Blueknight Energy Partners, L.P.
Q3 2015 Earnings Call Transcript

Published: 5 Nov 2015

[Operator:]

Welcome to the Blueknight Energy Partners Third Quarter Earnings Conference. [Operator Instructions]. I would now like to turn the conference over to Brent Gooden, Media Relations. Please go ahead.

[Brent Gooden:]

Thank you very much, Amy and thank you everyone for joining us here and good afternoon. It's my pleasure to welcome you to today's conference call where we will discuss Blueknight's financial operations and results for the third quarter of 2015. Alex Stallings, our Chief Financial Officer will discuss the financial results for the quarter ended September 30, 2015, Mark Hurley, our Chief Executive Officer will update you on our operational performance, project opportunities as well as external factors that our influencing our business. After our prepared comments, Mark and Alex will take your questions. But before we begin, I would like to remind everyone that the information on this call may contain certain forward-looking statements that are subject to various risk and uncertainty. These risks and uncertainties include, among other things, uncertainties related to partnership's debt levels and restrictions in our credit facility, our exposure to credit risk of our third-party customers, the partnership's future cash flows and operations, future market conditions, current and future government regulations, future taxation and other factors. If any of these risk or uncertainties materializes or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those expected. Please refer to Blueknight's SEC filings for a description of these and other risk and uncertainties that could affect our actual results. Blueknight undertakes no obligation to update or revise any forward-looking statements contained in this call whether as a result of new information, future events or otherwise. Blueknight Energy Partners, L.P. is a publicly traded master limited partnership with operations in 21 states. We provide integrated terminalling, storage, gathering and transportation services for companies engaged in the production, distribution and marketing of crude oil, asphalt and other petroleum products. We manage our operations through four operating segments. One asphalt terminalling services, crude oil terminalling and storage services, crude oil pipeline services, and crude oil trucking and producer field services. Now I am pleased to turn the call over to our CFO, Alex Stallings. Alex?

[Alex Stallings:]

