[10-Q] BLUE DOLPHIN ENERGY CO Quarterly Earnings Report
Blue Dolphin Energy Company (BDCO) reported third‑quarter 2025 results. Revenue from operations was $70.4 million, with a net loss of $4.7 million (basic and diluted EPS $(0.31)). Year‑to‑date revenue was $210.6 million with a nine‑month net loss of $4.2 million.
Liquidity remains tight. Cash and cash equivalents were $2.3 million and restricted cash $1.0 million. Current liabilities totaled $72.4 million, including $32.5 million of long‑term debt classified as current due to defaults. Total long‑term debt principal was $36.5 million as of September 30, 2025. Management noted historical working capital deficits and significant debt in default, while stating an expectation to meet obligations through operating cash flows and liquidation of working capital.
The company disclosed covenant defaults on the LE Term Loan Due 2034 and LRM Term Loan Due 2034, and non‑financial covenant defaults on the NPS Term Loan Due 2031. Q3 included a $3.0 million impairment of fixed assets and an increase in asset retirement obligations to a $6.0 million current liability. Shares outstanding were 14,921,968 as of September 30, 2025.
- None.
- None.
Insights
Multiple loan defaults and tight liquidity elevate refinancing risk.
BDCO posted a Q3 loss of
Disclosed defaults include financial covenant breaches on the LE Term Loan Due 2034 and LRM Term Loan Due 2034, and non‑financial covenant defaults on the NPS Term Loan Due 2031. The filing states lenders may accelerate obligations and exercise remedies, and management highlights historical working capital deficits.
Near‑term outcomes depend on lender actions and operating cash generation. Notable non‑operating items include a fixed‑asset impairment of
Table of Contents
| UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 |
FORM
(Mark One)
| | Quarterly REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No.
BLUE DOLPHIN ENERGY COMPANY
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| (Exact name of registrant as specified in its charter) |
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | | |
| (Address of principal executive offices) | (Zip Code) |
| (Registrant's telephone number, including area code) |
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
| | ||
| (Title of class) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is an large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definition of “large accelerated filer,” “accelerated filer, ” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||
| | ☑ | Smaller reporting company | | ||
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
| Number of shares of common stock, par value $0.01 per share, outstanding at November 14, 2025: |
Table of Contents
| PART I - FINANCIAL INFORMATION | ||
| ITEM 1. | FINANCIAL STATEMENTS | 8 |
| Consolidated Balance Sheets (Unaudited) | 8 | |
| Consolidated Statements of Operations (Unaudited) | 9 | |
| Consolidated Statements of Stockholders’ Equity (Unaudited) | 10 | |
| Consolidated Statements of Cash Flows (Unaudited) | 11 | |
| Notes to Consolidated Financial Statements | 12 | |
| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 34 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 55 |
| ITEM 4. | CONTROLS AND PROCEDURES | 55 |
| PART II - OTHER INFORMATION | 55 | |
| ITEM 1. | LEGAL PROCEEDINGS | 55 |
| ITEM 1A. | RISK FACTORS | 57 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 58 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 58 |
| ITEM 4. | MINE SAFETY DISCLOSURES | 58 |
| ITEM 5. | OTHER INFORMATION | 58 |
| ITEM 6. | EXHIBITS | 58 |
| SIGNATURES | 59 | |
Glossary of Terms
Throughout this Quarterly Report on Form 10-Q, we have used the following terms:
| Affiliate. Refers, either individually or collectively, to certain related parties including Jonathan Carroll, Chairman and Chief Executive Officer of Blue Dolphin, and his affiliates (including Ingleside and Lazarus Capital) and LEH and its affiliates (including LMT and LTRI). Together, Jonathan Carroll and LEH owned 84.4% of the Common Stock as of the filing date of this report.
AGO. Atmospheric gas oil (also known as atmospheric tower bottoms) is the heaviest product boiled by a crude distillation tower operating at atmospheric pressure. This fraction ordinarily sells as distillate fuel oil, either in pure form or blended with cracked stocks. Certain ethylene plants, called heavy oil crackers, can take AGO as feedstock.
AMT. Alternative Minimum Tax.
API Gravity. American Petroleum Institute (API) gravity; measures how heavy or light petroleum liquids are compared to water; standard used in the oil and gas industry to classify crude oil.
ARO. Asset retirement obligations.
ASU. Accounting Standards Update issued by FASB.
bbl(s). Barrel; a unit of volume equal to 42 U.S. gallons.
BDEX. Blue Dolphin Exploration Company, a wholly owned subsidiary of Blue Dolphin.
BDPC. Blue Dolphin Petroleum Company, a wholly owned subsidiary of Blue Dolphin.
BDPL. Blue Dolphin Pipe Line Company, a wholly owned subsidiary of Blue Dolphin.
BDSC. Blue Dolphin Services Co., a wholly owned subsidiary of Blue Dolphin.
Blue Dolphin. Blue Dolphin Energy Company, one or more of its consolidated subsidiaries, or all of them taken as a whole.
bpd. Barrel per day; a measure of the bbls of daily output produced in a refinery or transported through a pipeline.
Board. Board of Directors of Blue Dolphin.
BOEM. Bureau of Ocean Energy Management; an agency within the U.S. Department of the Interior.
BSEE. Bureau of Safety and Environmental Enforcement; an agency within the U.S. Department of the Interior.
CIP. Construction in progress. |
Distillation. The first step in the refining process whereby crude oil and condensate are heated at atmospheric pressure in the base of a distillation tower. As the temperature increases, the various compounds vaporize in succession at their various boiling points and then rise to prescribed levels within the tower based on their densities (from lightest to heaviest). They then condense in distillation trays and are drawn off individually for further refining. Distillation is also used at other points in the refining process to remove impurities.
DLA. Defense Logistics Agency, an agency within the U.S. Department of Defense.
Downtime. Scheduled and unscheduled periods in which the crude distillation tower is not operating. Downtime may occur for a variety of reasons, including severe weather, power failures, and preventive maintenance.
EIA. Energy Information Administration.
EIDL. Economic Injury Disaster Loan; an SBA program that provides economic relief to businesses within a declared disaster area.
EPA. Environmental Protection Agency.
Eagle Ford Shale. A hydrocarbon-producing geological formation extending across South Texas from the Mexican border into East Texas; crude oil from within this shale is typically characterized as light, sweet crude with a high API Gravity; particularly suitable for refining into gasoline and other light products.
Exchange Act. Securities Exchange Act of 1934, as amended.
FASB. Financial Accounting Standards Board.
FDIC. Federal Deposit Insurance Corporation.
Feedstocks. Crude oil and other hydrocarbons, such as condensate and intermediate products, used as basic input materials in a refining process. Feedstocks are transformed into one or more finished products.
Finished petroleum products. Materials or products which have received the final increments of value through processing operations, and which are being held in inventory for delivery, sale, or use.
Freeport facility. Onshore terminal facility consisting of processing units for: (i) crude oil and natural gas separation and dehydration, (ii) natural gas processing, treating, and redelivery, and (iii) vapor recovery; also includes the onshore portion of a 20-inch, 34 mile gathering pipeline originating at an offshore anchor platform in Galveston Area Block 288, a 16-inch natural gas pipeline connecting the Freeport facility to the Dow Chemical Plant complex, and 178 acres of land; facility is currently inactive.
GNCU. Greater Nevada Credit Union. |
| Glossary of Terms (Continued) |
| Common Stock. Blue Dolphin common stock, par value $0.01 per share. Blue Dolphin has 20,000,000 shares of Common Stock authorized and 14,921,968 shares of Common Stock issued and outstanding as of the filing date of this report.
Complexity. A numerical score that denotes, for a given refinery, the extent, capability, and capital intensity of the refining processes downstream of the crude distillation tower. Refinery complexities range from the relatively simple crude distillation tower (“topping unit”), which has a complexity of 1.0, to the more complex deep conversion (“coking”) refineries, which have a complexity of 12.0.
Condensate. Liquid hydrocarbons that are produced in conjunction with natural gas. Although condensate is sometimes like crude oil, it is usually lighter.
Consolidated EBITDA. Income (loss) before interest, taxes, and depreciation and amortization on a consolidated basis.
Cost of goods sold. For refinery operations, calculated as crude oil, fuel use, and chemicals plus other conversion costs plus intercompany processing fees plus associated depreciation and amortization. For tolling and terminaling, calculated as tolling and terminaling costs plus associated depreciation and amortization.
Crude distillation tower. A tall column-like vessel in which crude oil and condensate is heated and its vaporized components are distilled by means of distillation trays. This process refines crude oil and other inputs into intermediate and finished petroleum products; commonly referred to as a crude distillation unit or an atmospheric distillation unit.
Crude oil. A mixture of thousands of chemicals and compounds, primarily hydrocarbons. Crude oil quality is measured in terms of density (light to heavy) and sulfur content (sweet to sour). Light crude oil is thinner, has a high API Gravity, and requires less processing; heavy crude oil is thicker, has a low API Gravity, and requires more processing. Sweet crude contains sulfur content of less than 0.5% while sour crude contains sulfur content of greater than 0.5%. Crude oil must be broken down into its various components (distillates) by distillation before use as fuels or conversion to other products.
