Blueknight Energy Partners, L.P. - Quarter Report: 2020 March (Form 10-Q)

PART I. FINANCIAL INFORMATION

Item 1.    Unaudited Condensed Consolidated Financial Statements

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 

BLUEKNIGHT ENERGY PARTNERS, L.P.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As used in this quarterly report, unless we indicate otherwise: (1) “Blueknight Energy Partners,” “our,” “we,” “us” and similar terms refer to Blueknight Energy Partners, L.P., together with its subsidiaries, (2) our “General Partner” refers to Blueknight Energy Partners G.P., L.L.C., (3) “Ergon” refers to Ergon, Inc., its affiliates and subsidiaries (other than our General Partner and us) and (4) “Vitol” refers to Vitol Holding B.V., its affiliates and subsidiaries.  The following discussion analyzes the historical financial condition and results of operations of the Partnership and should be read in conjunction with our financial statements and notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations presented in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2020 (the “2019 Form 10-K”). 

Forward-Looking Statements

This report contains forward-looking statements.  Statements included in this quarterly report that are not historical facts (including any statements regarding plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto), including, without limitation, the information set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, are forward-looking statements. These statements can be identified by the use of forward-looking terminology including “may,” “will,” “should,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “continue,” or other similar words. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other “forward-looking” information. We and our representatives may from time to time make other oral or written statements that are also forward-looking statements.

Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of the filing of this report. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will prove to be correct. Important factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include, among other things, those set forth in “Part I, Item 1A. Risk Factors” in the 2019 Form 10-K.

All forward-looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this report.

Overview

We are a publicly traded master limited partnership with operations in 26 states. We provide integrated terminalling, gathering and transportation services for companies engaged in the production, distribution and marketing of liquid asphalt and crude oil.  We manage our operations through four operating segments: (i) asphalt terminalling services, (ii) crude oil terminalling services, (iii) crude oil pipeline services and (iv) crude oil trucking services.

Potential Impact of Crude Oil Market Price Changes and Other Matters on Future Revenues

The crude oil market price and the corresponding forward market pricing curve may fluctuate significantly from period to period, and other volatility in the overall energy industry, specifically in the midstream energy industry, may impact our partnership in the near term. Factors include the overall market price for crude oil and whether or not the forward price curve is in contango (in which future prices are higher than current prices and a premium is placed on storing product and selling at a later time) or backwardated (in which the current crude oil price per barrel is higher than the future price per barrel and a premium is placed on delivering product to market and selling as soon as possible), changes in crude oil production volume and the demand for storage and transportation capacity in the areas in which we serve, geopolitical concerns and overall changes in our cost of capital. As of May 1, 2020, the forward crude oil price has fallen considerably and the curve is currently in a deep contango. Potential impacts of these factors are discussed below.

Due to the global pandemic related to the coronavirus disease, COVID-19, and the Organization of Petroleum Exporting Countries’ and Russia’s disagreements over production output, the energy market had historic drops in oil prices in March and April of 2020. Despite this volatility in prices, our business is uniquely positioned and expected to benefit in certain areas, and cash flow for the full year is expected to remain stable in 2020. Our asphalt and crude oil terminalling services segments represented 91% of our operating margin for the three months ended March 31, 2020, and as of May 1, 2020, these segments are fully contracted with take-or-pay revenue that have a weighted average remaining term of 4.5 years. While our customers across all our segments could be impacted by the recent market volatility, they are primarily high-quality counterparties, with over 50% of our revenues earned from those that are investment grade quality, which minimizes our counterparty credit risk.  As of May 1, 2020, we do not expect any supply chain disruptions from COVID-19 to affect our customers. Management is also actively monitoring the states and regions in which we operate, and, as of now, our operations are excluded from mandatory closings due to the essential designation of our assets.  In addition, a large portion of our operating margin, approximately 77%, from the asphalt terminalling services business unit is related to infrastructure spending at the federal, state, and local levels, and the U.S. government has continued to indicate its support for infrastructure spending. While we are unaware of any potential negative impact of COVID-19 on our business at this time, we are continuing to monitor the situation and have been preparing our employees to take precautions and planning for unexpected events, which may include disruptions to our workforce, customers, vendors, facilities and communities in which we operate. In an effort to protect the health and safety of our employees and the customers and vendors we interact with, we took proactive action to adopt social distancing policies at our locations, including working from home, limiting the number of employees attending meetings, reducing the number of people in our sites at any one time, and suspending employee travel.