Thank you, Brent. Yesterday we reported financial results for the third quarter of 2015. Distributable cash flow for the three months ended September 30, 2015, increased to $20.6 million as compared to $15.9 million for the three months ended September 30, 2014, which was an increase of 30%. BKEP's adjusted EBITDA was $25.9 million for the third quarter of 2015 as compared to $20.2 million for the same period in 2014, an increase of 28%. Partnership reported net income of $14 million on total revenues of $47.2 million for the three months ended September 30, 2015, as compared to net income of $11.3 million on total revenues of $48.4 million for the third quarter of 2014. BKEP previously announced the third quarter 2015 cash distribution of $0.1450 per common unit, which was a 1.8% increase over the previous quarter's distribution and a 7.8%, increase over the third quarter of 2014 distribution and a $0.17875 per preferred units, both of which are payable on November 13, 2015. Additional information regarding the Partnership's results of operations will be provided in the Partnership’s quarterly report on Form 10-Q for the three months ended September 30, 2015 to be filed later today with the SEC. A few highlights for each of our segments, Asphalt Terminalling Services recorded another strong quarter with operating margin, excluding D&A growing to $15.5 million for the three months ended September 30, 2015 as compared to $12.1 million for the similar period in 2014 an increase of 28%. Increase was driven by increased product throughout, renegotiated throughput fees for certain of our facilities and the acquisition of Cheyenne asphalt terminalling facility we acquired in May of 2015. Crude oil terminalling and storage, for the quarter ended September 30, 2015 we recorded another quarter-over-quarter increase as operating margin increased to $5.2 million from 3.9 million for the quarter ended September 30, 2014 which was an increase of 33%. Operating margin increased due to the timing of contract renewals. As contracts were expire in early 2014, the rates at which we re-contracted storage at Cushing Interchange were impacted by a backwardated market for WTI which led to a decrease in the average rates for the comparative three-month periods. However in the fourth quarter of 2014, the market for WTI returned to contango of which future prices are higher than current prices. This has increased demand for storage services in the Cushing Interchange, resulting in an upward trend in storage rates. Due to the timing of the expiration of the historical contracts and the execution of new storage contracts, the overall impact of the increase in storage rates began in the second quarter of 2015. As of October 30 of 2015, we had approximately 5.7 million barrels of crude oil under storage service contracts with remaining terms of up to 19 months. Operating expenses for both comparable periods in 2015 were higher as compared to 2014 as a result of the timing of tank inspections and related maintenance and repair, increases in utility expenses as well as increases in the percentage of total corporate shared services costs incurred by the crude oil terminalling and storage services segment. Crude oil pipeline reported operating margin of $1 million for the third quarter of 2015 which is a decrease of 4.5 million as compared to the third quarter of 2014. Revenues decreased for the three months ended September 30, 2015 despite increases in volumes on our Oklahoma mainline and Eagle systems due primarily to the expiration of an increased tariff that was being charged from June of 2014 through May of 2015 on certain barrels transported on our East Texas pipeline system under a throughput and efficiency agreement. The tariff returned to a lower rate in June of 2015, which decreased total revenues generated on that particular system. 2014 crude oil pipeline margins included $2.3 million and $4.2 million in sales of crude oil related to pipeline loss allowances for the three and nine months ended September 30 of 2014 respectively. There were no sales of crude oil related to PLA sales in 2015. Operating expenses increased 2.4 million for the three months ended September 30, 2015 as compared to the three months ended September 30, 2014 due to the recognition of a $1.5 million insurance claim that decreased third quarter 2014 operating expenses. In addition, maintenance and repairs expense for the three months ended September 30, 2015 are higher as compared to the same period in 2014 due the timing of pipeline maintenance. We also recorded $1.4 million of equity earnings related to our 30% ownership in the West Texas Pecos River pipeline for the third quarter ended September 30, 2015 as compared to $423,000 for the same period in 2014. Crude oil trucking and producer field services reported operating margin of $0.5 million for the quarter ended September 30, 2015, which is a decrease of $0.5 million for the quarter ended -- as compared to the quarter ended September 30, 2014. Operating margin declined due to an increase in pipeline-connected barrels, increased competition, [rate] [ph] pressures and a decrease in crude oil drilling all of which impacted volumes. We’ve aggressively and we will continue to aggressively address cost in this segment. Other items, general and administrative expenses increased by a $0.5 million to $4.7 million for the three months ended September 30, 2015 which compares to 4.3 million for the three months ended September 30, 2014. This increase is primarily attributable to the employee comp related expenses and increased legal expenses in connection with litigation that was settled in the third quarter of 2015. Gain on sale of assets, we had gain on sale of assets for the three months ended September 30, 2015 which included $6 million gain on the sale crude oil pipeline, linefill and storage tank bottoms realized in relation to the settlement of litigation in September of 2015. Gains in 2014 were primarily consisted of sales of surplus, used property and equipments. From a liquidity perspective our total consolidated leverage was 3.4 times at September 30, 2015 and as of October 29, we had aggregate unused commitments under our revolving credit facility of approximately $164 million. Capital investment, expansion capital expenditures totaled $24.1 million for the nine months ended September 30, 2015. We are currently estimating capital expansion expenditures of $30 million to $40 million for 2015 not including the acquisition of the previously announced Cheyenne Asphalt terminal. Most of the spend will be related to Knight Warrior pipeline project. Maintenance capital expenditures for the nine months ended September 30, 2015 totaled $5.7 million. We expect maintenance capital expenditures to be in the $7 million to $8 million range net of reimbursable expenditures for 2015. And with that I'll turn it over to Mark Hurley, our CEO. Mark?

[Mark Hurley:]