Depropanizer unit. A distillation column that isolates propane from a mixture containing butane and other heavy components.
Distillates. The result of crude distillation and therefore any refined oil product. Distillate is more commonly used as an abbreviated form of middle distillate. There are mainly four (4) types of distillates: (i) very light oils or light distillates (such as naphtha), (ii) light oils or middle distillates (such as our jet fuel), (iii) medium oils, and (iv) heavy oils (such as our low-sulfur diesel and HOBM, reduced crude, and AGO). |
Greenhouse gases (GHGs). Molecules in the Earth’s atmosphere, such as carbon dioxide, methane, and chlorofluorocarbons that warm the atmosphere because they absorb some of the thermal radiation emitted from the Earth’s surface. GHG process emissions from the petroleum refining sector include emissions from venting, flares, and fugitive leaks from equipment (e.g., valves, flanges, pumps); GHG emissions also include combustion emissions from stationary combustion units.
Gross profit (deficit). Calculated as total revenue less total cost of goods sold; reflected as a dollar ($) amount.
HOBM. Heavy oil-based mud blendstock; see also “distillates.”
HUBZone. Historically Underutilized Business Zones program established by the SBA to help small businesses in both urban and rural communities.
IBLA. Interior Board of Land Appeals; an appellate review body within the U.S. Department of the Interior.
INC. Incident of Noncompliance issued by BOEM or BSEE.
Ingleside. Ingleside Crude, LLC, an affiliate of Jonathan Carroll.
Intercompany processing fees. Fees associated with an intercompany tolling agreement related to naphtha volumes.
Intermediate petroleum products. A petroleum product that might require further processing before being saleable to the ultimate consumer; further processing might be done by the producer or by another processor. Thus, an intermediate petroleum product might be a final product for one company and an input for another company to process it further.
IRC Section 382. Title 26, Internal Revenue Code, Subtitle A – Income Taxes, Subchapter C – Corporate Distributions and Adjustments, Part V Carryovers, § 382. Limits NOL carryforwards and certain built-in losses following ownership change.
IRS. Internal Revenue Service. |
| Glossary of Terms (Continued) |
| Jet fuel. A high-quality kerosene product primarily used in aviation. Kerosene-type jet fuel (including Jet A and Jet A-1) has a carbon number distribution between 8 and 16 carbon atoms per molecule; wide-cut or naphtha-type jet fuel (including Jet B) has between 5 and 15 carbon atoms per molecule.
Kissick Noteholder. John H. Kissick.
Lazarus Capital. Lazarus Capital, LLC, an affiliate of Jonathan Carroll.
LE. Lazarus Energy, LLC, a wholly owned subsidiary of Blue Dolphin.
LEH. Lazarus Energy Holdings, LLC, an affiliate of Jonathan Carroll and controlling shareholder of Blue Dolphin as of the date of this report.
Leasehold interest. The percent interest of a lessee under an oil and gas lease.
LMT. Lazarus Marine Terminal I, LLC, an affiliate of LEH.
LRM. Lazarus Refining & Marketing, LLC, a wholly owned subsidiary of Blue Dolphin.
LTRI. Lazarus Texas Refinery I, an affiliate of LEH.
Mbbls. One thousand bbls.
Mbbls/d. One thousand barrels of oil per day; a measure of the barrels of daily output produced in a refinery or transported through a pipeline.
MVP. MV Purchasing, LLC.
Naphtha. A refined or partly refined light distillate fraction of crude oil. Blended further or mixed with other materials, it can make high-grade motor gasoline or jet fuel. It is also a generic term for the lightest and most volatile petroleum fractions.
Natural gas. A naturally occurring hydrocarbon gas mixture consisting primarily of methane but commonly including varying amounts of other higher alkanes and sometimes a small percentage of carbon dioxide, nitrogen, hydrogen sulfide, or helium.
Nixon facility. Encompasses the Nixon refinery, petroleum storage tanks, loading and unloading facilities, and 56 acres of land in Nixon, Texas. |
Nixon refinery. The 15,000-bpd crude distillation tower and associated processing units in Nixon, Texas.
NOL. Net operating losses.
NPS. Nixon Product Storage, LLC, a wholly owned subsidiary of Blue Dolphin.
Operating days. Represents the number of days in a period in which the crude distillation tower operated; operating days are calculated by subtracting downtime in a period from calendar days in the same period.
OSHA. Occupational Safety and Health Administration.
Other conversion costs. Represents the combination of direct labor costs and manufacturing overhead costs. These are the costs that are necessary to convert our raw materials into refined products.
PADD. Petroleum Administration for Defense Districts; PADD regions enable regional analysis of petroleum product supply and movements by the EIA.
Petroleum. A naturally occurring flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds. The name petroleum covers both the naturally occurring unprocessed crude oils and petroleum products that are made up of refined crude oil.
PHMSA. Pipeline and Hazardous Materials Safety Administration of the U.S. Department of Transportation.
Preferred Stock. Blue Dolphin preferred stock, par value $0.10 per share. Blue Dolphin has 2,500,000 shares of Preferred Stock authorized and no shares of Preferred Stock issued and outstanding as of the filing date of this report.
Production. The volume processed as output from the crude distillation tower. Refinery production includes finished petroleum products, such as jet fuel, and intermediate petroleum products, such as naphtha, HOBM, and AGO.
Product slate. Represents type and quality of products produced.
Propane. A by-product of natural gas processing and petroleum refining. Propane is one of a group of liquified petroleum gases. Others include butane, propylene, butadiene, butylene, isobutylene, and mixtures thereof.
Refined products. Hydrocarbon compounds, such as jet fuel and residual fuel, produced by a refinery.
|
| Glossary of Terms (Continued) |
| Refinery. Within the oil and gas industry, a refinery is an industrial processing plant where crude oil, condensate, and intermediate feeds are separated and transformed into petroleum products.
Refining EBITDA. Income (loss) before interest, taxes, and depreciation and amortization for our refinery operations business segment.
Refining operations EBITDA per bbl. Refining EBITDA divided by sales (Mbbls) for the reporting period.
ROU. Right-of-use.
SBA. Small Business Administration.
SEC. Securities and Exchange Commission.
Securities Act. The Securities Act of 1933, as amended.
Significant customer. A customer who represents more than 10% of our total revenue from operations.
Stabilizer unit. A distillation column intended to remove the lighter boiling compounds, such as butane or propane, from a product.
Sulfur. Present at various levels of concentration in many hydrocarbon deposits, such as petroleum, coal, or natural gas. Also, produced as a by-product of removing sulfur-containing contaminants from natural gas and petroleum. Some of the most commonly used hydrocarbon deposits are categorized based on their sulfur content, with lower sulfur fuels (e.g., ultra low sulfur diesel) selling at a higher, premium price and higher sulfur fuels (e.g., HOBM) selling at a lower, discounted price.
Texas First. Texas First Rentals, LLC.
TCEQ. Texas Commission on Environmental Quality.
Throughput. The volume processed as input through the crude distillation tower. Refinery throughput includes crude oil or condensate.
Tolling and terminaling EBITDA. Income (loss) before interest, taxes, and depreciation and amortization for our tolling and terminaling business segment. |
Topping unit. A type of petroleum refinery that engages in only the first step of the refining process (see crude distillation tower). A topping unit uses atmospheric distillation to separate crude oil and condensate into constituent petroleum products. A topping unit has a refinery complexity range of 1.0 to 2.0.
Turnaround. A planned period of time when an industrial plant shuts down one or more units (and sometimes an entire facility) to perform maintenance, inspections, repairs, or upgrades.
USDA. U.S. Department of Agriculture.
USDOI. U.S. Department of the Interior.
U.S. GAAP. Accounting principles generally accepted in the United States of America.
Veritex. Veritex Community Bank, successor in interest to Sovereign Bank by merger.
WSJ Prime rate. The base rate on corporate loans posted by at least 70% of the ten largest U.S. banks as published by the Wall Street Journal. Effective September 18, 2025, the WSJ Prime rate decreased to 7.25%.
XBRL. eXtensible Business Reporting Language.
Yield. The percentage of refined products that is produced from crude oil and other feedstocks.
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Important Information Regarding Forward-Looking Statements
This report (including information incorporated by reference) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, including, but not limited to, those under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact, including without limitation statements regarding expectations regarding revenue, cash flows, capital expenditures, and other financial items, our business strategy, goals, and expectations concerning our market position, future operations, and profitability, are forward-looking statements. Forward-looking statements may be identified by use of the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar terms and phrases. Although we believe our assumptions concerning future events are reasonable, several risks, uncertainties, and other factors could cause actual results and trends to differ materially from those projected, including but not limited to:
| Business and Industry
● Significant debt in current liabilities, certain of which is in default. ● Inability to meet financial covenants under certain loan agreements. ● Restrictive covenants in our debt instruments that limit our ability to undertake certain types of transactions. ● Increased costs of capital or a reduction in the availability of credit. ● Affiliate Common Stock ownership and transactions that could cause conflicts of interest. ● Operational hazards inherent in transporting, processing, and storing crude oil and condensate and refined products. ● Geographical concentration of our assets and customers in the Eagle Ford Shale. ● Competition from companies with more significant financial and other resources. ● Market changes in insurance that impact premium costs and available coverages. ● Industry technological developments that outpace our ability to keep up. ● Use of NOL carryforwards to offset future taxable income for U.S. federal income tax purposes, which is subject to limitation. ● Variable interest rates on certain of our debt.