Asphalt Terminalling Services - Historically, there have only been limited times in which asphalt prices and volumes have had a direct correlation with the price of crude oil. However, due to the current steep decline in crude oil prices, asphalt prices have significantly fallen while demand has held steady for road construction activity due to there being fewer vehicles on roads to interfere with construction work and the lower asphalt prices.  This current environment is expected to have more positive than negative implications for our asphalt terminalling services operating segment. Generally, asphalt volumes correlate more closely with the strength of state and local economies, the level of allocations of tax funding to transportation spending and an increase in infrastructure spending needs.

As previously mentioned, the U.S. government continues to indicate supporting infrastructure spending in this time of economic uncertainty. Further, customers have communicated that infrastructure projects may be accelerated and increased during this time of decreased transportation volume on the roads and highways and decreased asphalt commodity prices. While it is early in the asphalt season, customer throughput volumes have generally been higher than the prior year. However, it is too early in the season to determine the financial impact for the year.

Crude Oil Terminalling Services - A contango crude oil curve tends to favor the crude oil storage business as crude oil marketers are incentivized to store crude oil during the current month and sell into the future month. From March 2016 through February 2020, the crude oil curve had generally been in a shallow contango or backwardation. In shallow contango or backwardated markets there is no clear incentive for marketers to store crude oil. Despite the shallow contango curve, we saw increased activity and interests from customers that are regularly turning over their volumes by blending various crude grades and delivering it out of the terminal or customers utilizing the storage for more operational purposes for their downstream operations. In late 2019, during recontracting efforts for 2020, the demand for storage declined and a small percentage of tanks were not contracted. However, with the forward price curve moving into a deeper contango in March and April 2020, there has been a significant increase in demand for crude oil storage in Cushing and globally, which positively impacted contracted volumes as of April 2020 and has the potential to affect the volumes, rates, and terms of our future recontracting efforts.

Crude Oil Pipeline Services - Crude oil pipeline transportation, while potentially influenced by the shape of the crude oil market curve, is typically impacted more by overall drilling activity.  The ability to fully utilize the capacity of our pipeline system may be impacted by the market price of crude oil and producers’ decisions to increase or decrease production in the areas we serve. With the historic drop in crude oil prices, the outlook for increased drilling activity is very challenging and the risk is higher for potential well shut-ins in this environment.

In our internal crude oil marketing operations, we have market price exposure for inventory that is carried over month-to-month as well as pipeline linefill we maintain. Since our pipeline tariffs require shippers to carry their share of linefill, our crude oil marketing operations, as a shipper, also carries linefill. We may also be exposed to price risk with respect to the differing qualities of crude oil we transport and our ability to effectively blend them to market specifications.  Due to the historic drop in crude oil prices in March 2020, we evaluated our pipeline linefill assets for impairment and recorded an impairment expense of $4.9 million for the three months ended March 31, 2020, based on a prior crude oil cost basis of approximately $46 per barrel as compared to prices at quarter end of approximately $20 per barrel.

Crude Oil Trucking Services - Crude oil trucking, while potentially influenced by the shape of the crude oil market curve, is typically impacted more by overall drilling activity and the ability to have the appropriate level of assets located properly to efficiently move the barrels to delivery points for customers.  Due to the historic drop in oil prices in March and April 2020, customers could have wells shut-in or request rate decreases, which could impact our revenues and operating margin.

Our Revenues 

Our revenues consist of (i) terminalling revenues, (ii) gathering and transportation revenues, (iii) product sales revenues and (iv) fuel surcharge revenues. For the three months ended March 31, 2020, the Partnership recognized revenues of  million for services provided to Ergon, with the remainder of our services being provided to third parties.

