260 | ||||||
Long-term debt, net of current portion
|
8,665,775 | 13,989,517 | ||||||
Long-term interest payable, net of current portion
|
961,929 | 858,784 | ||||||
Total long-term liabilities
|
10,511,714 | 15,769,561 | ||||||
TOTAL LIABILITIES
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39,936,342 | 39,761,086 | ||||||
STOCKHOLDERS' EQUITY
|
||||||||
Common stock ($0.01 par value, 20,000,000 shares authorized, 10,571,629 and 10,563,297
|
||||||||
shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively)
|
105,717 | 105,633 | ||||||
Additional paid-in capital
|
36,574,059 | 36,524,142 | ||||||
Accumulated deficit
|
(25,879,255 | ) | (20,008,935 | ) | ||||
Treasury stock, 150,000 shares and 0 shares, respectively, at cost
|
(800,000 | ) | - | |||||
Total stockholders' equity
|
10,000,521 | 16,620,840 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 49,936,863 | $ | 56,381,926 |
Three Months Ended June 30,
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Six Months Ended June 30,
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|||||||||||||||
2013
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2012
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2013
|
2012
|
|||||||||||||
REVENUE FROM OPERATIONS
|
||||||||||||||||
Refined product sales
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$ | 104,312,768 | $ | 84,416,296 | $ | 213,484,275 | $ | 130,187,259 | ||||||||
Pipeline operations
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77,105 | 124,476 | 150,253 | 194,386 | ||||||||||||
Oil and gas sales
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- | 1,226 | - | 7,282 | ||||||||||||
Total revenue from operations
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104,389,873 | 84,541,998 | 213,634,528 | 130,388,927 | ||||||||||||
COST OF OPERATIONS
|
||||||||||||||||
Cost of refined products sold
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105,871,717 | 88,051,229 | 212,194,378 | 133,692,455 | ||||||||||||
Refinery operating expenses
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2,724,644 | 2,239,914 | 5,469,853 | 3,302,665 | ||||||||||||
Pipeline operating expenses
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36,408 | 127,502 | 81,779 | 237,120 | ||||||||||||
Lease operating expenses
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14,390 | 25,621 | 41,291 | 44,959 | ||||||||||||
General and administrative expenses
|
461,539 | 734,720 | 946,103 | 1,260,307 | ||||||||||||
Depletion, depreciation and amortization
|
331,727 | 463,028 | 660,515 | 718,781 | ||||||||||||
Abandonment expense
|
23,901 | - | 51,352 | - | ||||||||||||
Accretion expense
|
31,177 | 29,189 | 56,340 | 50,750 | ||||||||||||
Total cost of operations
|
109,495,503 | 91,671,203 | 219,501,611 | 139,307,037 | ||||||||||||
Loss from operations
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(5,105,630 | ) | (7,129,205 | ) | (5,867,083 | ) | (8,918,110 | ) | ||||||||
OTHER INCOME (EXPENSE)
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||||||||||||||||
Net tank rental revenue
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278,349 | 81,364 | 556,699 | 175,319 | ||||||||||||
Interest and other income
|
977 | 2,265 | 1,812 | 3,915 | ||||||||||||
Interest expense
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(280,706 | ) | (275,333 | ) | (561,769 | ) | (508,850 | ) | ||||||||
Total other expense
|
(1,380 | ) | (191,704 | ) | (3,258 | ) | (329,616 | ) | ||||||||
Loss from continuing operations before income taxes
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(5,107,010 | ) | (7,320,909 | ) | (5,870,341 | ) | (9,247,726 | ) | ||||||||
Tax expense
|
||||||||||||||||
Current
|
- | 17,419 | - | (13,144 | ) | |||||||||||
Deferred
|
- | - | - | - | ||||||||||||
Income tax (expense) benefit
|
- | 17,419 | - | (13,144 | ) | |||||||||||
Loss from continuing operations, net of tax
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(5,107,010 | ) | (7,303,490 | ) | (5,870,341 | ) | (9,260,870 | ) | ||||||||
Loss from discontinued operations, net of tax
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- | (94,344 | ) | - | (106,858 | ) | ||||||||||
Net loss
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$ | (5,107,010 | ) | $ | (7,397,834 | ) | $ | (5,870,341 | ) | $ | (9,367,728 | ) | ||||
Basic loss per common share
|
||||||||||||||||
Continuing operations
|
$ | (0.49 | ) | $ | (0.69 | ) | $ | (0.56 | ) | $ | (0.93 | ) | ||||
Discontinued operations
|
$ | - | $ | (0.01 | ) | $ | - | $ | (0.01 | ) | ||||||
Basic loss per common share
|
$ | (0.49 | ) | $ | (0.70 | ) | $ | (0.56 | ) | $ | (0.94 | ) | ||||
Diluted loss per common share
|
||||||||||||||||
Continuing operations
|
$ | (0.49 | ) | $ | (0.69 | ) | $ | (0.56 | ) | $ | (0.93 | ) | ||||
Discontinued operations
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$ | - | $ | (0.01 | ) | $ | - | $ | (0.01 | ) | ||||||
Diluted loss per common share
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$ | (0.49 | ) | $ | (0.70 | ) | $ | (0.56 | ) | $ | (0.94 | ) | ||||
Weighted average number of common shares outstanding:
|
||||||||||||||||
Basic
|
10,421,629 | 10,541,853 | 10,465,736 | 10,002,926 | ||||||||||||
Diluted
|
10,421,629 | 10,541,853 | 10,465,736 | 10,002,926 |
Six Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
OPERATING ACTIVITIES
|
||||||||
Net loss
|
$ | (5,870,341 | ) | $ | (9,367,728 | ) | ||
Loss from discontinued operations
|
- | 106,858 | ||||||
Adjustments to reconcile net income (loss) to net cash
|
||||||||
provided by (used in) operating activities:
|
||||||||
Depletion, depreciation and amortization
|
660,515 | 713,071 | ||||||
Unrealized loss (gain) on derivatives
|
(215,300 | ) | 126,983 | |||||
Amortization of debt issue costs
|
16,900 | 16,899 | ||||||
Amortization of intangible assets
|