Thanks, Alex. And thanks to all of you who’ve dialed in today. We’re very pleased with our third quarter results and our results year-to-date especially in this market environment. The midstream MLP sector is obviously being challenged but with our diversifying business portfolio and strong position with take or pay fee-based contracts we’re performing well in spite of the tough environment. Our balance sheet is strong and distribution coverage remains high. Our coverage in the third quarter was 1.9 and for the nine months ended September 30, 2015 was 1.4. Key to our diversified portfolio with our terminalling business focused on Asphalt. I chose those words carefully, key term here is terminalling a business where we provide services such as storage blending and the loading and unloading of trucks rail cars and barges. Just like terminalling of refined products, crude oil and natural gas liquids. In fact we like the asphalt terminalling business a little more than those other products because customer contracts are longer, customer retention is higher and all of our contracts have built in escalators. We are not in the business of marketing asphalt or paving roads [ph]. We have little direct exposure to the commodity price. And as you heard in Alex's remarks our asphalt terminalling business had another strong quarter due to favorable market conditions and the contribution from our new plant in Cheyenne, Wyoming. We really like this business and we look to expand it. Let's now turn to our crude oil businesses which include trucking, terminalling and pipeline transportation. Clearly the trucking business segment is the one most challenged by the current environment and we have seen pressure on rates volumes and earnings. However this is fortunately a very small part of our overall business we really view trucking as a complimentary service where our pipeline business as opposed to being part of our growth strategy. We think this industry as a whole will be challenged at least through 2016. Fortunately though the challenges in our trucking business will offset by the performance of our crew terminalling business in the third quarter primarily at our Cushing facility. The change in the crude market a year ago has really benefited our crude storage business where we have now seen two consecutive quarter over quarter earnings improvements. We've been able to renegotiate some contracts with more favorable terms and we've done some profitable short term storage deals. In addition we have diversified our customer base over the last year with intention to bring in more service based customers who have operational needs for storage capacity rather than those who tend to just play the contango market. This business is performing well for us and like the asphalt terminalling business has provided a nice hedge in this period of low crude prices. Let's talk now about our crude pipeline business. We had a good third quarter in the segment, total volumes on all of our systems are very strong inspite of the low crude prices and declining recount. In fact the third quarter was the best quarter we've ever had from a total volume standpoint, the pipeline operating margin was down year-over-year however that was due to two unusual items in Q3 of last year including an insurance settlement and a large PLA sale, as a part of our growth strategy you may have seen announcement earlier this week for an open season on our new Oklahoma condensate pipeline project. We've been talking about this project for a few months and this is really Phase 1 of what we think will be a larger effort. The scoop and stack shale plays in Central Oklahoma are still performing well all things considered in this challenging environment. One of the trends we see is an increasing volume very light crude production also known as condensate. Historically producers and marketers have enabled to blend off this material into the common WTI stream. However this is now more challenge due to the volumes being produced and so we see a need for a dedicated condensate system which is the intent of this project and because we are converting an existing pipeline to the service this project can be done fairly quickly at a lower cost if it were a complete new bill. We will see how the open season goes but I think there is a high probability this project goes forward. Last but not least our Knight Warrior Project continues to be in our plans. However the current environment as we’re aware has resulted in reduced recount, lower production and a higher cost of capital because this is such a large project for us. We are approaching it very cautiously and objectively. We have taken a pause to update our view of the Eagle [indiscernible] production economics and volume potential. We also want to explore all options for raising capital to ensure that we do what is in the best interest of our unit folders. We expect this pause to be a few months and we will make the decision to proceed when we feel the project will deliver the kind of returns we expect. Our commercial commitments are not affected by this change in timing. We do remain bullish on the crude market and the Eaglebine play longer term but we’re a conservative company and we will approach it in that matter. I'd like to say a little more about our strategy in this segment of our business. The cornerstone of our strategy will always be focused on growth and we are open to growing either organically or through M&A opportunities. Over the last several years acquisitions have not been appealing to us because valuations have been too high in our view. Organic growth has been more attractive. Now we see that changing. We are seeing more M&A opportunities come our way and we see valuations coming more in line with our thinking. We believe this trend is going to continue and probably accelerate and because we have been had been disciplined in our approach and maintain a strong balance sheet. We are in a position to act as you know we did the Cheyenne acquisition earlier this year and just this week we closed on a small crew pipeline acquisition in Southern Oklahoma that complements our existing system very well. We intend to be active in the M&A area and very aggressive when the right opportunity comes along. Amy, this concludes my prepared remarks and we are now ready to open up the line for questions and answers.

[Operator:]

[Operator Instructions]. Our first question is from Tristan Richardson with SunTrust.

[Tristan Richardson:]

Just curious, in your prepared comments and the release talked about sort of seeing that shift to more M&A opportunities out there in the market and you noted gathering and processing as a potential there and it seems to be a little bit different from what you guys have said in the past and I'm curious sort of what opportunities in gathering processing you see and how they would fit with your existing footprint and I would imagine in the Oklahoma and Texas areas.

[Mark Hurley:]

Yes. Tristan, we spent a couple of days with our GP partners about three weeks ago and because we are seeing more M&A activity we really kind of focused our thinking on what would be a good fit for us. And there are obvious things like pipeline opportunities in Texas and Oklahoma and terminalling opportunities really pretty much anywhere in U.S. But we talked some about gathering and processing and as it turns out we’ve got some of that expertise in the company from previous experience and many of the customers that we deal with are either involved in the business or have a need for some of those services and so we don't think it be too far of a reach at all to go after gathering and processing operation or small company if it fits geographically and kind of fits the skill set of the company. And so that's why we included that, realistically probably a lower probability than some of those other things I mentioned but I think it is something that we'd be certainly willing to look at.