Terminalling revenues consist of (i) storage service and operating lease fees resulting from short-term and long-term contracts for committed space that may or may not be utilized by the customer in a given month and (ii) terminal throughput service charges to pump crude oil to connecting carriers or to deliver asphalt product out of our terminals. We earn terminalling revenues in two of our segments: (i) asphalt terminalling services and (ii) crude oil terminalling services. Storage service revenues are recognized as the services are provided on a monthly basis. Terminal throughput service charges are recognized as the crude oil or asphalt product is delivered out of our terminal.

We have leases and terminalling agreements with customers for all of our 53 asphalt facilities, including 28 facilities under contract with Ergon.  These agreements have, based on a weighted average by remaining fixed revenue, approximately 4.6 years remaining under their terms.  One agreement expires at the end of 2020, and the remaining agreements expire at varying times thereafter, through 2026. We may not be able to extend, renegotiate or replace these contracts when they expire and the terms of any renegotiated contracts may not be as favorable as the contracts they replace. We operate the asphalt facilities pursuant to the terminalling agreements, while our contract counterparties operate the asphalt facilities that are subject to lease agreements.

As of May 1, 2020, we had approximately 5.8 million barrels of crude oil storage under service contracts, including 3.2 million barrels of crude oil storage contracts that expire in 2020. The remaining terms on the service contracts that extend beyond 2020 range from 11 to 20 months. Storage contracts with Vitol represent 3.2 million barrels of crude oil storage capacity under contract. We are in negotiations to either extend contracts or enter into new customer contracts for the agreements expiring in 2020; however, there is no certainty that we will have success in contracting available capacity or that extended or new contracts will be at the same or similar rates as expiring contracts. If we are unable to renew even some of the expiring storage contracts, we may experience lower utilization of our assets which could have a material adverse effect on our business, cash flows, ability to make distributions to our unitholders, the price of our common units, results of operations and ability to conduct our business.

Gathering and transportation services revenues consist of service fees recognized for the gathering of crude oil for our customers and the transportation of crude oil to refiners, to common carrier pipelines for ultimate delivery to refiners or to terminalling facilities owned by us and others. We earn gathering and transportation revenues in two of our segments: (i) crude oil pipeline services and (ii) crude oil trucking services. Revenue for the gathering and transportation of crude oil is recognized when the service is performed and is based upon regulated and non-regulated tariff rates and the related transport volumes.

The following is a summary of our average gathering and transportation volumes for the periods indicated (in thousands of barrels per day):

Volumes have decreased in both pipeline and trucking transportation due to decreased drilling activities in the areas we serve.  Vitol accounted for 41% and 8% of volumes transported on our pipelines in the three months ended March 31, 2019 and 2020, respectively.

Product sales revenues are comprised of (i) revenues recognized for the sale of crude oil to our customers that we purchase at production leases and (ii) revenue recognized in buy/sell transactions with our customers. We earn product sales revenue in our crude oil pipeline services operating segment. Product sales revenue is recognized for products upon delivery and when the customer assumes the risks and rewards of ownership.

Fuel surcharge revenues are comprised of revenues recognized for the reimbursement of fuel and power consumed to operate our asphalt terminals.  We recognize fuel surcharge revenues in the period in which the related fuel and power expenses are incurred.

Our Expenses

Operating expenses decreased by 8% for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, due to decreases in compensation expense and maintenance repairs expense as a result of a focus on managing costs, as well as a decrease in depreciation expense.  General and administrative expenses also decreased for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019. The is primarily due to a decrease in professional fees and an overall commitment to reducing costs across the company. Our interest expense decreased by 20% for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019. See Interest expense within our results of operations discussion for additional detail regarding the factors that contributed to the decrease in interest expense in 2020.

Distributions

The amount of distributions we pay and the decision to make any distribution is determined by the Board of Directors of our General Partner (the “Board”), which has broad discretion to establish cash reserves for the proper conduct of our business and for future distributions to our unitholders. In addition, our cash distribution policy is subject to restrictions on distributions under our credit agreement. 