9,463 | 5,710 | ||||||
Accretion expense
|
56,340 | 50,750 | ||||||
Abandonment costs incurred
|
51,352 | (3,685 | ) | |||||
Common stock issued for services
|
50,000 | 119,000 | ||||||
Changes in operating assets and liabilities (net of effects of acquisition in 2012)
|
||||||||
Restricted cash
|
62,226 | (538 | ) | |||||
Accounts receivable
|
6,416,559 | (5,589,773 | ) | |||||
Prepaid expenses and other current assets
|
(36,072 | ) | 24,272 | |||||
Deposits
|
(4,213 | ) | (775,921 | ) | ||||
Inventory
|
(1,033,422 | ) | 810,594 | |||||
Accounts payable, accrued expenses and other liabilities
|
(4,233,122 | ) | 8,736,277 | |||||
Accounts payable, related party
|
913,401 | 2,022,546 | ||||||
Net cash used in operating activities - continuing operations
|
(3,155,714 | ) | (3,004,685 | ) | ||||
Net cash used in operating activities - discontinued operations
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- | (12,577 | ) | |||||
Net cash used in operating activities
|
(3,155,714 | ) | (3,017,262 | ) | ||||
INVESTING ACTIVITIES
|
||||||||
Capital expenditures
|
(887,970 | ) | (2,074,137 | ) | ||||
Proceeds from sale of assets
|
201,000 | - | ||||||
Cash acquired on acquisition
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- | 1,674,594 | ||||||
Net cash used in investing activities
|
(686,970 | ) | (399,543 | ) | ||||
FINANCING ACTIVITIES
|
||||||||
Proceeds from issuance of debt
|
3,705,191 | 4,252,847 | ||||||
Payments on long-term debt
|
(60,876 | ) | (356,651 | ) | ||||
Proceeds from notes payable
|
15,032 | 16,000 | ||||||
Payments on notes payable
|
(56,740 | ) | (18,925 | ) | ||||
Net cash provided by financing activities
|
3,602,607 | 3,893,271 | ||||||
Net increase (decrease) in cash and cash equivalents
|
(240,077 | ) | 476,466 | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
420,896 | 1,822 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 180,819 | $ | 478,288 | ||||
Supplemental Information:
|
||||||||
Non-cash operating activities
|
||||||||
Reduction in accounts receivable in exchange for treasury stock received
|
$ | 800,000 | $ | - | ||||
Non-cash investing and financing activities:
|
||||||||
Financing of insurance premiums
|
$ | - | $ | 82,560 | ||||
Related party payable converted to equity
|
$ | - | $ | 993,732 | ||||
Acquisition of Blue Dolphin at fair value, inclusive
|
||||||||
of cash acquired of $1,674,594
|
$ | - | $ | 18,046,154 | ||||
Accrued services payable converted to common stock
|
$ | 50,000 | $ | 119,000 |
(1)
|
Organization
|
●
|
Lazarus Energy, LLC, a Delaware limited liability company (petroleum processing assets) (“LE”);
|
●
|
Lazarus Refining & Marketing, LLC, a Delaware limited liability company (petroleum storage and terminaling) (“LRM”);
|
●
|
Blue Dolphin Pipe Line Company, a Delaware corporation (pipeline operations);
|
●
|
Blue Dolphin Petroleum Company, a Delaware corporation (exploration and production activities);
|
●
|
Blue Dolphin Services Co., a Texas corporation (administrative services);
|
●
|
Blue Dolphin Exploration Company, a Delaware corporation (exploration and production investments) (“BDEX”); and
|
●
|
Petroport, Inc., a Delaware corporation (inactive).
|
(2)
|
Basis of Presentation
|
(3)
|
Significant Accounting Policies
|
(4)
|
Business Segment Information
|
Three Months Ended June 30, 2013
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Crude Oil
|
Oil and Gas
|
|||||||||||||||||||
and Condensate
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Processing
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 104,312,768 | $ | 77,105 | $ | - | $ | - | $ | 104,389,873 | ||||||||||
Operation cost(2)
|
(108,600,407 | ) | (122,066 | ) | (42,395 | ) | (398,908 | ) | (109,163,776 | ) | ||||||||||
Other non-interest income
|
278,349 | - | - | - | 278,349 | |||||||||||||||
EBITDA
|
$ | (4,009,290 | ) | $ | (44,961 | ) | $ | (42,395 | ) | $ | (398,908 | ) | ||||||||
Depletion, depreciation and amortization
|
(331,727 | ) | ||||||||||||||||||
Other income (expense), net
|
(279,729 | ) | ||||||||||||||||||
Loss from continuing operations, | ||||||||||||||||||||
before income taxes
|
$ | (5,107,010 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | - | ||||||||||||||||||
Capital expenditures
|
$ | 357,744 | $ | - | $ | - | $ | - | $ | 357,744 | ||||||||||
Identifiable assets(3)
|
$ | 47,519,385 | $ | 1,620,019 | $ | 19,299 | $ | 778,160 | $ | 49,936,863 |
(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 $212,001 and an unrealized gain of $79,200.
|
(3)
|
Identifiable assets contain related legal obligations of each segment including cash, accounts receivable and payable and recorded net assets.
|
Three Months Ended June 30, 2012
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Crude Oil
|
Oil and Gas
|
|||||||||||||||||||
and Condensate
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Processing
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 84,416,296 | $ | 124,476 | $ | 1,226 | $ | - | $ | 84,541,998 | ||||||||||
Operation cost(2)
|
(90,369,807 | ) | (241,503 | ) | (218,085 | ) | (378,780 | ) | (91,208,175 | ) | ||||||||||
Other non-interest income
|
81,364 | - | - | - | 81,364 | |||||||||||||||
EBITDA
|
$ | (5,872,147 | ) | $ | (117,027 | ) | $ | (216,859 | ) | $ | (378,780 | ) | ||||||||
Depletion, depreciation and amortization
|
(463,028 | ) | ||||||||||||||||||
Other income (expense), net
|
(273,068 | ) | ||||||||||||||||||
Loss from continuing operations, | ||||||||||||||||||||
before income taxes
|
$ | (7,320,909 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | (94,344 | ) | |||||||||||||||||
Capital expenditures
|
$ | 724,805 | $ | - | $ | - | $ | - | $ | 724,805 | ||||||||||
Identifiable assets(3)
|
$ | 44,975,160 | $ | 11,914,226 | $ | 5,506,385 | $ | 1,014,185 | $ | 63,409,956 |
(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.