Downstream and Midstream Operations
● Commodity price and refined product demand volatility, which can adversely affect our refining margins. ● Crude oil, other feedstocks, and refined products commodity price volatility. ● Availability and cost of crude oil and other feedstocks to operate the Nixon facility. ● Downtime at the Nixon refinery. ● Reliable supply and price of electricity to operate the Nixon facility. ● Potential impairment in the carrying value of long-lived assets, which could negatively affect our operating results. ● Adverse changes in operational cash flow and working capital, shortfalls for which Affiliates may not fund. ● Critical personnel loss, labor actions, and workplace safety issues. ● Market share loss, an unfavorable financial condition shift, or the bankruptcy or insolvency of a significant customer. ● Increases in the cost or availability of third-party vessels, pipelines, trucks, and other means of delivering and transporting our crude oil and condensate, feedstocks, and refined products. ● Sourcing of a substantial amount, if not all, of our crude oil and condensate from the Eagle Ford Shale. ● Geographical concentration of our refining operations and customers within the Eagle Ford Shale. ● Severe weather or other climate-related events that affect our facilities or those of our vendors, suppliers, or customers. ● Our ability to implement a new business strategy, such as renewable fuels, may be materially and adversely affected by many known and unknown factors. ● Our ability to effect and integrate potential acquisitions. ● Sourcing of a substantial amount, if not all, of our crude oil and condensate from the Eagle Ford Shale. |
|
Legal, Government, and Regulatory
● Environmental laws and regulations that may require us to make substantial capital improvements to remain compliant or remediate current or future contamination that could lead to material liabilities. ● Strict laws and regulations regarding personnel and process safety. ● Uncertainty regarding the impact of current and future sanctions (including tariffs) imposed by governments, including the U.S., and other authorities in response to economic and geopolitical tensions. ● General economic, political, or regulatory developments, including recession, inflation, tariffs, interest rates, or changes in governmental policies relating to refined petroleum products, crude oil, or taxation. ● Assessment of penalties by regulatory agencies, such as BOEM, BSEE, OSHA and the TCEQ for violations. ● Our estimates of future AROs related to our pipeline and facilities assets, which may increase. ● Regulatory changes and other measures related to GHG emissions, climate change, and an ongoing desire to transition to greater renewable energy solutions.
Security
● A terrorist attack or armed conflict. ● Increased activism against oil and gas companies. ● Actual or potential cybersecurity threats or loss of data privacy.
Common Stock
● Fluctuations in our stock price that may result in a substantial investment loss. ● Increasing attention to environmental, social, and governance matters. ● Declines in our stock price due to share sales. ● Dilution of the equity of current stockholders and the potential decline of our stock price due to the issuance of new Common Stock or Preferred Stock from the pool of authorized shares that we have available to issue. ● The potential sale of shares in accordance with Rule 144, which may adversely affect the market. ● The lack of dividend payments. |
See also the risk factors described in greater detail under “Item 1A.” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the SEC and elsewhere in our subsequent quarterly and periodic reports, including this report. 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 revise or update any forward-looking statements as a result of new information, future events, or otherwise.
Unless the context otherwise requires, references in this report to “Blue Dolphin,” “we,” “us,” “our,” or “ours” refer to Blue Dolphin Energy Company, one or more of its consolidated subsidiaries, or all of them taken as a whole.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (in thousands, except share amounts) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash, current | ||||||||
| Accounts receivable, net | ||||||||
| Accounts receivable, related party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ||||||||
| Total current assets | ||||||||
| LONG-TERM ASSETS | ||||||||
| Total property and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Surety bonds | ||||||||
| Deferred tax assets, net | ||||||||
| Total long-term assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Long-term debt less unamortized debt issue costs, current portion (in default) | $ | $ | ||||||
| Line of credit, related party | ||||||||
| Long-term debt, related party, current portion | ||||||||
| Interest payable | ||||||||
| Interest payable, related party | ||||||||
| Accounts payable | ||||||||
| Current portion of lease liabilities | ||||||||
| Income taxes payable | ||||||||
| Asset retirement obligations, current portion | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Long-term lease liabilities, net of current | ||||||||
| Long-term debt, net of current portion (in default) | ||||||||
| Long-term debt, related party, net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies (Note 14) | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Common stock ($ par value, shares authorized; shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively) (1) | ||||||||
| Additional paid-in capital | ||||||||
| Retained deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
| (1) | Blue Dolphin has 2,500,000 shares of preferred stock, par value $0.10 per share, authorized. At September 30, 2025 and December 31, 2024, there were no shares of preferred stock issued and outstanding. |
The accompanying notes are an integral part of these consolidated financial statements.
| Financial Statements (Continued) |
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 |
2024 |
2025 |
2024 |
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| (in thousands, except share and per-share amounts) |
(in thousands, except share and per-share amounts) |
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| REVENUE FROM OPERATIONS |
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| Refinery operations |
$ | $ | $ | $ | ||||||||||||
| Tolling and terminaling |
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| Total revenue from operations |
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| COSTS AND EXPENSES |
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| Crude oil, fuel use, and chemicals |
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| Other conversion costs |
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| Tolling and terminaling costs |
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| Depreciation and amortization |
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| Total cost of goods sold |
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| Other operating costs |
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| LEH operating fee, related party |
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| Other operating expenses |
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| General and administrative expenses |
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| Depreciation and amortization |
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| Impairment of fixed assets |
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| Total cost of operations |
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| Income (loss) from operations |
( |
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| OTHER INCOME (EXPENSE) |
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| Interest and other income |
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| Interest and other expense |
( |
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| Total other expense |
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| Income (loss) before income taxes |
( |
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| Income tax benefit (expense) |
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| Net income (loss) |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
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| Income (loss) per common share: |
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| Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
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| Diluted |
$ | ( |
) | $ | ( |
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) | $ | ( |
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| Weighted average number of common shares outstanding: |
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| Basic |
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| Diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
| Financial Statements (Continued) |
| Common Stock |
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| Shares Issued and |
Additional Paid-In |
Retained Earnings |
Total Stockholders' |
|||||||||||||||||
| Outstanding |
Par Value |
Capital |
(Deficit) |
Equity |
||||||||||||||||
| (in thousands except share amounts) |
||||||||||||||||||||
| Balance at June 30, 2024 |
$ | $ | $ | $ | ||||||||||||||||
| Net income (loss) |
- | ( |
) | ( |
) | |||||||||||||||
| Balance at September 30, 2024 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Common Stock |
||||||||||||||||||||
| Shares Issued and |
Additional Paid-In |
Retained Earnings |
Total Stockholders' |
|||||||||||||||||
| Outstanding |
Par Value |
Capital |
(Deficit) |
Equity |
||||||||||||||||
| (in thousands except share amounts) |
||||||||||||||||||||
| Balance at June 30, 2025 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Net income (loss) |
- | ( |
) | ( |
) | |||||||||||||||
| Balance at September 30, 2025 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Common Stock |
||||||||||||||||||||
| Shares Issued and |
Additional Paid-In |
Retained Earnings |
Total Stockholders' |
|||||||||||||||||
| Outstanding |
Par Value |
Capital |
(Deficit) |
Equity |
||||||||||||||||
| (in thousands except share amounts) |
||||||||||||||||||||
| Balance at December 31, 2023 |
$ | $ | $ | $ | ||||||||||||||||
| Net income (loss) |
- | ( |
) | ( |
) | |||||||||||||||
| Balance at September 30, 2024 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Common Stock |
||||||||||||||||||||
| Shares Issued and |
Additional Paid-In |
Retained Earnings |
Total Stockholders' |
|||||||||||||||||
| Outstanding |
Par Value |
Capital |
(Deficit) |
Equity |
||||||||||||||||
| (in thousands except share amounts) |
||||||||||||||||||||
| Balance at December 31, 2024 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Net income (loss) |
- | ( |
) | ( |
) | |||||||||||||||
| Balance at September 30, 2025 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Financial Statements (Continued) |
| Nine Months Ended September 30, |
||||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| OPERATING ACTIVITIES |
||||||||
| Net income (loss) |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Deferred income tax |
( |
) | ( |
) | ||||
| Amortization of debt issue costs |
||||||||
| Impairment of fixed assets |
||||||||
| Changes in operating assets and liabilities |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Accounts receivable, related party |
( |
) | ( |
) | ||||
| Prepaid expenses and other current assets |
( |
) | ||||||
| Inventory |
( |
) | ||||||
| Asset retirement obligations |
( |
) | ||||||
| Accounts payable, accrued expenses and other liabilities |
( |
) | ||||||
| Accounts payable, related party |
( |
) | ||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| INVESTING ACTIVITIES |
||||||||
| Capital expenditures |
( |
) | ||||||
| Net cash used in investing activities |
( |
) | ||||||
| FINANCING ACTIVITIES |
||||||||
| Payments on debt principal |
( |
) | ( |
) | ||||
| Net activity on related-party debt |
||||||||
| Net cash provided by (used in) financing activities |
( |
) | ||||||
| Net change in cash, cash equivalents, and restricted cash |
( |
) | ||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |
||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD |
$ | $ | ||||||
| Supplemental Information: |
||||||||
| Non-cash investing and financing activities: |
||||||||
| Financing of capital expenditures via long-term note |
$ | $ | ||||||
| Interest paid |
$ | $ | ||||||
| Notes to Consolidated Financial Statements |
| (1) |
Organization |
Company Overview. Blue Dolphin was formed in 1986 as a Delaware corporation. The company is an independent downstream energy company operating in the Gulf Coast region of the U.S. Operations primarily consist of a light sweet-crude,
| (2) | Principles of Consolidated and Significant Accounting Policies |
Basis of Presentation. We prepared the accompanying unaudited consolidated financial statements, which include Blue Dolphin and its subsidiaries, in accordance with U.S. GAAP for interim consolidated financial information pursuant to the rules and regulations of the SEC under Article 10 of Regulation S-X and the instructions to Form 10-Q. Accordingly, we condensed or omitted certain information and footnote disclosures normally included in our audited financial statements pursuant to the SEC's rules and regulations. We eliminated significant intercompany transactions in the consolidation. Management believes all adjustments considered necessary for a fair presentation are included, disclosures are adequate, and the presented information is not misleading.