On April 16, 2020, the Board approved a cash distribution of $0.17875 per outstanding preferred unit for the three months ended March 31, 2020. We will pay this distribution on May 14, 2020, to unitholders of record as of May 4, 2020. The total distribution will be approximately $6.4 million, with approximately $6.3 million and $0.1 million paid to our preferred unitholders and General Partner, respectively.

In addition, the Board approved a cash distribution of $0.04 per outstanding common unit for the three months ended March 31, 2020. We will pay this distribution on May 14, 2020, to unitholders of record as of May 4, 2020. The total distribution will be approximately $1.7 million, with approximately $1.6 million and less than $0.1 million paid to our common unitholders and General Partner, respectively, and approximately $0.1 million paid to holders of phantom and restricted units pursuant to awards granted under our Long-Term Incentive Plan.

Results of Operations

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with GAAP, management uses additional measures that are known as “non-GAAP financial measures” in its evaluation of past performance and prospects for the future.  The primary measure used by management is operating margin, excluding depreciation and amortization.

Management believes that the presentation of such additional financial measures provides useful information to investors regarding our performance and results of operations because these measures, when used in conjunction with related GAAP financial measures, (i) provide additional information about our core operating performance and ability to generate and distribute cash flow; (ii) provide investors with the financial analytical framework upon which management bases financial, operational, compensation and planning decisions and (iii) present measurements that investors, rating agencies and debt holders have indicated are useful in assessing us and our results of operations. These additional financial measures are reconciled to the most directly comparable measures as reported in accordance with GAAP, and should be viewed in addition to, and not in lieu of, our unaudited condensed consolidated financial statements and footnotes. 

The table below summarizes our financial results for the three months ended March 31, 2019 and 2020, reconciled to the most directly comparable GAAP measure:

For the three months ended March 31, 2020, overall operating margin, excluding depreciation and amortization, was fairly consistent with the same period in 2019.  Margins in our asphalt terminalling segment were in-line with the prior year, crude oil terminalling services was slightly lower due to less contracted storage over the quarter versus the prior year, and crude oil pipeline services segment reflect a significant decrease in throughput volumes.  Crude oil trucking services operating margin, excluding depreciation and amortization, improved for the three months ended March 31, 2020, due to an overall focus on reducing costs and long hauls at higher rates.

A more detailed analysis of changes in operating margin by segment follows.

Analysis of Operating Segments

Asphalt terminalling services segment

Our asphalt terminalling services segment operations generally consist of fee-based activities associated with providing terminalling services, including storage, blending, processing and throughput services, for asphalt product and residual fuel oil. Revenue is generated through operating lease contracts and storage, throughput and handling contracts.

The following table sets forth our operating results from our asphalt terminalling services segment for the periods indicated:

The following is a discussion of items impacting asphalt terminalling services segment operating margin for the periods indicated:

Crude oil terminalling services segment

Our crude oil terminalling services segment operations generally consist of fee-based activities associated with providing terminalling services, including storage, blending, processing and throughput services for crude oil. Revenue is generated through short- and long-term storage contracts.

The following table sets forth our operating results from our crude oil terminalling services segment for the periods indicated:

The following is a discussion of items impacting crude oil terminalling services segment operating margin for the periods indicated:

Crude oil pipeline services segment

Our crude oil pipeline services segment operations include both service and product sales revenue. Service revenue generally consists of tariffs and other fees associated with transporting crude oil products on pipelines. Product sales revenue is comprised of (i) revenues recognized for the sale of crude oil to our customers that we purchase at production leases and (ii) revenue recognized in buy/sell transactions with our customers. Product sales revenue is recognized for products upon delivery and when the customer assumes the risks and rewards of ownership.

The following table sets forth our operating results from our crude oil pipeline services segment for the periods indicated:

The following is a discussion of items impacting crude oil pipeline services segment operating margin for the periods indicated:

Crude oil trucking services segment

Our crude oil trucking services segment operations generally consist of fee-based activity associated with transporting crude oil products on trucks. Revenues are generated primarily through transportation fees.