|
Six Months Ended June 30, 2013
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Crude Oil
|
Oil and Gas
|
|||||||||||||||||||
and Condensate
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Processing
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 213,484,275 | $ | 150,253 | $ | - | $ | - | $ | 213,634,528 | ||||||||||
Operation cost(2)
|
(217,664,084 | ) | (218,901 | ) | (100,059 | ) | (858,052 | ) | (218,841,096 | ) | ||||||||||
Other non-interest income
|
556,699 | - | - | - | 556,699 | |||||||||||||||
EBITDA
|
$ | (3,623,110 | ) | $ | (68,648 | ) | $ | (100,059 | ) | $ | (858,052 | ) | ||||||||
Depletion, depreciation and amortization
|
(660,515 | ) | ||||||||||||||||||
Other income (expense), net
|
(559,957 | ) | ||||||||||||||||||
Loss from continuing operations, before income taxes
|
$ | (5,870,341 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | - | ||||||||||||||||||
Capital expenditures
|
$ | 887,970 | $ | - | $ | - | $ | - | $ | 887,970 | ||||||||||
Identifiable assets(3)
|
$ | 47,519,385 | $ | 1,620,019 | $ | 19,299 | $ | 778,160 | $ | 49,936,863 |
(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 $248,441 and an unrealized gain of $215,300.
|
(3)
|
Identifiable assets contain related legal obligations of each segment including cash, accounts receivable and payable and recorded net assets.
|
Six Months Ended June 30, 2012
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Crude Oil
|
Oil and Gas
|
|||||||||||||||||||
and Condensate
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Processing
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 130,187,259 | $ | 194,386 | $ | 7,282 | $ | - | $ | 130,388,927 | ||||||||||
Operation cost(2)
|
(137,232,245 | ) | (437,220 | ) | (422,372 | ) | (496,419 | ) | (138,588,256 | ) | ||||||||||
Other non-interest income
|
175,319 | - | - | - | 175,319 | |||||||||||||||
EBITDA
|
$ | 267,594,823 | $ | 631,606 | $ | 429,654 | $ | 496,419 | ||||||||||||
Depletion, depreciation and amortization
|
(718,781 | ) | ||||||||||||||||||
Other income (expense), net
|
(504,935 | ) | ||||||||||||||||||
Loss from continuing operations, before income taxes
|
$ | (9,247,726 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | (106,858 | ) | |||||||||||||||||
Capital expenditures
|
$ | 2,074,137 | $ | - | $ | - | $ | - | $ | 2,074,137 | ||||||||||
Identifiable assets(3)
|
$ | 44,975,160 | $ | 11,914,226 | $ | 5,506,385 | $ | 1,014,185 | $ | 63,409,956 |
(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.
|
(5)
|
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 June 30, 2013 Using
|
||||||||||||||||
Financial assets:
|
Carrying Value as at June 30, 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
|
$ | 79,200 | $ | 79,200 | $ | - | $ | - |
(6)
|
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
|
45,000 | - | - | - | ||||||||||||
Fair Value
|
||||||||||
June 30,
|
December 31,
|
|||||||||
Asset Derivatives
|
Balance Sheets Location
|
2013
|
2012
|
|||||||
Prepaid expenses and other current
|
||||||||||
assets (accrued expenses and other
|
||||||||||
Commodity contracts
|
current liabilities)
|
$ | 79,200 | $ | (136,100 | ) |
Gain (Loss) Recognized
|
||||||||||||||||||
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||
Derivatives
|
Statements of Operations Location
|
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Commodity contracts
|
Cost of refined products sold
|
$ | 55,350 | $ | - | $ | (33,141 | ) | $ | - |
|
|
(7)
|
Concentration of Risk
|
Six Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
Low-sulfur diesel
|
49.8 | % | 45.6 | % | ||||
Naphtha
|
26.3 | % | 26.8 | % | ||||
Atmospheric gas oil
|
23.8 | % | 27.1 | % | ||||
Reduced crude
|
0.1 | % | 0.5 | % | ||||
100.0 | % | 100.0 | % |
(8)
|
Prepaid Expenses and Other Current Assets
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Prepaid insurance
|
$ | 101,673 | $ | 185,814 | ||||
Prepaid restructuring fees
|
50,000 | - | ||||||
Employee advances
|
- | 22,500 | ||||||
Prepaid loan closing fees
|
33,513 | 20,000 | ||||||
Unrealized hedging gains
|
79,200 | - | ||||||
$ | 264,386 | $ | 228,314 |
(9)
|
Deposits
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Utility deposits
|
$ | 31,250 | $ | 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 | - | ||||||
$ | 1,240,660 | $ | 1,236,447 | |||||
(10)
|
Inventories
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Low-sulfur diesel
|
$ | 1,054,402 | $ | 397,240 | ||||
Naphtha
|
1,510,195 | 1,562,055 | ||||||
Atmospheric gas oil
|
750,476 | 322,356 | ||||||
Crude
|
19,041 | 19,041 | ||||||
$ | 3,334,114 | $ | 2,300,692 |
(11)
|
Property, Plant and Equipment, Net
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Refinery and facilities
|
$ | 34,734,307 | $ | 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
|
443,939 | 577,567 | ||||||
37,315,457 | 36,714,977 | |||||||
Less: Accumulated depletion, depreciation and amortization
|
2,334,665 | 1,674,151 | ||||||
34,980,792 | 35,040,826 | |||||||
Construction in Progress
|
907,748 | 821,259 | ||||||
Property, Plant and Equipment, Net
|
$ | 35,888,540 | $ | 35,862,085 |
(12)
|
Discontinued Operations
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Revenue
|
$ | - | $ | 248,855 | $ | - | $ | 443,139 | ||||||||
Lease operating expenses
|
- | 273,341 | - | 455,716 | ||||||||||||
Depletion, depreciation and amortization
|
- | 57,362 | - | 79,571 | ||||||||||||
Accretion expense
|
- | 12,496 | - | 14,710 | ||||||||||||
Total costs and expenses
|
- | 343,199 | - | 549,997 | ||||||||||||
Loss from discontinued operations, net of tax
|
$ | - | $ | (94,344 | ) | $ | - | $ | (106,858 | ) |
(13)
|
Accounts Payable, Related Party
|
(14)
|
Notes Payable
|
(15)
|
Accrued Expenses and Other Current Liabilities
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Excise taxes
|
$ | 283,640 | $ | 292,303 | ||||
Turnaround expenses
|
63,646 | - | ||||||
Transportation
|
- | 69,551 | ||||||
Other payable
|
252,199 | 134,501 | ||||||
Property taxes
|
27,000 | - | ||||||
Insurance
|
22,440 | - | ||||||
Unrealized hedging loss
|
- | 136,100 | ||||||
Unearned revenue
|
65,000 | 92,783 | ||||||
$ | 713,925 | $ | 725,238 |
(16)
|
Asset Retirement Obligations
|
Asset retirment obligations at December 31, 2012
|
$ | 921,260 | ||
Liabilities settled
|
(8,244 | ) | ||
Accretion expense
|
56,341 | |||
969,357 | ||||
Less: current portion of asset retirement obligations
|
85,347 | |||
Asset retirement obligations, long-term balance
|
||||
at June 30, 2013
|
$ | 884,010 |
(17)
|
Long-Term Debt
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Refinery Note
|
$ | 9,256,114 | $ | 9,298,183 | ||||
Construction and Funding Agreement
|
8,850,775 | 5,206,175 | ||||||
Notre Dame Debt
|
1,300,000 | 1,300,000 | ||||||
Captial Leases
|
- | 2,119 | ||||||
19,406,889 | 15,806,477 | |||||||
Less: Current portion of long-term debt
|
10,741,114 | 1,816,960 | ||||||
$ | 8,665,775 | $ | 13,989,517 |
(18)
|
Leases
|
(19)
|
Treasury Stock
|
(20)
|
Income Taxes
|
(21)
|
Commitments and Contingencies
|
●
|
Crude Supply Agreement -- Pursuant to the Crude Supply Agreement, GEL, an affiliate of Genesis, 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 Note 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 $64,358 (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.