We derived the consolidated balance sheet as of December 31, 2024 from the audited financial statements at that date. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the SEC. Operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2025, or for any other period.
| Notes to Consolidated Financial Statements (Continued) |
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash, current | ||||||||
| $ | $ | |||||||
Accounts Receivable and Allowance for Credit Losses. Accounts receivables are presented net of any necessary allowance(s) for credit losses. Receivables are recorded at the invoiced amount and generally do not bear interest. When necessary, an allowance for credit losses is established based on prior experience and other factors which, in management's judgment, deserve consideration in estimating bad debts. Management assesses the collectability of the customer's account based on current aging status, collection history, and financial condition. Based on a review of these factors, management establishes or adjusts the allowance for specific customers and the entire accounts receivable portfolio. We had an allowance for credit losses of $
Financial Instruments and Fair Value Measurements. Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and long-term debt. As of September 30, 2025 and December 31, 2024, the carrying amounts of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximated their fair values because they are highly liquid or due to the short-term nature of these instruments. The carrying value of long-term debt approximates fair value as it carries interest rates that fluctuate with the prime rate.
| Notes to Consolidated Financial Statements (Continued) |
| Notes to Consolidated Financial Statements (Continued) |
New Pronouncements Issued, Not Yet Effective. We expect to adopt the following ASUs in future periods:
| ●
| ASU 2024-03 — Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"). In November 2024, the FASB issued ASU 2024-03, requiring additional disclosure of certain costs and expenses within the notes to the consolidated financial statements. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the provisions of ASU 2024-03 and the incremental disclosures that will be required in our consolidated financial statements. |
| ●
| ASU 2023-09 — Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). In December 2023, the FASB issued ASU 2023-09, requiring us to disclose specified additional information in our income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require us to disaggregate our income taxes paid disclosure by federal and state taxes, with further disaggregation required for significant individual jurisdictions. ASU 2023-09 allows for adoption using either a prospective or retrospective transition method. We will adopt ASU 2023-09 for our financial statements covering the annual period ending December 31, 2025. We do not anticipate the pronouncement will change total reported tax expense, tax assets or tax liabilities. However, we expect the pronouncement will require expanded income tax disclosures. |
| (3) | Related-Party Transactions |
Affiliate Agreements.
Financial and Operating Agreements. Blue Dolphin and certain of its subsidiaries are currently parties to the following financial and operating agreements with Affiliates:
| Agreement / Transaction | Parties | Effective Date | Key Terms |
| Fourth Amended and Restated Operating Agreement | Blue Dolphin and subsidiaries LEH | 04/01/2025 | For LEH operation and management of all Blue Dolphin's assets; |
| Amended and Restated Jet Fuel Sales Agreement | LE LEH | 04/01/2023 | Jet fuel sales by LE to LEH; |
| NPS Terminal Services Agreement | NPS LEH | 11/01/2022 | LEH pays NPS a tank rental fee of $ |
| Second Amended and Restated Master Services Agreement | LE Ingleside | 03/01/2025 | For storage of LE products intended for customer receipt by barge; LE pays Ingleside a tank rental fee of $ |
| LE Amended and Restated Guaranty Fee Agreement | LE Jonathan Carroll | 01/01/2023 | Relates to payoff of LE $ |
| NPS Guaranty Fee Agreement | NPS Jonathan Carroll | 01/01/2023 | Relates to payoff of NPS $ |
| LRM Amended and Restated Guaranty Fee Agreement | LRM Jonathan Carroll | 01/01/2023 | Relates to payoff of LRM $ |
| Blue Dolphin Guaranty Fee Agreement | Blue Dolphin Jonathan Carroll | 01/01/2023 | Relates to payoff of Blue Dolphin $ |
| Office Sub-Lease Agreement | LEH BDSC | 09/01/2024 | LEH office space in Houston, Texas; sub-lease executed 10/30/24; 24-month extension of prior office sub-lease agreement; term expires 08/31/2026; rent is approximately $ |
| Ground Lease Agreement | LEH NPS | 07/01/2025 | LEH pays NPS a ground storage fee of $ |
| Notes to Consolidated Financial Statements (Continued) |
Debt Agreements. Blue Dolphin and certain subsidiaries are parties to the following debt agreements with Affiliates:
| Original | Monthly | ||||||
| Principal | Payment | ||||||
| Loan Description | Parties | (in millions) | Maturity Date | (in millions) | Interest Rate | Loan Purpose | |
| Second Amended and Restated Affiliate Revolving Credit Agreement | Blue Dolphin and Subsidiaries | Set-off against other obligations Borrower owes to Lender |
| Working capital | |||
| LEH and Subsidiaries | |||||||
| Amended and Restated BDPL-LEH Loan Agreement | LEH |
|
| $ | | Working capital | |
| BDPL |
| (1) | Effective June 1, 2025, the maximum borrowing limit under the agreement was increased to $ |
Covenants, Guarantees and Security. The Amended and Restated BDPL-LEH Loan Agreement contains representations and warranties that we consider usual and customary for a credit facility of this type. There are no financial covenants in the Amended and Restated BDPL-LEH Loan Agreement, but certain other customary business covenants are included. Certain BDPL property serves as collateral under the Amended and Restated BDPL-LEH Loan Agreement.
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Current assets | ||||||||
| Accounts receivable, related party | $ | $ | ||||||
| Current liabilities | ||||||||
| Accounts payable, related party | ||||||||
Accounts receivable, related party at September 30, 2025 reflected amounts owed by LEH to LE under the Amended and Restated Jet Fuel Sales Agreement.
