Blueknight Announces Sale of Three Asphalt Terminals to Ergon, Amends Credit Facility and Completes Oklahoma Pipeline Repair

Source Press Release
Company Blueknight Energy Partners, L.P.Ergon, Inc 
Tags Asset Deals, Deals, Refining & Marketing Activities
Date June 29, 2018

Blueknight Energy Partners, L.P. (“BKEP” or the “Partnership”) (NASDAQ: BKEP) (NASDAQ: BKEPP) announced today that it has entered into an Asset Purchase Agreement (“Purchase Agreement”) with Ergon Asphalt & Emulsions, Inc. (“Ergon A&E”) to sell three asphalt terminals located in Lubbock and Saginaw, Texas and Memphis, Tennessee to Ergon A&E for a purchase price of $90.0 million in cash (the “Asset Sale”). Net proceeds from the Asset Sale will be used to reduce outstanding indebtedness under BKEP’s credit facility. The transaction is subject to normal closing conditions and regulatory approval and is expected to close upon the expiration or earlier termination of the HSR waiting period.

Ergon A&E is an affiliate of Ergon, Inc. (“Ergon”), which indirectly owns (i) 100% of Blueknight Energy Partners G.P., L.L.C., the general partner (the “General Partner”) of the Partnership and (ii) 27.5% of the limited partnership interests in the Partnership. Accordingly, the Conflicts Committee of the Board of Directors of the General Partner reviewed and evaluated the Purchase Agreement to determine whether to grant special approval of the Purchase Agreement and the Asset Sale. The Conflicts Committee retained independent legal and financial advisors, Potter Anderson & Corroon LLP and Evercore, respectively, to assist with the evaluation of the terms of the Purchase Agreement and Asset Sale. The Conflicts Committee unanimously approved the Purchase Agreement and the Asset Sale.

In addition, BKEP amended its credit facility to, among other things, (i) permit the Asset Sale, (ii) permit BKEP to make up to a $55.0 million investment in the previously announced Cimarron Express joint venture, (iii) reduce commitments under the credit facility from $450.0 million to $400.0 million, (iv) limit distributions by the Partnership to $10.7 million per quarter until December 31, 2019, and (v) provide financial covenant relief, all subject to the terms and conditions of the credit facility amendment.

Additional information regarding the Asset Sale and the amended credit facility will be contained in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission on June 29, 2018.

Comments from BKEP CEO Mark Hurley:

“These transactions and actions we are announcing today represent the culmination of the plan outlined in our first quarter earnings conference call. We are committed to taking the steps necessary to better position BKEP for future growth. The sale, along with an anticipated 30% reduction in the cash distributions to our common unitholders, decreases leverage and provides additional financial flexibility. We are encouraged by the recent strengthening of crude oil commodity prices, which has correlated to increased opportunities for crude oil transportation even though crude oil storage remains challenged. In fact, the now completed restoration of service to our previously out-of-service pipeline in Oklahoma, has nearly doubled our pipeline capacity. Demand exists, and we are aggressively pursuing volume in the area with the expectation that we will begin transporting in July. The repaired pipeline will primarily transport lighter crude oils to Cushing that are dominant in the south-central part of Oklahoma, which includes the active SCOOP and Merge regions.

“Let me express our appreciation to Ergon for its support of the Partnership through the acquisition of the three terminals as well as its participation with Kingfisher Midstream in the Cimarron Express joint venture. The project to construct the new 16-inch diameter, 65-mile crude oil pipeline from northeastern Kingfisher County, Oklahoma to BKEP’s Cushing, Oklahoma crude oil terminal is progressing well with startup expected in mid-2019. We also appreciate our lenders agreeing to amend our credit facility to provide additional near-term flexibility and an avenue to purchase Ergon’s interest in the Cimarron Express joint venture.”

Source: EvaluateEnergy® ©2018 EvaluateEnergy Ltd