|
(22)
|
Earnings Per Share
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Loss from continuing operations, net of tax
|
$ | (5,107,010 | ) | $ | (7,303,490 | ) | $ | (5,870,341 | ) | $ | (9,260,870 | ) | ||||
Loss from discontinued operations, net of tax
|
- | (94,344 | ) | - | (106,858 | ) | ||||||||||
Net loss
|
(5,107,010 | ) | (7,397,834 | ) | (5,870,341 | ) | (9,367,728 | ) | ||||||||
Basic and diluted loss per common share
|
||||||||||||||||
Continuing operations
|
$ | (0.49 | ) | $ | (0.69 | ) | $ | (0.56 | ) | $ | (0.93 | ) | ||||
Discontinued operations
|
$ | - | $ | (0.01 | ) | $ | - | $ | (0.01 | ) | ||||||
Basic and diluted loss per common share
|
$ | (0.49 | ) | $ | (0.70 | ) | $ | (0.56 | ) | $ | (0.94 | ) | ||||
Basic and Diluted
|
||||||||||||||||
Weighted average number of shares of common stock
|
||||||||||||||||
outstanding and potential dilutive shares of common stock
|
10,421,629 | 10,541,853 | 10,465,736 | 10,002,926 |
(23)
|
Stock Options
|
Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Life (Years)
|
Aggregate Intrinsic Value
|
|||||||||||||
Options outstanding at December 31, 2012
|
14,642 | $ | - | |||||||||||||
Options granted
|
- | $ | - | |||||||||||||
Options exercised
|
- | $ | - | |||||||||||||
Options exercised or cancelled
|
- | $ | - | |||||||||||||
Options outstanding at June 30, 2013
|
14,642 | $ | 19.67 | 0.4 | $ | - | ||||||||||
Options exercisable at June 30, 2013
|
14,642 | $ | 19.67 | 0.4 | $ | - |
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
●
|
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 June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Nixon Facility
|
||||||||||||||||
Operating days
|
90 | 88 | 175 | 148 | ||||||||||||
Total refinery throughput(1)
|
||||||||||||||||
bbls
|
1,008,857 | 786,017 | 1,987,662 | 1,177,525 | ||||||||||||
bpd
|
11,210 | 8,932 | 11,358 | 7,956 | ||||||||||||
Capacity utilization rate
|
75 | % | 60 | % | 76 | % | 53 | % | ||||||||
Total refinery production
|
||||||||||||||||
bbls
|
984,922 | 776,377 | 1,943,228 | 1,160,530 | ||||||||||||
bpd
|
10,944 | 8,822 | 11,104 | 7,841 | ||||||||||||
Capacity utilization rate
|
73 | % | 59 | % | 74 | % | 52 | % |
(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 Note 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 $64,358 (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 June 30, 2013
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Crude Oil
|
Oil and Gas
|
|||||||||||||||||||
and Condensate
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Processing
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 104,312,768 | $ | 77,105 | $ | - | $ | - | $ | 104,389,873 | ||||||||||
Operation cost(2)
|
(108,600,407 | ) | (122,066 | ) | (42,395 | ) | (398,908 | ) | (109,163,776 | ) | ||||||||||
Other non-interest income
|
278,349 | - | - | - | 278,349 | |||||||||||||||
EBITDA
|
$ | (4,009,290 | ) | $ | (44,961 | ) | $ | (42,395 | ) | $ | (398,908 | ) | $ | (4,495,554 | ) | |||||
Depletion, depreciation and amortization
|
(331,727 | ) | ||||||||||||||||||
Other income (expense), net
|
(279,729 | ) | ||||||||||||||||||
Loss from continuing operations,
|
||||||||||||||||||||
before income taxes
|
$ | (5,107,010 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | - | ||||||||||||||||||
Capital expenditures
|
$ | 357,744 | $ | - | $ | - | $ | - | $ | 357,744 | ||||||||||
Identifiable assets(3)
|
$ | 47,519,385 | $ | 1,620,019 | $ | 19,299 | $ | 778,160 | $ | 49,936,863 |
(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 $212,001 and an unrealized gain of $79,200.
|
(3)
|
Identifiable assets contain related legal obligations of each segment including cash, accounts receivable and payable and recorded net assets.
|
Three Months Ended June 30, 2012
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Crude Oil
|
Oil and Gas
|
|||||||||||||||||||
and Condensate
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Processing
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 84,416,296 | $ | 124,476 | $ | 1,226 | $ | - | $ | 84,541,998 | ||||||||||
Operation cost(2)
|
(90,369,807 | ) | (241,503 | ) | (218,085 | ) | (378,780 | ) | (91,208,175 | ) | ||||||||||
Other non-interest income
|
81,364 | - | - | - | 81,364 | |||||||||||||||
EBITDA
|
$ | (5,872,147 | ) | $ | (117,027 | ) | $ | (216,859 | ) | $ | (378,780 | ) | $ | (6,584,813 | ) | |||||
Depletion, depreciation and amortization
|
(463,028 | ) | ||||||||||||||||||
Other income (expense), net
|
(273,068 | ) | ||||||||||||||||||
Loss from continuing operations,
|
||||||||||||||||||||
before income taxes
|
$ | (7,320,909 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | (94,344 | ) | |||||||||||||||||
Capital expenditures
|
$ | 724,805 | $ | - | $ | - | $ | - | $ | 724,805 | ||||||||||
Identifiable assets(3)
|
$ | 44,975,160 | $ | 11,914,226 | $ | 5,506,385 | $ | 1,014,185 | $ | 63,409,956 |
(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.