[Tristan Richardson:]

And Mark are you generally commodity agnostic or as you look at M&A opportunities would like to stay focused generally on either crude oriented assets or refined product etcetera?

[Mark Hurley:]

Particularly when we get into the terminalling side of the business, the competencies, the work processes, the skills needed in the terminalling area kind of cross the whole spectrum of product lines, right, asphalt, refined products, NGLs and so forth, and so we really feel we would be in a good position to take on any of those product lines and I think to a certain extent there will be some benefit to that because it gives us a little more diversification around those industries and those business environments just as asphalt does for us today. And I think the other thing we really like about going after terminalling opportunities is that is we already have a nationwide footprint so we operate today in 23 different states coast to coast and so there is really no region that we would shy away from or which helps to open the spectrum of opportunities for us.

[Operator:]

The next question is from Gabe Moreen of Bank of America Merrill Lynch.

[Gabe Moreen:]

Just a couple of follow-up questions on Knight Warrior and can I ask how much of that capital is being deployed so far for that project?

[Mark Hurley:]

We've been at it for a while but we have deployed or committed or spent less than 10% of the total capital project. And that is simply because the things that we have been doing are time consuming but they're not the higher cost items. The things like engineering, surveying, and [title searches] [ph], permitting. So while the time spent has been considerable the amount of money spent has not been great and we're - but the next phase of this project will require major expenditures and that's why we think this is a good time to say, hey let's make sure we understand the landscape as well as possible and make sure we also understand the financing opportunities as well.

[Gabe Moreen:]

And then I guess, Mark in terms of follow up on your comments the restart, sounds like it's a couple of months –you’ll [indiscernible] at least, but it also sounds like from your commentary it’s part cost of capital, part backdrop in terms of production there in the Eaglebine, is it really all the above or is there just kind of one of those major items that stands out to you in terms of making this project to go again?

[Mark Hurley:]

I mean it's all of the above but clearly I think the key driver is the kind of volumes we can expect on the system, but we're also very sensitive to the capital structure and the impact on the unit holders, surely those few things. But this area has been really reflective of what's going in the other shale plays as well, rig counts are down, volumes have remained very high but we've seen with I think peak but we are still pretty strong but we have seen those I think peak, interestingly enough about this area though the rig count has actually started to come up in the last couple of months, so we think that's a very favorable sign. But we just want to be sure; we want this to be a home run absolutely for us and the unitholders and so we're going to go at it pretty carefully.

[Gabe Moreen:]

And then shifting gears I guess to the storage segment, you mentioned the contracts and then starting to get to the upside are those re-signings, renegotiations showing up this quarter. But I think you also mentioned some short term opportunities around some things you're doing, can you just I guess talk a little bit more about that on the one hand I think having some good contracts with longer duration with commercials as opposed to financial players versus some of the short term upside I think you referenced?

[Mark Hurley:]

The way it works, Gabe, is that we have I think Alex mentioned we have today 5.7, 5.8 million barrels of storage under contract and that's kind of typical. But in the operation of this business you always have tanks that are going out for inspection and maintenance that is required by the way and so you have to take tanks out and put them back in service. And so it's kind of a revolving door of assets asset terminal. But that creates some short term opportunities. And so if we have a tank that we can lease for three months or six months whatever that time period can be we take advantage of it and it's been particularly lucrative for us over the last year because there has been some demand for storage.

[Operator:]

The next question comes from Matt Schmid at Stephens.

[Matt Schmid:]

On the Oklahoma condensate pipeline obviously there's a lot to be determined with the open season but potentially what level of investment could be associated with that on kind of what you're looking at with Phase 1?

[Mark Hurley:]

And one of the things we really love about the project Matt is that the level of investment will be directly reflective of response to the open season. We have a number of options on this project. It could be a very simple lower volume one grade common stream system from [indiscernible] to Cushing, it could also be a multi-grade higher volume system that will –more horsepower - more pumping horsepower, more tanks etcetera and so we will gauge the open season, see the results of the open season and then build what fits the market. So it could be anywhere from $5 million to $10 million up to $40 million to $50 million, but we will peg that expenditure to the kind of commitments that we get.

[Matt Schmid:]

And then looking at 2016, outside of Knight Warrior, what are you thinking about a comfort level or maybe I guess it depends on what happens opportunistically but a sort of expansion capital level you're targeting outside of Knight Warrior?