Related-Party Debt. We reflect the amounts owed by Blue Dolphin and its subsidiaries to Affiliates under debt agreements on our consolidated balance sheets within line of credit, related party, long-term debt, related party and interest payable, related party. Related-party debt as of the dates indicated was as follows:
| September 30, | December 31 | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| LEH | ||||||||
| Amended and Restated BDPL-LEH Loan Agreement | $ | $ | ||||||
| Line of credit, related party | ||||||||
| LEH Total | ||||||||
| Less: Long-term debt, related party, current portion | ( | ) | ( | ) | ||||
| Less: Line of credit, related party | ( | ) | ( | ) | ||||
| Long-term debt, related party, net of current portion | $ | $ | ||||||
| Notes to Consolidated Financial Statements (Continued) |
Related-party accrued interest associated with long-term debt and line of credit, related party, as of the dates indicated was as follows:
| September 30, | December 31 | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| LEH | ||||||||
| Amended and Restated BDPL-LEH Loan Agreement | $ | $ | ||||||
| Line of credit, related party | ||||||||
| LEH Total | ||||||||
| Jonathan Carroll | ||||||||
| Guaranty fee agreements | ||||||||
| Less: Long-term debt, related party, current portion | ( | ) | ( | ) | ||||
| Long-term interest payable, related party, net of current portion | $ | $ | ||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
| (in thousands, except percent amounts) | (in thousands, except percent amounts) | |||||||||||||||||||||||||||||||
| Refinery operations | ||||||||||||||||||||||||||||||||
| LEH | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
| Third-Parties | % | % | % | % | ||||||||||||||||||||||||||||
| Tolling and terminaling | ||||||||||||||||||||||||||||||||
| LEH | % | % | % | % | ||||||||||||||||||||||||||||
| Third-Parties | % | % | % | % | ||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||
Interest expense. Interest expense associated with guaranty fee agreements and a debt agreement with Affiliates as of the dates indicated was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Jonathan Carroll | ||||||||||||||||
| Guaranty Fee Agreements | ||||||||||||||||
| Tied to First Term Loan Due 2034 | $ | $ | $ | $ | ||||||||||||
| Tied to NPS Term Loan Due 2031 | ||||||||||||||||
| Tied to Second Term Loan Due 2034 | ||||||||||||||||
| Tied to Blue Dolphin Term Loan Due 2051 | ||||||||||||||||
| LEH | ||||||||||||||||
| Amended and Restated BDPL-LEH Loan Agreement | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Notes to Consolidated Financial Statements (Continued) |
| (4) | Revenue and Segment Information |
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Accounts receivable (including related-party), beginning January 1st, of period | $ | $ | ||||||
| Accounts receivable (including related-party), end of period | ||||||||
| Unearned revenue, beginning January 1st, of period | $ | $ | ||||||
| Unearned revenue, end of period | ||||||||
| Notes to Consolidated Financial Statements (Continued) |
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||
| September 30, | ||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||
| Refinery Operations | Tolling & Terminaling | Corporate & Other | Intercompany Elimination (1) | Consolidated | Refinery Operations | Tolling & Terminaling | Corporate & Other | Intercompany Elimination | Consolidated | |||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||
| Segment revenue | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Crude oil, fuel use, and chemicals | ||||||||||||||||||||||||||||||||||||||||
| Other conversion costs | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Tolling and terminaling costs | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||||
| Total costs of goods sold | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| LEH operating fee, related party | ||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||||||||||||||||||||||||
| Other operating expenses(2) | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||||
| Impairment of fixed assets | ||||||||||||||||||||||||||||||||||||||||
| Interest, net | ||||||||||||||||||||||||||||||||||||||||
| Total costs and expenses | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Income tax benefit | ||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||||||||
| (1) | Fees associated with an intercompany tolling agreement related to naphtha volumes. |
| (2) | Includes costs and expenses associated with our pipeline and facilities assets. |
| Notes to Consolidated Financial Statements (Continued) |
| Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
| September 30, | ||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||
| Refinery Operations | Tolling & Terminaling | Corporate & Other | Intercompany Elimination (1) | Consolidated | Refinery Operations | Tolling & Terminaling | Corporate & Other | Intercompany Elimination (1) | Consolidated | |||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Crude oil, fuel use, and chemicals | ||||||||||||||||||||||||||||||||||||||||
| Other conversion costs | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Tolling and terminaling costs | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||||
| Total costs of goods sold | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| LEH operating fee, related party | ||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||||||||||||||||||||||||
| Other operating expenses(2) | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||||
| Impairment of fixed assets | ||||||||||||||||||||||||||||||||||||||||
| Interest, net | ||||||||||||||||||||||||||||||||||||||||
| Total costs and expenses | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Income tax benefit | ||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||
| (1) | Fees associated with an intercompany tolling agreement related to naphtha volumes. |
| (2) | Includes costs and expenses associated with our pipeline and facilities assets. |
| Notes to Consolidated Financial Statements (Continued) |
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Capital expenditures | ||||||||||||||||
| Refinery operations (1) | $ | $ | $ | $ | ||||||||||||
| Total capital expenditures | $ | $ | $ | $ | ||||||||||||
| (1) | $ |
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Identifiable assets | ||||||||
| Refinery operations | $ | $ | ||||||
| Tolling and terminaling | ||||||||
| Corporate and other | ||||||||
| Total identifiable assets | $ | $ | ||||||
| (5) | Prepaid Expenses and Other Current Assets |
Prepaid expenses and other current assets, as of the dates indicated, consisted of the following:
| September 30, | December 31 | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Prepaid insurance | $ | $ | ||||||
| Surety bonds, current portion | ||||||||
| Prepaid easement renewal fees | ||||||||
| Other prepaids | ||||||||
| $ | $ | |||||||
| Notes to Consolidated Financial Statements (Continued) |
| (6) |
Inventory |
Inventory, as of the dates indicated, consisted of the following:
| September 30, |
December 31 |
|||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| HOBM |
$ | $ | ||||||
| Naphtha |
||||||||
| Jet fuel |
||||||||
| Crude oil and condensate |
||||||||
| Chemicals |
||||||||
| AGO |
||||||||
| Propane |
||||||||
| LPG mix |
||||||||
| $ | $ | |||||||
We incurred an inventory impairment expense of $
| (7) |
Property, Plant and Equipment, Net |
Property, plant and equipment, net, as of the dates indicated, consisted of the following:
| September 30, |
December 31 |
|||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| Refinery and facilities |
$ | $ | ||||||
| Land |
||||||||
| Other property and equipment |
||||||||
| Less: Accumulated depreciation and amortization |
( |
) | ( |
) | ||||
| Construction in progress |
||||||||
| $ | $ | |||||||
| (8) | Accrued Expenses and Other Current Liabilities |
Accrued expenses and other current liabilities, as of the dates indicated, consisted of the following:
| September 30, | December 31 | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Accrued fines and penalties | $ | $ | ||||||
| Insurance | ||||||||
| Unearned revenue from contracts with customers | ||||||||
| Taxes payable | ||||||||
| Other payable | ||||||||
| Customer deposits | ||||||||
| Board of director fees payable | ||||||||
| $ | $ | |||||||
| Notes to Consolidated Financial Statements (Continued) |
| (9) | Third-Party Long-Term Debt |
Debt Agreements. Blue Dolphin and certain subsidiaries are currently parties to the following debt agreements with third parties:
| Original | Monthly Principal | |||||||||
| Principal | and Interest Payment | |||||||||
| Loan Description | Parties | (in millions) | Maturity | (in millions) | Interest Rate | Loan Purpose | ||||
| Veritex Loans | ||||||||||
| LE Term Loan Due 2034 (in default)(1) | LE | $ |
| $ |
| Capital improvements | ||||
| Veritex | ||||||||||
| LRM Term Loan Due 2034 (in default)(1) | LRM | $ |
| $ |
| Capital improvements | ||||
| Veritex | ||||||||||
| GNCU Loan | ||||||||||
| NPS Term Loan Due 2031 (in default)(2) | NPS | $ |
| $ | | Working capital | ||||
| GNCU | ||||||||||
| SBA Economic Injury Disaster Loans | ||||||||||
| Blue Dolphin Term Loan Due 2051(3) | Blue Dolphin | $ |
| $ | | Working capital | ||||
| SBA | ||||||||||
| LE Term Loan Due 2050(4) | LE | $ |
| $ | | Working capital | ||||
| SBA | ||||||||||
| NPS Term Loan Due 2050(4) | NPS | $ |
| $ | | Working capital | ||||
| SBA | ||||||||||
| Equipment Loan Due 2025(5) | LE | $ | $ | Equipment Purchase | ||||||
| Texas First | ||||||||||
| Equipment Loan Due 2031 (6) | LE | $ |
| $ | | Equipment Purchase | ||||
| Ritchie Bros. Financial Services |
| (1) | Our secured loan agreements with Veritex are subject to certain financial and non-financial covenants. As of September 30, 2025, LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034. With respect to non-financial covenants, we are required to have a balance of $ |
| (2) | Loan requires monthly interest-only payments for the first thirty-six ( |
| (3) | Original principal amount was $ |
| (4) | Payments deferred for thirty ( |
| (5) | In October 2020, LE entered into the Equipment Loan Due 2025 to purchase a backhoe; the backhoe is used at the Nixon facility. The Equipment loan was paid in full in November 2025. |
| (6) | In March 2025, LE entered into the Equipment Loan Due 2031 to purchase mobile offices; the mobile offices are used at the Nixon facility. |
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Veritex Loans | ||||||||
| LE Term Loan Due 2034 (in default) | $ | $ | ||||||
| LRM Term Loan Due 2034 (in default) | ||||||||
| Kissick Debt (1) | ||||||||
| GNCU Loan | ||||||||
| NPS Term Loan Due 2031 (in default) | ||||||||
| SBA Economic Injury Disaster Loans | ||||||||
| Blue Dolphin Term Loan Due 2051 | ||||||||
| LE Term Loan Due 2050 | ||||||||
| NPS Term Loan Due 2050 | ||||||||
| Equipment Loan Due 2025 | ||||||||
| Equipment Loan Due 2031 | ||||||||
| Less: Long-term debt, net, current portion | ( | ) | ( | ) | ||||
| Less: Unamortized debt issue costs | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| (1) | Kissick Debt was paid in full in March 2025. |
Unamortized debt issue costs associated with the Veritex and GNCU loans, as of the dates indicated, consisted of the following:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Veritex Loans | ||||||||
| LE Term Loan Due 2034 (in default) | $ | $ | ||||||
| LRM Term Loan Due 2034 (in default) | ||||||||
| GNCU Loan | ||||||||
| NPS Term Loan Due 2031 (in default) | ||||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Amortization expense was less than $
| Notes to Consolidated Financial Statements (Continued) |
Accrued interest related to third-party long-term debt, reflected as accrued interest payable in our consolidated balance sheets, as of the dates indicated, consisted of the following:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| SBA Economic Injury Disaster Loans | ||||||||
| Blue Dolphin Term Loan Due 2051 | $ | $ | ||||||
| LE Term Loan Due 2050 | ||||||||
| NPS Term Loan Due 2050 | ||||||||
| Veritex Loans | ||||||||
| LE Term Loan Due 2034 (in default) | ||||||||
| LRM Term Loan Due 2034 (in default) | ||||||||
| GNCU Loan | ||||||||
| NPS Term Loan Due 2031 (in default) | ||||||||
| Equipment Loan Due 2025 | ||||||||
| Less: Accrued interest payable, current portion | ( | ) | ( | ) | ||||
| Long-term interest payable, net of current portion | $ | $ | ||||||
We classified the debt associated with the LE Term Loan Due 2034, LRM Term Loan Due 2034, and NPS Term Loan Due 2031 within long-term debt, current portion on our consolidated balance sheets at September 30, 2025 and December 31, 2024 due to being in default.