|
Six Months Ended June 30, 2013
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Crude Oil
|
Oil and Gas
|
|||||||||||||||||||
and Condensate
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Processing
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 213,484,275 | $ | 150,253 | $ | - | $ | - | $ | 213,634,528 | ||||||||||
Operation cost(2)
|
(217,664,084 | ) | (218,901 | ) | (100,059 | ) | (858,052 | ) | (218,841,096 | ) | ||||||||||
Other non-interest income
|
556,699 | - | - | - | 556,699 | |||||||||||||||
EBITDA
|
$ | (3,623,110 | ) | $ | (68,648 | ) | $ | (100,059 | ) | $ | (858,052 | ) | $ | (4,649,869 | ) | |||||
Depletion, depreciation and amortization
|
(660,515 | ) | ||||||||||||||||||
Other income (expense), net
|
(559,957 | ) | ||||||||||||||||||
Loss from continuing operations,
|
||||||||||||||||||||
before income taxes
|
$ | (5,870,341 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | - | ||||||||||||||||||
Capital expenditures
|
$ | 887,970 | $ | - | $ | - | $ | - | $ | 887,970 | ||||||||||
Identifiable assets(3)
|
$ | 47,519,385 | $ | 1,620,019 | $ | 19,299 | $ | 778,160 | $ | 49,936,863 |
(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 $248,441 and an unrealized gain of $215,300.
|
(3)
|
Identifiable assets contain related legal obligations of each segment including cash, accounts receivable and payable and recorded net assets.
|
Six Months Ended June 30, 2012
|
||||||||||||||||||||
Segment
|
||||||||||||||||||||
Crude Oil
|
Oil and Gas
|
|||||||||||||||||||
and Condensate
|
Pipeline
|
Exploration &
|
Corporate &
|
|||||||||||||||||
Processing
|
Transportation
|
Production
|
Other(1)
|
Total
|
||||||||||||||||
Revenues
|
$ | 130,187,259 | $ | 194,386 | $ | 7,282 | $ | - | $ | 130,388,927 | ||||||||||
Operation cost(2)
|
(137,232,245 | ) | (437,220 | ) | (422,372 | ) | (496,419 | ) | (138,588,256 | ) | ||||||||||
Other non-interest income
|
175,319 | - | - | - | 175,319 | |||||||||||||||
EBITDA
|
$ | 267,594,823 | $ | 631,606 | $ | 429,654 | $ | 496,419 | $ | (8,024,010 | ) | |||||||||
Depletion, depreciation and amortization
|
(718,781 | ) | ||||||||||||||||||
Other income (expense), net
|
(504,935 | ) | ||||||||||||||||||
Loss from continuing operations,
|
||||||||||||||||||||
before income taxes
|
$ | (9,247,726 | ) | |||||||||||||||||
Loss from discontinued operations
|
$ | (106,858 | ) | |||||||||||||||||
Capital expenditures
|
$ | 2,074,137 | $ | - | $ | - | $ | - | $ | 2,074,137 | ||||||||||
Identifiable assets(3)
|
$ | 44,975,160 | $ | 11,914,226 | $ | 5,506,385 | $ | 1,014,185 | $ | 63,409,956 |
(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 June 30,
|
For Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Cash flow from operations
|
||||||||||||||||
Adjusted loss from continuing operations
|
$ | (4,979,105 | ) | $ | (6,580,415 | ) | $ | (5,241,071 | ) | $ | (8,232,142 | ) | ||||
Adjusted loss from discontinued operations
|
- | (24,486 | ) | (12,577 | ) | |||||||||||
Change in assets and current liabilities
|
1,569,686 | 5,165,998 | 2,085,357 | 5,227,457 | ||||||||||||
Total cash flow from operations
|
(3,409,419 | ) | (1,438,903 | ) | (3,155,714 | ) | (3,017,262 | ) | ||||||||
Cash inflows (outflows)
|
||||||||||||||||
Proceeds from issuance of debt
|
3,705,191 | 1,888,835 | 3,705,191 | 4,252,847 | ||||||||||||
Payments on long term debt
|
- | (353,735 | ) | (60,876 | ) | (356,651 | ) | |||||||||
Cash acquired on Acquisition
|
- | - | - | 1,674,594 | ||||||||||||
Capital expenditures
|
(357,744 | ) | (724,805 | ) | (887,970 | ) | (2,074,137 | ) | ||||||||
Proceeds from sale of assets
|
201,000 | - | 201,000 | - | ||||||||||||
Proceeds from notes payable
|
- | 16,000 | 15,032 | 16,000 | ||||||||||||
Payments on note payble
|
(46,268 | ) | (18,925 | ) | (56,740 | ) | (18,925 | ) | ||||||||
Total cash inflows (outflows)
|
3,502,179 | 807,370 | 2,915,637 | 3,493,728 | ||||||||||||
Total change in cash flows
|
$ | 92,760 | $ | (631,533 | ) | $ | (240,077 | ) | $ | 476,466 |
(a)
|
Exhibits:
The following exhibits are filed herewith:
|
Note Modification Agreement effective June 1, 2013 by and between Lazarus Energy, LLC, Jonathan P. Carroll, Gina L. Carroll, Lazarus Energy Holdings, LLC, GEL TEX Marketing, LLC, Milam Services, Inc. and American First National Bank.
|
|
Letter from American First National Bank to Lazarus Energy, LLC dated as of December 13, 2012.
|
|
Letter from American First National Bank to Lazarus Energy, LLC dated as of July 24, 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: August 14, 2013
|
By:
|
/s/ JONATHAN P. CARROLL
|
|
|
|
Jonathan P. Carroll
Chief Executive Officer, President,
Assistant Treasurer and Secretary
(Principal Executive Officer)
|
|
|
|
|
|
Date: August 14, 2013
|
By:
|
/s/ TOMMY L. BYRD
|
|
|
|
Tommy L. Byrd
Interim Chief Financial Officer,
Treasurer and Assistant Secretary
(Principal Financial Officer)
|
This written loan agreement represents the final agreement between the parties, and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties relating to this Loan.
