Blue Dolphin Energy Company Reports Operating Results (10-Q)

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May 23, 2011
Blue Dolphin Energy Company (BDCO, Financial) filed Quarterly Report for the period ended 2011-03-31.

Blue Dolphin Energy Company has a market cap of $11.07 million; its shares were traded at around $5.35 with and P/S ratio of 4.04.

Highlight of Business Operations:

Revenue from Pipeline Operations. Revenue from pipeline operations decreased by $86,457, or 20%, in the current quarter to $342,630 primarily due to a decrease in gas volumes transported. Revenue from the BDPS in the current quarter decreased to approximately $281,000 compared to approximately $356,000 in the previous quarter. Daily gas volumes transported on the BDPS averaged 8 MMcf of gas per day in the current quarter compared to 13 MMcf of gas per day in the previous quarter. Revenue on the GA 350 Pipeline decreased to approximately $62,000 in the current quarter compared to approximately $73,000 in the previous quarter. Daily gas volumes transported on the GA 350 Pipeline averaged 13 MMcf of gas per day in the current quarter compared to 15 MMcf of gas per day in the previous quarter.

Our average realized gas price per Mcf in the current quarter was $3.85 compared to $4.05 in the previous quarter. The sales mix by product was 88% oil and 12% gas. Our average realized price per barrel of oil was $105.33 in the current quarter compared to $78.57 in the previous quarter. Revenue breakdown for the current quarter by field was approximately $4,000 for Galveston Area Block 321, $28,300 for High Island Block 115, $6,400 for High Island Block 37 and $311,000 for the North Sumatra Basin-Langsa Field.

Lease Operating Expenses. Lease operating expenses increased in the current quarter by $237,255 to $258,443, primarily due to the addition of expenses from the North Sumatra Basin-Langsa Field. Lease operating costs associated with the North Sumatra Basin-Langsa Field totaled approximately $238,000 for the current quarter.

Depletion, Depreciation and Amortization. Depletion, depreciation and amortization increased $28,862, or 25%, to $146,708 in the current quarter primarily due to the July 2010 acquisition of the North Sumatra Basin-Langsa Field, with associated depletion of approximately $12,400.

Going Concern. As described in Note (3) Significant Accounting Policies to the Notes to Condensed Consolidated Financial Statements included in this report, there is substantial doubt about our ability to continue as a going concern. We incurred a net loss of $432,088 and $1,022,895 for the three month period ended March 31, 2011 and the year ended December 31, 2010, respectively. We had an accumulated deficit of $31,562,634 and $31,130,546 as of March 31, 2011 and December 31, 2010, respectively. We anticipate that we will continue to incur substantial operating losses unless we are able to achieve and sustain profitability.

Blue Dolphin v. LEH (State of Texas). On May 26, 2010, we filed a petition in the 129th Judicial District, in the District Court of Harris County, State of Texas (the Court) alleging breach of contract and asserting our right to the unpaid principal balance and all accrued interest due and payable under the Loan. Although LEH filed a counter-claim alleging usurious interest based on a $500,000 consulting agreement made between the parties, in September 2010 we exercised our right to cure the alleged usury without having to admit guilt based on a statutory provision. In so doing, the Borrower was credited $500,000 against the outstanding principal balance, and the matter proceeded without undue delay. In response, LEH filed an amended counter-claim further alleging breach of contract under the confidentiality agreement between the parties. By order dated February 7, 2011, the Court granted a partial summary judgment on liability under the promissory note and Guaranty in favor of Blue Dolphin and against LEH and LLRII. The Court, however, deferred a ruling on the damages and attorneys fees to be awarded. Although the parties reached an agreement regarding the amount of attorneys fees to be awarded, and the defendants do not dispute the calculation of damages sought by Blue Dolphin, the defendants continue to contest Blue Dolphins entitlement to summary judgment. On February 25, 2011, we filed a motion for entry of the partial summary judgment. On March 28, 2011, our motion for entry of the partial summary judgment was heard before the Court. The Court entered the partial summary judgment in the amount of $1.7 million in favor of Blue Dolphin and against LEH and the Borrower on the promissory note and Guaranty. The only claim that remains pending is the counter-claim alleging breach of contract under the confidentiality agreement.

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