Defaults.
| Notes to Consolidated Financial Statements (Continued) |
Guarantees and Security.
| Loan Description | Guarantees | Security | |
| Veritex Loans | |||
| LE Term Loan Due 2034 (in default) | ● USDA | ● | First priority lien on Nixon facility’s business assets (excluding accounts receivable and inventory) |
| ● Jonathan Carroll(1) | ● | Assignment of all Nixon facility contracts, permits, and licenses | |
| ● Affiliate cross-guarantees | ● | Absolute assignment of Nixon facility rents and leases, including tank rental income | |
| ● | $ | ||
| LRM Term Loan Due 2034 (in default) | ● USDA | ● | Second priority lien on rights of LE in crude distillation tower and other collateral of LE |
| ● Jonathan Carroll(1) | ● | First priority lien on real property interests of LRM | |
| ● Affiliate cross-guarantees | ● | First priority lien on all LRM fixtures, furniture, machinery, and equipment | |
| ● | First priority lien on all LRM contractual rights, general intangibles, and instruments, except with respect to LRM rights in its leases of certain specified tanks for which Veritex has second priority lien | ||
| ● | Substantially all assets | ||
| GNCU Loan | |||
| NPS Term Loan Due 2031 (in default) | ● USDA | ● | Deed of trust lien on approximately |
| ● Jonathan Carroll(1) | ● | Leasehold deed of trust lien on certain property leased by NPS from LE | |
| ● Affiliate cross-guarantees | ● | Assignment of leases and rents and certain personal property | |
| SBA EIDL | |||
| BDEC Term Loan Due 2051 | --- | ● | Business assets (e.g., machinery and equipment, furniture, fixtures, etc.) |
| LE Term Loan Due 2050 | --- | ● | Business assets (e.g., machinery and equipment, furniture, fixtures, etc.) |
| NPS Term Loan Due 2050 | --- | ● | Business assets (e.g., machinery and equipment, furniture, fixtures, etc.) |
| Equipment Loan Due 2025 | --- | ● | First priority security interest in the equipment (backhoe) |
| Equipment Loan Due 2031 | --- | ● | First priority security interest in the equipment (mobile offices) |
| (1) | Veritex required Jonathan Carroll to personally guarantee repayment of borrowed funds and accrued interest. |
| (10) | AROs |
Refinery and Facilities. Management has concluded that there is no legal or contractual obligation to dismantle or remove our refinery and facilities assets. Management believes that our refinery and facilities assets have indeterminate lives under FASB ASC guidance for estimating AROs because dates or ranges of dates upon which we would retire these assets cannot reasonably be estimated at this time. When a legal or contractual obligation to dismantle or remove refinery and facilities assets arises and a date or range of dates can reasonably be estimated for the retirement of these assets, we will estimate the cost of performing the retirement activities and record a liability for the fair value of that cost using present value techniques.
| Notes to Consolidated Financial Statements (Continued) |
Pipelines and Facilities and Oil and Gas Properties. We have AROs associated with decommissioning our pipelines and facilities assets, as well as for plugging and abandoning our oil and gas properties. We recorded a liability for the fair value of an ARO at the time the asset was installed or placed in service. From time to time we adjust the liability due to changes in estimates or the timing of decommissioning the assets. ARO liability as of the dates indicated was as follows:
| September 30, | December 31 | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| AROs, at the beginning of the period | $ | $ | ||||||
| Liabilities settled | ( | ) | ||||||
| Changes in estimate | ||||||||
| Less: AROs, current portion | ||||||||
| Long-term AROs, at the end of the period | $ | $ | ||||||
BDPL's ARO estimate was $
| (11) | Lease Obligations |
Lease Obligations
| September 30, | December 31 | ||||||||
| Balance Sheet Location | 2025 | 2024 | |||||||
| (in thousands) | |||||||||
| Assets | |||||||||
| Operating lease ROU assets | Operating lease ROU assets | $ | $ | ||||||
| Less: Accumulated amortization on operating lease assets | Operating lease ROU assets | ( | ) | ( | ) | ||||
| Total lease assets | |||||||||
| Liabilities | |||||||||
| Current | |||||||||
| Operating lease | Current portion of lease liabilities | ||||||||
| Noncurrent | |||||||||
| Operating lease | Long-term lease liabilities, net of current | ||||||||
| Total lease liabilities | $ | $ | |||||||
| Notes to Consolidated Financial Statements (Continued) |
| Weighted average remaining lease term in years | ||||
| Operating lease | ||||
| Weighted average discount rate | ||||
| Operating lease | % |
The following table presents information related to lease costs incurred for operating and finance leases:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Operating lease costs | $ | $ | $ | $ | ||||||||||||
| Short-term lease expense, related party | ||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
The table below presents supplemental cash flow information related to leases as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||
| Operating cash flows for operating lease | $ | $ | $ | $ | ||||||||||||
| September 30, | Operating Lease | |||
| (in thousands) | ||||
| 2025 | $ | |||
| 2026 | ||||
| $ | ||||
| Notes to Consolidated Financial Statements (Continued) |
| (12) | Income Taxes |
The Inflation Reduction Act ("IRA") was enacted in August 2022. The IRA imposes a 15% alternative minimum tax on corporations whose average annual adjusted financial statement income during the most recently completed three-year period exceeds $1.0 billion. We do not fall within the “applicable corporations” category and are therefore exempt from paying an alternative minimum tax.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Current | ||||||||||||||||
| Federal | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| State | ( | ) | ( | ) | ||||||||||||
| Deferred | ||||||||||||||||
| Federal | ||||||||||||||||
| Change in valuation allowance | ||||||||||||||||
| Total provision for income taxes | $ | $ | $ | $ | ||||||||||||
We record income tax related interest and penalties, if applicable, as a component of the provision for income tax expense. Furthermore, none of our federal and state income tax returns are currently under examination by the IRS or state authorities. As of the nine months ended September 30, 2025, fiscal years 2021 and later remain subject to examination by the IRS and fiscal years 2020 and later remain subject to examination by the State of Texas. We believe there are no uncertain tax positions for both federal and state income taxes.
U.S. GAAP treats Texas franchise tax, a form of business tax imposed on an entity’s gross profit rather than its net income, like an income tax for financial reporting purposes.
Deferred income taxes as of the dates indicated consisted of the following:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Deferred tax assets: | ||||||||
| NOL and capital loss carryforwards | $ | $ | ||||||
| Business interest expense | ||||||||
| Start-up costs (crude oil and condensate processing facility) | ||||||||
| ARO liability/deferred revenue | ||||||||
| Other | ||||||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Basis differences in property and equipment | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
| Notes to Consolidated Financial Statements (Continued) |
At September 30, 2025, there were uncertain tax positions for which a reserve or liability was necessary.
NOL Carryforwards. Under IRC Section 382, a corporation that undergoes an “ownership change” is subject to limitations on using pre-change NOL carryforwards to offset future taxable income. Within the meaning of IRC Section 382, an “ownership change” occurs when the aggregate stock ownership of stockholders who own more than 5% (after applying certain look-through rules) increases by more than fifty percent [50% over such stockholders’ lowest percentage ownership during the testing period (generally three years)]. Based on the tax rule, ownership changes occurred in 2005 and 2012. The 2005 ownership change related to a series of private placements; the 2012 ownership change related to a reverse acquisition.