The following table sets forth our operating results from our crude oil trucking services segment for the periods indicated:

The following is a discussion of items impacting crude oil trucking services segment operating margin for the periods indicated:

Other Income and Expenses

Depreciation and amortization expense. Depreciation and amortization expense decreased to $6.1 million for the three months ended March 31, 2020, compared to $6.7 million for the same period in 2019.  This decrease is primarily the result of certain assets reaching the end of their depreciable lives.

General and administrative expense.  General and administrative expense decreased to $3.5 million for the three months ended March 31, 2020, compared to $3.7 million for the same period in 2019, primarily due to a decrease in professional fees and an overall commitment to reducing costs across the company.

Asset impairment expense. Asset impairment expense for the three months ended March 31, 2020, of $5.1 million primarily consisted of a write-down of crude oil linefill due to the decrease in the market price of crude oil.  Asset impairment expense for the three months ended March 31, 2019, was $1.1 million, and consisted of a change in estimate of the push-down impairment related to Cimarron Express Pipeline, LLC (“Cimarron Express”) of $0.8 million (see Note 8 of our condensed consolidated financial statements for more information) and $0.3 million related to a flood at an asphalt terminal in Wolcott, Kansas.

Gain (loss) on sale of assets. During the three months ended March 31, 2020, the immaterial loss was due to the disposal of assets for repair. Gains for 2019 primarily relate to the sale of certain truck stations in locations not served by our crude oil trucking services segment.

Other income. Other income for the three months ended March 31, 2020, relates to insurance recoveries related to flood damages incurred in 2019 at certain asphalt facilities.

Interest expense. Interest expense represents interest on borrowings under our credit agreement as well as amortization of debt issuance costs. The following table presents the significant components of interest expense:

The decrease in credit agreement interest is due to a decrease in floating interest rates.

Effects of Inflation

In recent years, inflation has been modest and has not had a material impact upon the results of our operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined by Item 303 of Regulation S-K.

Liquidity and Capital Resources

Cash Flows and Capital Expenditures

The following table summarizes our sources and uses of cash for the three months ended March 31, 2019 and 2020: 

Operating Activities.  Net cash provided by operating activities decreased to $7.9 million for the three months ended March 31, 2020, as compared to $19.5 million for the three months ended March 31, 2019, due to decreased net income as discussed in Results of Operations above as well as changes in working capital.

Investing Activities.  Net cash used in investing activities was $15.1 million for the three months ended March 31, 2020, compared to net cash provided by investing activities of $3.5 million for the three months ended March 31, 2019.  The three months ended March 31, 2020, included a $12.2 million payment to Ergon related to our purchase of Ergon’s DEVCO entity related to Cimarron Express.  The three months ended March 31, 2019, included proceeds from the sale of certain assets of $6.3 million. Of such proceeds, $2.6 million related to the December 2018 sale of linefill for which the cash consideration was not received until January 2019.   Capital expenditures for the three months ended March 31, 2019 and 2020, included maintenance capital expenditures of $2.1 million and $1.8 million, respectively, and expansion capital expenditures of $0.7 million and $1.1 million, respectively.

Financing Activities.  Net cash provided by financing activities was $7.3 million for the three months ended March 31, 2020, compared to net cash used in financing activities $23.3 million for the three months ended March 31, 2019.  Cash provided by financing activities for the three months ended March 31, 2020, consisted primarily of net borrowings on long-term debt of $16.0 million offset by $8.1 million in distributions to our unitholders. Net cash used in financing activities for the three months ended March 31, 2019, consisted primarily of net payments on long-term debt of $13.0 million and $9.7 million in distributions to our unitholders.

Our Liquidity and Capital Resources

Cash flows from operations and from our credit agreement are our primary sources of liquidity. At March 31, 2020, we had a working capital deficit of $5.6 million. This is primarily a function of our approach to cash management. At March 31, 2020, we had approximately $271.6 million of revolver borrowings and approximately $1.0 million of letters of credit outstanding under the credit agreement, leaving us with approximately $127.4 million of availability under our credit agreement subject to covenant restrictions, which limited our availability to $30.5 million. As of May 1, 2020, we have approximately $270.6 million of revolver borrowings and approximately $2.0 million of letters of credit outstanding under the credit agreement, leaving us with aggregate unused commitments under our revolving credit facility of approximately $127.4 million and cash on hand of approximately $0.5 million. The credit agreement is scheduled to mature on May 11, 2022.