|
BORROWER:
|
|||
LAZARUS ENERGY, LLC | |||
By:
|
/s/ JONATHAN P. CARROLL
|
||
Printed Name:
|
Jonathan Carroll
|
||
Title:
|
Director
|
||
GUARANTOR:
|
|||
/s/ JONATHAN P. CARROLL
|
|||
JONATHAN P. CARROLL, Individually
|
|||
/s/ GINA L. CARROLL
|
|||
GINA L. CARROLL, Individually
|
|||
LAZARUS ENERGY HOLDINGS, LLC
|
|||
By:
|
/s/ JONATHAN P. CARROLL
|
||
Printed Name:
|
Jonathan Carroll
|
||
Title:
|
Director
|
LENDER:
|
|||
AMERICAN FIRST NATIONAL BANK
|
|||
By:
|
/s/ ANALIZA DEL VALLE
|
||
Printed Name:
|
Analiza Del Valle
|
||
Title:
|
SVP
|
||
OTHER PARTIES:
|
|||
GEL TEX MARKETING, LLC
|
|||
By:
|
/s/ R.V. DEERE
|
||
Printed Name:
|
R.V. Deere
|
||
Title:
|
CFO
|
||
MILAM SERVICES, INC.
|
|||
By:
|
/s/ R.V. DEERE
|
||
Printed Name:
|
R.V. Deere
|
||
Title:
|
CFO
|
||
THE STATE OF TEXAS §
|
|||
COUNTY OF Harris
|
|||
This instrument was acknowledged before me on May 2nd, 2013 by Jonathan P. Carroll, the Director of LAZARUS ENERGY, LLC, a Delaware limited liability company, on behalf of said company.
|
|||
( Notary Seal)
|
|||
/s/ JENNIFER M. HARVEY
|
|||
Notary Public, State of Texas
|
THE STATE OF TEXAS §
|
|||
COUNTY OF Harris
|
|||
This instrument was acknowledged before me on May 2nd, 2013 by JONATHAN P. CARROLL.
|
|||
( Notary Seal)
|
|||
/s/ JENNIFER M. HARVEY
|
|||
Notary Public, State of Texas
|
|||
THE STATE OF TEXAS §
|
|||
COUNTY OF Harris
|
|||
This instrument was acknowledged before me on May 2nd, 2013 by GINA L. CARROLL.
|
|||
( Notary Seal)
|
|||
/s/ JENNIFER M. HARVEY
|
|||
Notary Public, State of Texas
|
|||
THE STATE OF TEXAS §
|
|||
COUNTY OF Harris
|
|||
This instrument was acknowledged before me on May 2nd, 2013 by Jonathan P. Carroll, the Director of LAZARUS ENERGY HOLDINGS, LLC, a Delaware limited liability company, on behalf of said company.
|
|||
( Notary Seal)
|
|||
/s/ JENNIFER M. HARVEY
|
|||
Notary Public, State of Texas
|
THE STATE OF TEXAS §
|
|||
COUNTY OF Harris
|
|||
This instrument was acknowledged before me on May 3rd, 2013 by ANALIZA VALLE, the S.V.P. of AMERICAN FIRST NATIONAL BANK, a national banking association, on behalf of said national banking association.
|
|||
( Notary Seal)
|
|||
/s/ QUYEN LE TRAN
|
|||
Notary Public, State of Texas
|
|||
THE STATE OF TEXAS §
|
|||
COUNTY OF Harris
|
|||
This instrument was acknowledged before me on May 1st, 2013 by R.V. DEERE, the CFO of GEL TEX MARKETING, LLC, a Delaware limited liability company, on behalf of said company.
|
|||
( Notary Seal)
|
|||
/s/ JANEL R. WHITE
|
|||
Notary Public, State of Texas
|
|||
THE STATE OF TEXAS §
|
|||
COUNTY OF Harris
|
|||
This instrument was acknowledged before me on May 1st, 2013 by Jonathan P. Carroll, the R.V. DEERE, the CFO of MILAM SERVICES, INC., a Delaware corporation, on behalf of said corporation.
|
|||
( Notary Seal)
|
|||
/s/ JANEL R. WHITE
|
|||
Notary Public, State of Texas
|
Ms. AnaLiza del Valle, Senior Vice President/SBA Manager American First National Bank
9999 Bellaire Boulevard Houston, Texas 77036
RE: Lazarus Energy, LLC
Nixon, Wilson County, Texas
Forbearance Agreement
Business & Industry Guarantee Loan Servicing — $10,000,000
|
12 DEC 2012
|
Ms. del Valle
|
Page 2 |
/s/ FRANCISCO VALENTIN, JR.
|
|
Francisco Valentin, Jr.
State Director
|
AMERICAN FIRST
NATIONAL BANK
|
/s/ ANALIZA DEL VALLE
|
|
AnaLiza del Valle
|
|
SVP/SBA Manage
|
Ms. AnaLiza del Valle, Senior Vice President/SBA Manager
American First National Bank
9999 Bellaire Boulevard
Houston, Texas 77036
RE: Lazarus Energy, LLC
Nixon, Wilson County, Texas
Forbearance Agreement
Business & Industry Guarantee Loan Servicing — $10,000,000
|
12 DEC 2012
|
Ms. del Valle
|
Page 2 |
/s/ FRANCISCO VALENTIN, JR.
|
|
Francisco Valentin, Jr.