NOL carryforwards that remained available for future use for the periods indicated was as follows (amounts shown are net of NOLs that will expire unused because of the IRC Section 382 limitation):
| Net Operating Loss Carryforward | ||||||||||||
| Pre-Ownership | Post-Ownership | |||||||||||
| Change | Change | Total | ||||||||||
| (in thousands) | ||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Net operating losses used and expired | ( | ) | ||||||||||
| Balance at December 31, 2024 | $ | $ | $ | |||||||||
| Net operating losses used and expired | ( | ) | ( | ) | ( | ) | ||||||
| Balance at September 30, 2025 | $ | $ | $ | |||||||||
| Notes to Consolidated Financial Statements (Continued) |
| (13) | Earnings and Dividends Per Share |
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (in thousands, | (in thousands, | |||||||||||||||
| except share and per share amounts) | except share and per share amounts) | |||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted earnings (loss) per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted shares used in computing earnings per share | ||||||||||||||||
Diluted EPS for the three and nine months ended September 30, 2025 and 2024 was the same as basic EPS as there were stock options or other dilutive instruments outstanding. Basic and diluted EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding.
| (14) | Commitments and Contingencies |
Fourth Amended and Restated Operating Agreement. See “Note (3)” to our consolidated financial statements for additional disclosures related to operation and management of all Blue Dolphin assets by an Affiliate under the Fourth Amended and Restated Operating Agreement and modifications to this agreement.
| Notes to Consolidated Financial Statements (Continued) |
Legal Matters. In the ordinary course of business, we are involved in legal matters incidental to the routine operation of our business, such as mechanic’s liens and contract-related disputes. We may also become party to lawsuits, administrative proceedings, and governmental investigations, including environmental, regulatory, and other matters. Large, sometimes unspecified, damages or penalties may be sought from us in some matters, which may require years to resolve. Although we cannot provide assurance, we believe that an adverse resolution of the matters described below would not have a material impact on our liquidity, consolidated financial position, or consolidated results of operations.
Resolved Matters.
RLI Corp. Surety Bonds. Blue Dolphin currently has surety bonds through RLI Corp. as required by different regulatory agencies, including an area-wide general lease surety bond to operate in the Gulf of America and multiple pipeline surety bonds with BOEM and an operator performance bond with the Railroad Commission of Texas. The bonds total approximately $
TCEQ Final Agreed Order. In October 2021, LRM received a proposed agreed order from the TCEQ for alleged solid and hazardous waste violations discovered during an investigation from January to March 2020. The proposed agreed order assessed an administrative penalty of $
BOEM Supplemental Pipeline Surety Bonds. To cover the various obligations of lessees and rights-of-way holders operating in federal waters of the U.S. Gulf of America, BOEM evaluates an operator’s financial ability to carry out present and future obligations to determine whether the operator must provide additional security beyond the statutory bonding requirements. Such obligations include the cost of plugging and abandoning wells and decommissioning pipelines and platforms at the end of production or service activities. Once plugging and abandonment work has been completed, the collateral backing the financial assurance is released by BOEM. Historically, BDPL maintained $
In February 2025, the USDOI directed BOEM and BDPL to submit either a joint status report, or separate status reports, to update the court relative to the facts in the case. If joint, submissions were due by March 11, 2025; if separate, BOEM’s submission was due by March 11, 2025 and BDPL’s response to BOEM’s submission was due by March 25, 2025. Although BOEM submitted its report by its respective deadline, BDPL missed its deadline as notifications were sent to BDPL’s former counsel in the matter. On March 10, 2025, the USDOI notified BDPL by letter that the agency granted BDPL until March 31, 2025 to submit its response; however, management was not in receipt of the USDOI’s notification letter until March 25, 2025. On March 27, 2025, BDPL filed a motion through new counsel requesting an extension of its deadline to file its status report response no later than April 30, 2025; BDPL filed the required status report response to the court on April 24, 2025. On June 4, 2025, the IBLA issued a notice allowing BOEM and BDPL to engage in settlement negotiations, if desired. However, in August 2025, the IBLA dismissed BDPL's appeals to provide additional supplemental pipeline bonds. Based on dismissal of the appeals, BOEM can pursue enforcement of the original orders.
| Notes to Consolidated Financial Statements (Continued) |
Decommissioning Obligations. BSEE mandated that BDPL's pipelines and facilities assets, including its offshore platform, offshore in federal waters be decommissioned due to their extended period of inactivity. BDPL's delay in decommissioning its offshore assets does not relieve BDPL of its obligations to comply with BSEE's mandate or of BSEE's authority to impose civil penalties. On March 17, 2025, BSEE issued BDPL an INC for failing to decommission Pipeline Segment No. 8437.
In October 2025, our third-party consultant completed its review and analysis of its request for bid process to decommission our offshore assets. Final project estimates were double what management expected. As a result, management increased its ARO liability from $
| ● | Civil Penalty G-2024-054. In August 2024, BDPL received a civil penalty referral letter from BSEE for failing to remove its GA-288C junction platform offshore in federal waters. The civil penalty referral is associated with BSEE INC No. G-114 issued in October 2023. In March 2025, BSEE calculated a proposed civil penalty of $ |
| ● | Civil Penalty G-2024-056. In August 2024, BDPL received a civil penalty referral letter from BSEE for failing to flush, fill, and abandon its lateral pipeline from GA-245 to the GA-273 subsea tie-in (Pipeline Segment No. 15635) offshore in federal waters. The civil penalty referral is associated with BSEE INC No. G-802 issued in November 2023. In January 2025, BSEE calculated a proposed civil penalty of $ |
BDPL had 60 days from receipt of BSEE's final decisions to: (1) pay the civil penalties, (2) request an informal resolution with the reviewing officers' next-level supervisor, or (3) appeal BSEE's decisions to the IBLA. In September 2025, BDPL requested an informal follow up meeting with the reviewing officers' next-level supervisor; the next-level supervisor confirmed receipt of the requests. As of the filing date of this report, the parties were working to schedule the informal follow up meeting to review Civil Penalties G-2024-054 and G-2024-056.
BDPL remains subject to additional civil penalties until the violation(s) have been corrected. At September 30, 2025, we accrued $
The following BDPL civil penalty referral was closed:
| ● | Civil Penalty G-2024-010. In April 2024, BDPL received a civil penalty referral letter from BSEE for failing to remediate certain BSEE INCs issued in September 2023 associated with its GA-288C junction platform offshore in federal waters. Specifically, remediation is associated with BSEE INC Nos. E120 (physically boarding platform monthly, performing visual inspections for environmental pollution, and maintaining monthly inspection records), G112 (removing 55-gallon drum leaking oil on platform deck), L141 (flushing and filling Pipeline Segment No. 13101 with inhibited seawater), and L142 (decommissioning in place Pipeline Segment No. 13101). In March 2025, BSEE calculated a proposed civil penalty of $ |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is management’s perspective of our current financial condition and results of operations, as well as significant trends that may affect future performance. All statements in this section, other than statements of historical fact, are forward-looking statements that are inherently uncertain. See "Important Information Regarding Forward-Looking Statements” for a discussion of the factors that could cause actual results to differ materially from those projected in these statements. You should read the following discussion together with the financial statements and the related notes included elsewhere in this report, as well as with the business strategy, risk factors, and financial statements and related notes included thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Blue Dolphin was formed in 1986 as a Delaware corporation. The company is an independent downstream energy company operating in the Gulf Coast region of the U.S. Operations primarily consist of a light sweet-crude, 15,000-bpd crude distillation tower, and approximately 1.25 million bbls of petroleum storage tank capacity in Nixon, Texas. Blue Dolphin trades on the OTCQX under the ticker symbol “BDCO.”
Unless the context otherwise requires, references in this report to “we,” “us,” “our,” or “ours” refer to Blue Dolphin, one or more of its consolidated subsidiaries, or all of them taken as a whole.
Jonathan Carroll, our Chief Executive Officer, and an Affiliate together controlled 84.4% of the voting power of our Common Stock as of the filing date of this report. An Affiliate also operates and manages all Blue Dolphin properties, funds working capital requirements during periods of working capital deficits, guarantees certain of our third-party secured debt, and is a significant customer. Blue Dolphin and certain subsidiaries are currently parties to various agreements with Affiliates. See “Part I, Item 1. Financial Statements – Note (3)” for additional disclosures related to Affiliate agreements, arrangements, and risks associated with working capital deficits.
Business Operations Update
During the third quarter of 2025, refining margins were $3.3 million more favorable to the third quarter of 2024. For the nine months ended September 30, 2025, refining margins were $3.4 million more favorable compared to the nine months ended September 30, 2024. Blue Dolphin's net income (loss) increased to ($4.2) million, or ($0.28) per share, for the nine months ended September 30, 2025 compared net income (loss) of ($4.7) million, or ($0.32) per share, for the nine months ended September 30, 2024.
Our full operating results for the three and nine months ended September 30, 2025 and September 30, 2024, including results by segment, can be found within ‘Results of Operations.’
We used cash flow from operations of $2.5 million for the nine months ended September 30, 2025. The use of cash flow from operations was primarily due to an increase in accounts receivable, related party and a decrease in accounts payable. Inventory remains elevated due primarily to unfavorable product pricing, limited opportunities for customers who export to Mexico, and an intentional buildup of inventory by us during periods of low refining margins. At September 30, 2025, we had $3.3 million in cash and cash equivalents. The components of our liquidity and descriptions of our cash flows, capital investments, and other matters impacting our liquidity and capital resources can be found within ‘Liquidity and Capital Resources.’