Our credit agreement contains certain financial covenants which include a maximum permitted consolidated total leverage ratio, which may limit our availability to borrow funds thereunder.  The consolidated total leverage ratio is assessed quarterly based on the trailing twelve months of EBITDA, as defined in the credit agreement. The maximum permitted consolidated total leverage ratio as of March 31, 2020, for each fiscal quarter thereafter, is 4.75. Our consolidated total leverage ratio was 4.27 to 1.00 as of March 31, 2020. 

Management evaluates whether conditions and/or events raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued (the “assessment period”). In performing this assessment, management considered the risk associated with its ongoing ability to meet the financial covenants.

Based on forecasted EBITDA during the assessment period, management believes that it will meet the financial covenants. However, there are certain inherent risks associated with our continued ability to comply with our consolidated total leverage ratio covenant.  These risks relate, among other things, to potential future (a) decreases in storage volumes and rates as well as throughput and transportation rates realized; (b) weather phenomenon that may potentially hinder the asphalt business activity; and (c) other items affecting forecasted levels of expenditures and uses of cash resources. Violation of the consolidated total leverage ratio covenant would be an event of default under the credit agreement, which would cause our $271.6 million in outstanding debt, as of March 31, 2020, to become immediately due and payable.  If this were to occur, we would not expect to have sufficient liquidity to repay these outstanding amounts then due, which could cause the lenders under the credit facility to pursue other remedies. Such remedies could include exercising their collateral rights to our assets. Based on our current forecasts, we believe we will be able to comply with the consolidated total leverage ratio during the assessment period.  However, we cannot make any assurances that we will be able to achieve our forecasts. If we are unable to achieve our forecasts, further actions may be necessary to remain in compliance with our consolidated total leverage ratio covenant including, but not limited to, cost reductions, common and preferred unitholder distribution curtailments, and/or asset sales.  We can make no assurances that we would be successful in undertaking these actions, or that we will remain in compliance with the consolidated total leverage ratio during the assessment period.

Capital Requirements. Our capital requirements consist of the following:

The following table breaks out capital expenditures for the three months ended March 31, 2019 and 2020 (in thousands):

We currently expect our expansion capital expenditures for organic growth projects to be approximately $2.2 million to $2.6 million for all of 2020.  We currently expect maintenance capital expenditures to be approximately $7.8 million to $8.2 million, net of reimbursable expenditures, for all of 2020.

Our Ability to Grow Depends on Our Ability to Access External Expansion Capital. Our partnership agreement requires that we distribute all of our available cash to our unitholders. Available cash is reduced by cash reserves established by our General Partner to provide for the proper conduct of our business (including for future capital expenditures) and to comply with the provisions of our credit agreement.  We may not grow as quickly as businesses that reinvest their available cash to expand ongoing operations because we distribute all of our available cash. 

Recent Accounting Pronouncements

For information regarding recent accounting developments that may affect our future financial statements, see Note 13 to our unaudited condensed consolidated financial statements.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Partnership is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

Item 4.    Controls and Procedures.

Evaluation of disclosure controls and procedures.  Our General Partner’s management, including the Chief Executive Officer and Chief Financial Officer of our General Partner, evaluated, as of the end of the period covered by this report, the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of our General Partner concluded that our disclosure controls and procedures, as of March 31, 2020, were effective. 

Changes in internal control over financial reporting.  There were no changes to our internal control over financial reporting that occurred during the three months ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings.

The information required by this item is included under the caption “Commitments and Contingencies” in Note 12 to our unaudited condensed consolidated financial statements and is incorporated herein by reference thereto.

Item 1A.    Risk Factors.

See the risk factors set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2019.

Item 6.    Exhibits.

The information required by this Item 6 is set forth in the Index to Exhibits accompanying this quarterly report and is incorporated herein by reference.

INDEX TO EXHIBITS

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*    Filed herewith.

#     Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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