State Director
|
AMERICAN FIRST
NATIONAL BANK
|
/s/ ANALIZA DEL VALLE
|
|
AnaLiza del Valle
|
|
SVP/SBA Manage
|
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: August 14, 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: August 14, 2013
|
By:
|
/s/ TOMMY L. BYRD
|
|
Tommy L. Byrd
|
|||
Interim Chief Financial Officer, Treasurer and Assistant Secretary
|
|||
(Principal Financial Officer)
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Date: August 14, 2013
|
By:
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/s/ JONATHAN P. CARROLL
|
|
Jonathan P. Carroll
|
|||
Chief Executive Officer, President Assistant Treasurer and Secretary
|
|||
(Principal Executive Officer)
|
Date: August, 2013
|
By:
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/s/ TOMMY L. BYRD
|
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Tommy L. Byrd
|
|||
Interim Chief Financial Officer, Treasurer and Assistant Secretary
|
|||
(Principal Financial Officer)
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11. Property, Plant and Equipment, Net
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment, Net | Property and equipment consisted of the following:
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7. Concentration of Risk (Details)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Concentration Risk | 100.00% | 100.00% |
Low-sulfur diesel
|
||
Concentration Risk | 49.80% | 45.60% |
Naphtha
|
||
Concentration Risk | 26.30% | 26.80% |
Atmospheric gas oil
|
||
Concentration Risk | 23.80% | 27.10% |
Reduced crude [Member]
|
||
Concentration Risk | 0.00% | 0.00% |
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
REVENUE FROM OPERATIONS | ||||
Refined product sales | $ 104,312,768 | $ 84,416,296 | $ 213,484,275 | $ 130,187,259 |
Pipeline operations | 77,105 | 124,476 | 150,253 | 194,386 |
Oil and gas sales | 1,226 | 7,282 | ||
Total revenue from operations | 104,389,873 | 84,541,998 | 213,634,528 | 130,388,927 |
COST OF OPERATIONS | ||||
Cost of refined products sold | 105,871,717 | 88,051,229 | 212,194,378 | 133,692,455 |
Refinery operating expenses | 2,724,644 | 2,239,914 | 5,469,853 | 3,302,665 |
Pipeline operating expenses | 36,408 | 127,502 | 81,779 | 237,120 |
Lease operating expenses | 14,390 | 25,621 | 41,291 | 44,959 |
General and administrative expenses | 461,539 | 734,720 | 946,103 | 1,260,307 |
Depletion, depreciation and amortization | 331,727 | 463,028 | 660,515 | 718,781 |
Abandonment expense | 23,901 | 51,352 | ||
Accretion expense | 31,177 | 29,189 | 56,340 | 50,750 |
Total cost of operations | 109,495,503 | 91,671,203 | 219,501,611 | 139,307,037 |
Loss from operations | (5,105,630) | (7,129,205) | (5,867,083) | (8,918,110) |
OTHER INCOME (EXPENSE) | ||||
Net tank rental revenue | 278,349 | 81,364 | 556,699 | 175,319 |
Interest and other income | 977 | 2,265 | 1,812 | 3,915 |
Interest expense | (280,706) | (275,333) | (561,769) | (508,850) |
Total other expense | (1,380) | (191,704) | (3,258) | (329,616) |
Loss from continuing operations before income taxes | (5,107,010) | (7,320,909) | (5,870,341) | (9,247,726) |
Tax expense Current | 17,419 | (13,144) | ||
Tax expense Deferred | ||||
Income tax (expense) benefit | 0 | 17,419 | 0 | (13,144) |
Loss from continuing operations, net of tax | (5,107,010) | (7,303,490) | (5,870,341) | (9,260,870) |
Loss from discontinued operations, net of tax | (94,344) | (106,858) | ||
Net loss | $ (5,107,010) | $ (7,397,834) | $ (5,870,341) | $ (9,367,728) |
Basic loss per common share | ||||
Continuing operations | $ (0.49) | $ (0.69) | $ (0.56) | $ (0.93) |
Discontinued operations | $ (0.01) | $ (0.01) | ||
Basic loss per common share | $ (0.49) | $ (0.70) | $ (0.56) | $ (0.94) |
Diluted loss per common share | ||||
Continuing operations | $ (0.49) | $ (0.69) | $ (0.56) | $ (0.93) |
Discontinued operations | $ (0.01) | $ (0.01) | ||
Diluted loss per common share | $ (0.49) | $ (0.70) | $ (0.56) | $ (0.94) |
Weighted average number of common shares outstanding: | ||||
Basic | 10,421,629 | 10,541,853 | 10,465,736 | 10,002,926 |
Diluted | 10,421,629 | 10,541,853 | 10,465,736 | 10,002,926 |
4. Business Segment Information
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment Information | We are engaged in three lines of business: (i) refinery operations, (ii) pipeline transportation and (iii) oil and gas exploration and production. As part of our refinery operations business segment, we also conduct petroleum storage and terminaling operations. Our primary operating asset is the Nixon Facility. We also operate oil and natural gas pipelines in the Gulf of Mexico and hold oil and natural gas leasehold interests in the U.S. Gulf of Mexico; however, these operations are considered non-core to our business. Management uses earnings before interest, income taxes and depreciation ("EBITDA") to assess the operating results and effectiveness of our business segments.
Segment financials for the three months ended June 30, 2013 (and at June 30, 2013) were as follows:
__________________________
Segment financials for the three months ended June 30, 2012 (and at June 30, 2012) were as follows:
__________________________
Segment financials for the six months ended June 30, 2013 (and at June 30, 2013) were as follows:
__________________________
Segment financials for the six months ended June 30, 2012 (and at June 30, 2012) were as follows:
|
18. Leases
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Accounting Policies [Abstract] | |
Leases | We are currently under a ten-year lease agreement that expires in 2017 for office space in downtown Houston, Texas. The Houston office serves as our company headquarters. The current minimum monthly payment is $9,463 per month. The office lease agreement provides for periodic rent escalations or rent holidays over the term of the lease, which is recognized on a straight-line basis. For the three months ended June 30, 2013 and 2012, rent expense for the office lease was $25,161 and $28,344, respectively. For the six months ended June 30, 2013 and 2012, rent expense for the office lease was $51,221 and $52,121, respectively. |
19. Treasury Stock (Details Narrative)
|
Jun. 30, 2013
|
---|---|
Treasury Stock Details Narrative | |
Treasury stock | 150,000 |
10. Inventories (Details) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Inventory Disclosure [Abstract] | ||
Low-sulfur diesel | $ 1,054,402 | $ 397,240 |
Naphtha | 1,510,195 | 1,562,055 |
Atmospheric gas oil | 750,476 | 322,356 |
Crude | 19,041 | 19,041 |
Inventories, Net | $ 3,334,114 | $ 2,300,692 |
12. Discontinued Operations
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | On November 6, 2012, BDEX entered into a Sale and Purchase Agreement with Blue Sky Langsa, Limited (Blue Sky) to dispose of its 7% undivided working interest in Indonesia. As a result, our operations related to Indonesia ceased effective November 6, 2012 and the disposal was completed on February 28, 2013. Operations associated with Indonesia, which were previously reported as part of the Oil and Gas Exploration & Production business segment, have been classified as discontinued operations and are presented in a separate line in the consolidated statements of operations for all periods presented.
