Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is This Little Midstream the Next Big Thing? – Blueknight Energy Partners L.P. (BKEP)

In a world full of Kinder Morgan Inc (NYSE:KMI)s and TransCanada Corporation (USA) (NYSE:TRP)s, it is easy to forget about little midstream players like Blueknight Energy Partners L.P. (NASDAQ:BKEP). But remember, Kinder Morgan started out with just one pipeline and now it is the third-largest energy company in the U.S. by enterprise value. Sometimes it pays to check out the little guys, so today I’m taking a closer look at Blueknight Energy Partners.

Kinder Morgan Inc (NYSE:KMI)The Blueknight rises
In the summer of 2008, the energy trading outfit SemGroup LP had declared bankruptcy after a $2.4 billion trading loss on short crude oil futures. It had spun off its midstream MLP, SemGroup Energy Partners, sparing the MLP a similar fate, but leaving it without $100 million in annual revenues. In 2009, Vitol stepped in to pick up the pieces and the restored MLP rose from the ashes as Blueknight Energy Partners, a more conservative midstream master limited partnership.

Though it was rough going at first, by late last year, The Oklahoman was reporting on the stability of Blueknight, and its potential to grow into a prime-time midstream company. Talk is cheap, but so far Blueknight is backing it up. It completed its capital and debt restructuring by the end of 2011, and 2012 marked the first time in four years the partnership paid a distribution to unitholders.

Assets and asphalt
Blueknight’s assets support three major business operations: crude oil terminals and storage, crude oil gathering and transportation, and asphalt terminals and storage. The asphalt business is actually the largest segment, though the crude oil business is growing.

Blueknight controls 1,289 miles of crude pipeline and 15 million barrels of crude oil and petroleum storage capacity, including 6.6 million barrels of storage at the oil hub in Cushing, Okla. These assets are all located in Texas and Oklahoma. It also has a fleet of more than 130 trucks which it uses for field services for oil producers.

Its asphalt assets are located in 22 states and span the continental U.S., reaching as far west as California and Washington, and as far east as New Jersey and Georgia. Blueknight controls 7.2 million barrels of asphalt and residual fuel oil storage in 44 terminals.

Future plans
Blueknight is intent on growing distributable cash flow and increasing value for unitholders, focusing on three key initiatives to achieve this goal:

  • Provide services for crude oil producers in growing oil play regions (Texas, North Dakota, Oklahoma, Rockies)
  • Capitalize on strong asphalt business by growing key customers, making acquisitions as necessary
  • Improve its trucking business

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.