[Mark Hurley:]

It actually be spent in 2016, I think it could be anywhere from again outside of what happens Knight Warrior, I think and it will be driven by acquisitions. I think it can be anywhere from $20 million to $50 million or so. Would you agree?

[Alex Stallings:]

I would agree with that, I mean a lot of the acquisition opportunities we're seeing now are little bit more bite size but again for us because of our size right now and any incremental $1 million or $2 million that we can pick up from a cash flow perspective can be very a creative because the deals we're seeing are being done we think we can do them that very reasonable multiples. So you know we just -- we're starting to see more bite sized type deals some of the some of the bigger guys are going to be interested in. But for us any of those types of deals move the needle and the market, I think we can do two or three those types of deals and spent $50 million or so next year just picking up a few more million a cash flow.

[Operator:]

The next question is from TJ Schultz at RBC Capital.

[TJ Schultz:]

I just want to follow up on Knight Warrior, so my understanding have been that the committed volume was enough to move forward and I think you mentioned that the commercial commitments are not really being impacted. So I just wanted to see if you can expand on that, you have a certain base volume that will stick with you here and you just want some more visibility on kind of the ability to attract either more committed or walk up volumes, is that the right way to think about it?

[Mark Hurley:]

Exactly, I mean the way -- these projects typically play out whether it's us or any other pipeline company. You know you really work for commitments that will get some sort of minimal rate of return and we were able to do that right and those commitments have not been impacted by talking about now. But with the area having grown like it has over the last year particularly up until say through the second quarter. You know we just we do have confidence we would have a fair amount of walk up volume and when you add that walk up volume to the commitments that we have it really was a home run project and that's the best way to describe it, was a home run project. But of course the risk around a project like this is that the market turns upside down like it has in that and that walk up volume becomes at risk. And so you know we want to be careful that we don't do a project that just fits our minimum expectations because it so big compared to the size of our company. We wanted to be hugely successful and so it was so with what happened so with what happened with the rig count and production we just want to step back and do some very, very detailed work which we're doing with some outside consultants around what those production look like $50 world what does it look like in a $60, what does it look like in a $70 world. And I think the good news is that this is a fairly attractive area from a production economic standpoint you know it kind of mirrors the Eagle Ford and so I think we get prices $55 to $60 range. You’re going to see production and rig counts increase. But we just want to verify that and really understand those risks a little bit. So you know that's where we are, we don't want to do a project that's 60% of our market cap and have a fairly meet our expectations kind of where we’re.

[TJ Schultz:]

And then I think about financing Knight Warrior maybe if you have any update on kind of you know if you were to move forward how much is left to be spent and you’ve done some equity financing already that had been allocated for some of that but I'm just trying to think if this gets delayed in and you're not sitting still and you get some of that money allocated elsewhere. What's left that you need to think about the financing equation moving forward on Knight Warrior and how that kind of plays against, how long you wait to make that decision?

[Mark Hurley:]

This is kind of a difficult question to answer just given what the capital markets look like today, TJ. I think it's fair to say we did a $75 million equity offering I think we had said that we would probably do you 50

[TJ Schultz:]

Okay. That's fine. Just lastly for me on the crude pipeline segment, if you can just give a little bit more color I think there was a comment on the tariff expiration. [Indiscernible] margin was little lower than I think we had modeled it if you can provide any color on kind of the run rate right now on operating margin if that's something that -- if that’s the run rate we should think about moving forward?

[Alex Stallings:]

I think the run rate is probably what you saw in in Q2. I mean just to kind of a normalized to the normalized situation, it may have been impacted by maybe a few $100,000 related to kind of incremental repair and maintenance cost. We were doing do some integrity work on one of the systems and so that would have impacted it. So you’re probably like a few $100,000 exclusive of any PLA sales and PLA sales are something that we typically do. I mean so they're not incredibly unusual I think, you know in 2014 we did kind of have an -- it's a little bit more lumpy, I guess there is a way to describe it but we would expect kind of going forward probably is we get into '16 there will be some incremental PLA sales. So I think probably run rate, you’re few 100,000 short, this particular quarter and then plus any incremental PLA we might do.

[Operator:]

[Operator Instructions]. And our next question comes from [indiscernible].

[Unidentified Analyst:]

Given the changes in the market that we've seen over the last six months or so, then your deferral of the Knight Warrior Project for at least a few months, I mean what growth rate and distribution and what coverage ratio sort of makes you guys comfortable next year?