The following is a summary of the operating results of our discontinued operations:
|
5. Fair Value Measurement (Details) (USD $)
|
Jun. 30, 2013
|
---|---|
Financial liabilties: | |
Commodity contracts | $ 79,200 |
FairValueInputsLevel1Member
|
|
Financial liabilties: | |
Commodity contracts | 79,200 |
FairValueInputsLevel2Member
|
|
Financial liabilties: | |
Commodity contracts | |
FairValueInputsLevel3Member
|
|
Financial liabilties: | |
Commodity contracts |
11. Property, Plant and Equipment, Net (Details) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Property Plant And Equipment Net Details | ||
Less: Accumulated depletion, depreciation and amortization | $ 2,334,665 | $ 1,674,151 |
Property, Plant and Equipment less depreciation | 34,980,792 | 35,040,826 |
Construction in Progress | 907,748 | 821,259 |
Property, Plant and Equipment, Net | $ 35,888,540 | $ 35,862,085 |
11. Property, Plant and Equipment, Net (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment | Property and equipment consisted of the following:
|
21. Commitments and Contingencies
|
6 Months Ended | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||
Commitments and Contingencies | Management Agreement
See Note (13) Accounts Payable, Related Party of this report for additional disclosures related to the Management Agreement.
Genesis Agreements
We continue to be dependent on our relationship with Genesis and its affiliates. Our relationship with Genesis is governed by three agreements:
The Joint Marketing Agreement contains negative covenants that restrict LEs actions under certain circumstances. For example, LE is prohibited from making any modifications to the Nixon Facility or entering into any contracts with third-parties that would materially affect or impair GELs or its affiliates rights under the agreements set forth above. The Joint Marketing Agreement has an initial term of three years expiring on August 12, 2014. After the expiration of its initial term, the Joint Marketing Agreement shall be automatically renewed for successive one year terms unless either party notifies the other party of its election to terminate the Joint Marketing Agreement within 90 days of the expiration of the then current term. The Joint Marketing Agreement also provides that it may be terminated prior to the end of its then current term under certain circumstances.
As of June 30, 2013, total advances under the Construction and Funding Agreement, including Deficit Amounts, were $8,850,775. As of June 30, 2013, pursuant to amendments and clarifications to the Joint Marketing Agreement, the net Deficit Amount included in our obligation amount under the Construction and Funding Agreement was $5,395,050.
Refinery Note
As of June 30, 2013, the principal balance outstanding on the Refinery Note was $9,256,114. During the three months ended June 30, 2013, GEL paid AFNB in the amount of $178,646 to repay all Arrearages.
Lazarus Texas Refinery I, LLC (LTRI) Option
In June 2012, we purchased an exclusive option, which expires on September 4, 2013, from LEH to acquire all of the issued and outstanding membership interests of LTRI, a Delaware limited liability company and a wholly-owned subsidiary of LEH. LTRIs assets include a refinery, located on a 104 acre site in Ingleside, San Patricio County, Texas (the Ingleside Refinery). The Ingleside Refinery consists of crude oil and condensate processing equipment, pipeline connections, trucking terminals and related storage, storage tanks, a barge dock and receiving facility, pipelines, equipment, related loading and unloading facilities and utilities.
In the event we exercise the option to purchase the Ingleside Refinery, Blue Dolphin and LEH will enter into a definitive purchase and sale agreement. We paid LEH a fully refundable sum of $100,000 in cash as consideration to purchase the exclusive option. Upon exercise of the exclusive option to purchase the Ingleside Refinery, we will assume all outstanding liabilities, including a note payable, and reimburse LEH for costs associated with the acquisition, refurbishment and environmental remediation of the site. The parties continue to monitor such refurbishment and remediation efforts as a prerequisite to determining the purchase price. If there is a material difference between LEHs expenditures for such remediation efforts and our desired purchase price, LEH has agreed to refund us the purchase price for the Ingleside Refinery option.
Lazarus Energy Development, LLC (LED) Option
In connection with the Merger, we purchased an exclusive option, which expires on September 4, 2013, from LEH to acquire all of the issued and outstanding membership interests of LED, a Delaware limited liability company and a wholly-owned subsidiary of LEH. LED owns approximately 46 acres of real property, which is located adjacent to the Nixon Facility in Nixon, Wilson County, Texas. We paid LEH a fully refundable sum of $183,421 in cash as consideration to purchase this option.
Legal Matters
From time to time we are subject to various lawsuits, claims, mechanics liens and administrative proceedings that arise out of the normal course of business. Management does not believe that the liens will have a material adverse effect on our results of operations.
Environmental Matters
All of our operations and properties are subject to extensive federal, state, and local environmental, health, and safety regulations governing, among other things, the generation, storage, handling, use and transportation of petroleum and hazardous substances; the emission and discharge of materials into the environment; waste management; characteristics and composition of diesel and other fuels; and the monitoring, reporting and control of greenhouse gas emissions. Our operations also require numerous permits and authorizations under various environmental, health and safety laws and regulations. Failure to comply with these permits or environmental, health or safety laws generally could result in fines, penalties or other sanctions, or a revocation of our permits. |
20. Income Taxes
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Income Tax Disclosure [Abstract] | |
Income Taxes | LE is a limited liability company and, prior to the Merger, its taxable income or net operating losses (NOLs) flowed through to its sole member for federal and state income tax purposes. Blue Dolphin is a C corporation and is a taxable entity for federal and state income tax purposes. Upon the Merger, LE became the subsidiary of Blue Dolphin and LEs taxable income or NOLs flowed through to Blue Dolphin for federal and state income tax purposes. However, Section 382 of the Internal Revenue Code imposes a limitation on Blue Dolphins use of LEs NOLs. The amount of NOLs subject to such limitations is approximately $18.5 million. Nevertheless, the NOLs generated subsequent to the Merger, approximately $13.3 million, is not subject to any such limitation. For the three and six months ended June 30, 2013, we did not recognize any deferred tax assets resulting from our NOLs due to the uncertainty of their use.
For the three months ended June 30, 2013 and 2012, income tax expense was $0 and income tax benefit was $17,419, respectively. For the six months ended June 30, 2013 and 2012, income tax expense was $0 and $13,144, respectively. Income tax expense and benefit related to the State of Texas margins tax (TMT). TMT is a form of business tax imposed on gross margin revenue to replace the state of Texas prior franchise tax structure. Although TMT is imposed on an entitys gross profit revenue rather than on its net income, certain aspects of TMT make it similar to an income tax. |
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