[Mark Hurley:]

We still want to continue to grow our distribution at the 7% to 8% kind of range which is what we've done this year. And we want on our coverage staying above one which we think we can do. That obviously can get impacted on a shorter term basis by what we do on Knight Warrior. But I think with the pendulum kind of swinging more towards acquisitions than it has before we should expect the growth to be what it has been and obviously capital we spend other and Knight Warrior to be immediately accretive.

[Unidentified Analyst:]

So a growth rate of 7% to 8% assumes some of these small deals of good multiples you're seeing out there?

[Mark Hurley:]

Yes. Like I said we have a number of them coming our way both on the asphalt side and on the crew oil side and we think they're more reasonably priced or more reasonably valued, they have got a number of them are looking at right now and so we feel some of those will get done.

[Unidentified Analyst:]

Will each of these deals be able to be done without have issue more equity using your existing balance sheet?

[Mark Hurley:]

Yes I mean the size deals we're talking about and Alex talked about it I mean we're talking about things in the $10 million to $20 million to $ 25 million range and those we can pick off pretty quickly. We're looking at some larger things and so that would be an excess of $75 million to $100 million and those might need something other than just our credit facility kind of financing. And in that event we would look at our options including getting some participating [indiscernible] or whatever would make most sense in those cases.

[Unidentified Analyst:]

And can we assume that crude oil or pipeline services operating margin and the trucking margin have bottomed out or could those potentially go lower and/or negative?

[Mark Hurley:]

I think the pipeline segment is as Alex described, we see that being pretty steady say for any acquisitions that we do. I think on the trucking side I think we’ve pretty much seen that bottomed out for us. We manage our costs very closely to make sure that we've got the revenue to support it and that’s we have been able to do that this year.

[Unidentified Analyst:]

This quarter are we a little bit surprised that the producers are reducing the traction Eagle Ford but have maintained their production in Permian Basin. So I'm just learning, do you know that just because of their lacks of infrastructure or is there some challenge for their Eagle Ford or some quality of accretion?

[Mark Hurley:]

Well you know I'm hesitant to respond on behalf of the producers which I know I'm not doing, I'm just offering a view, but I just think producers in general have retreated to what is core for them and I think the Permian is maintaining its production probably better than the other shale areas because number one it is core and they have really learned how to produce efficiently in that area. And so I think they have just retreated to what they know what is most efficient and the Permian kind of wins that battle in today's world I think.

[Operator:]

The next question comes from Tristan Richardson at SunTrust.

[Tristan Richardson:]

Just one quick follow up, on the gain the you reported in the quarter. I think this is straightforward but just wanted to ask if there's anything else associated with this that might crop up going forward whether there's other assets associated with the settlement or is this truly sort of onetime in nature settlement gain? A Mark Hurley We’re are not expecting anything else to come off it Tristan, we think it's just a onetime gain. I know why you asked the question because I do want to make a comment because I’ve seen Tristan the early reports of our third quarter performance a lot attributed to this particular single event which was I think $6.1 million impact. If you go back to 2014 and look at the usually high PLA sales that we had and insurance settlement that we had, those things totaled almost $6 million, I guess $5.7 million and so you know excluding both of those events and doing more of an apples to apples comparison we have still seen the kind of business performance improvement that that is indicated in the releases that we’ve done, again usual stuff in both years -- just coincidentally has amounted to that same amount.

[Tristan Richardson:]

And Mark were these assets generating EBITDA, I mean obviously they are pretty small but?

[Mark Hurley:]

It's literally it was just a sale of line fill is the way it was recorded So it's [indiscernible] that’s does not necessary to operate our systems anymore. So it's really not totally dissimilar to what you know a PLA sale, just happens to be the way we characterize line fills as a fixed asset and so it's really, that’s what the sale was. So what we end up having now is a lot of our customers put up their own line fill and so it's kind of display stat, there is no reason for us to carry any extra. So that's the way that was reported so it's not an asset that's going -- that we will be counting on to create future earnings.

[Operator:]

At this time we show no further questions. So that concludes our question and answer session. I would like to turn the conference back over to Mark Hurley for closing remarks.

[Mark Hurley:]

Well thank you very much. I just appreciate everyone calling in, I appreciate your interest in Blueknight and like I said we had a great quarter, we think our business is on the right track and as usual if you have any follow up questions after this is over you’re welcome to call Alex or myself or Brian. Thank you very much,

[Operator:]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.