General Trends and Outlook
Uncertainties remain surrounding general macroeconomic conditions related to inflation, tariffs, interest rates, capital and credit markets, and geopolitical tensions (including military conflicts in Ukraine and Israel and escalations in the Middle East). We do not operate or own assets in Russia, Ukraine, or the Middle East. However, the extent to which these factors impact our working capital, commodity prices, refined product demand, supply chain, financial condition, liquidity, results of operations, and future prospects will depend on future developments, which cannot be predicted with any degree of confidence. While it is difficult to predict the ultimate economic impacts of these factors on our operations, below are key factors that impacted our results of operations so far in 2025 and will likely impact our results of operations for the rest of 2025 and into 2026:
| ● | Light crude oil commodity pricing and demand. |
| Management’s Discussion and Analysis (Continued) |
| ● | Jet fuel commodity pricing and demand. |
| ● | Naphtha commodity pricing and demand. |
We can provide no guarantees that: our business strategy will be successful, Affiliates will continue to fund our working capital needs when we experience working capital deficits, we will meet regulatory requirements to provide additional financial assurance (supplemental pipeline surety bonds) and decommission offshore pipelines and platform assets, we can obtain additional financing on commercially reasonable terms or at all, or margins on our refined products will be favorable. Further, if lenders exercise their rights and remedies under secured loan agreements that are in default, our business, financial condition, and results of operations will be materially adversely affected.
Liquidity and Access to Capital Markets
We continue efforts to improve our balance sheet. In March 2025, we fully repaid our debt obligation to the Kissick Noteholder, and we continue to engage with potential lenders to obtain additional funding to refinance and restructure our debt. There can be no assurance that we will be able to raise additional capital on acceptable terms, if at all, or refinance existing debt. If we are unable to refinance or restructure our debt, certain of which is currently in default, or forbear or waive defaults and lenders exercise their rights with respect to the debt, we may not, in the short term, be able to purchase crude oil and condensate or meet debt payment obligations. In the long term, we may not be able to manage business disruptions or execute our business strategy. We may have to consider other options, such as selling assets, raising additional debt or equity capital, filing bankruptcy, or ceasing operations.
Regulation Changes
Our operations and the operations of our customers have been, and will continue to be, affected by political developments and federal, state, tribal, local, and other laws and regulations that are increasing in number and becoming more stringent and complex. These laws and regulations include, among other things, permitting requirements, environmental protection measures such as limitations on methane and other GHG emissions, and renewable fuels standards. The number and scope of the regulations with which we and our customers must comply has a meaningful impact on our and their businesses, and new or revised regulations, reinterpretations of existing regulations, and permitting delays or denials could adversely affect the profitability of our assets.
Business Strategy and Accomplishments
We have outlined the below strategic business objectives to improve our financial profile and refining margins. These objectives are modified, as necessary, to reflect changing economic conditions and other circumstances.
| Optimize Existing Asset Base |
● Maintain safe operations and enhance health, safety, and environmental systems. ● Plan and manage turnarounds and downtime. |
| Improve Operational Efficiencies |
● Reduce or streamline variable costs incurred in production. ● Increase throughput capacity and optimize product slate. ● Increase tolling and terminaling revenue. |
| Seize Market Opportunities |
● Leverage existing infrastructure to engage in renewable energy projects. ● Take advantage of market opportunities as they arise. |
Successful execution of our business strategy depends on multiple factors. These factors include (i) having adequate working capital to meet operational needs and regulatory requirements, (ii) maintaining safe and reliable operations at the Nixon facility, (iii) meeting contractual obligations, (iv) having favorable margins on refined products, and (v) collaborating with new partners to develop and finance clean energy projects. Our business strategy involves risks. Accordingly, we cannot assure investors that our plans will be successful. If we are unsuccessful, we would likely have to consider other options, such as selling assets, raising additional debt or equity capital, cutting costs, or otherwise reducing our cash requirements, negotiating with our creditors to restructure our applicable obligations, filing bankruptcy, or ceasing operating. In such a case, the trading price of our common stock and the value of an investment in our common stock could significantly decrease, which could lead to holders of our common stock losing their investment in our common stock in its entirety.
| Management’s Discussion and Analysis (Continued) |
Optimize Existing Asset Base. During the nine months ended September 30, 2025, the Nixon facility experienced 17 days of downtime, which includes a 12 day pre-planned turnaround during the three months ended March 31, 2025. Comparatively, the Nixon facility experienced 21 days of downtime for the nine months ended September 30, 2024.The decrease in 2025 is due to frigid weather (3 days) in 2024 and less turnaround days.
Improve Operational Efficiencies. During the nine months ended September 30, 2025 we optimized the efficiency of the Nixon refinery's flare gas monitoring system. Improvements to the flare gas system will reduce greenhouse gas emissions, optimize combustion efficiency, and lower operational costs.
Seize Market Opportunities. Management continues to review renewable energy growth opportunities with potential commercial partners. However, many renewable energy incentives established under the Inflation Reduction Act were terminated or significantly shortened by the One Big Beautiful Bill Act.
Our Operations
Our assets are organized into two business segments:
| ● |
refinery operations (also referred to herein as downstream operations), which is owned by LE; and |
| ● |
tolling and terminaling services (also referred to herein as midstream operations), which is owned by LRM and NPS |
| Property |
Key Products Handled |
Operating Subsidiary |
Location |
| Nixon facility ● Crude distillation tower (15,000 bpd) ● Petroleum storage tanks ● Loading and unloading facilities ● Land (56 acres) |
Crude Oil
Refined Products |
LE |
Nixon, Texas |
| Management’s Discussion and Analysis (Continued) |
| Property |
Key Products Handled |
Operating Subsidiary |
Location |
| Nixon facility ● Petroleum storage tanks (third-party leasing) ● Loading and unloading facilities |
Crude Oil Refined Products |
LRM, NPS |
Nixon, Texas |
| Management’s Discussion and Analysis (Continued) |
| Property |
Operating Subsidiary |
Location |
| Freeport facility ● Crude oil and natural gas separation and dehydration ● Natural gas processing, treating, and redelivery ● Vapor recovery unit ● Two onshore pipelines (the onshore portion of the 20-inch offshore pipeline and a 16-inch natural gas pipeline connecting the Freeport facility to the Dow Chemical Plant complex) ● Land (178 acres) |
BDPL |
Freeport, Texas |
| Offshore Pipelines ● 20-inch, 34 mile gathering pipeline with lateral lines originating at an offshore anchor platform in Galveston Area Block 288 ● 8-inch, 13-mile offshore pipeline extending from Galveston Area Block 350 to an interconnect at a transmission pipeline in Galveston Area Block 391 |
BDPL |
U.S. Gulf of America |
| Leasehold Interests in Offshore Oil and Gas Wells |
BDPC |
U.S. Gulf of America |
Results of Operations
Below is a discussion and analysis of the factors contributing to our consolidated financial results of operations. This information should be read in conjunction with our financial statements in “Part I, Item 1. Financial Statements.” While management intends for the financial statements, together with the following information, to provide investors with a reasonable basis for assessing our historical operations, they should not serve as the only criteria for predicting future performance.
Major Influences on Results of Operations. Our results of operations and liquidity are highly dependent upon the margins that we receive for our refined products. The dollar per barrel commodity price difference between crude oil and condensate (input) and refined products (output) is the most significant driver of refining margins, and they have historically been subject to wide fluctuations. When the spread between these commodity prices decreases, our margins are negatively affected. To improve margins, we must maximize yields of higher-value finished petroleum products and minimize costs of feedstocks and operating expenses. Although an increase or decrease in the commodity price for crude oil and other feedstocks generally result in a similar increase or decrease in commodity prices for finished petroleum products, typically there is a time lag between the two. For example, if the price per barrel of crude oil increases, the price of jet fuel per barrel will also generally increase, as jet fuel is a refined product derived from crude oil. Therefore, the effect of crude oil commodity price changes on our finished petroleum product commodity prices depends, in part, on how quickly and how fully the market adjusts to reflect these changes. Unfavorable margins may have a material adverse effect on our earnings, cash flows, and liquidity.
The general outlook for the oil and natural gas industry for the remainder of 2025 remains unclear given uncertainties surrounding general macroeconomic conditions related to inflation, tariffs, interest rates, capital and credit markets, and geopolitical tensions (including military conflicts in Ukraine and Israel and escalations in the Middle East). We can provide no assurances that refining margins will be positive and demand will increase.
| Management’s Discussion and Analysis (Continued) |
How We Evaluate Our Operations. Management uses certain financial and operating measures to analyze segment performance. These measures are significant factors in assessing our operating results and profitability and include: Earnings before interest, income taxes, and depreciation and amortization ("EBITDA") on a consolidated and segment basis, refinery throughput, production and sales data, refinery downtime, tolling and terminaling revenue, and intercompany processing fees.
Consolidated Results. Our consolidated results of operations include certain other unallocated corporate activities and the elimination of intercompany transactions and therefore do not equal the sum of the operating results of our refinery operations and tolling and terminaling business segments.
Q3 2025 Versus Q3 2024.
Overview. Net income (loss) for 2025 was ($4.7) million or $ (0.31) per share, compared to net income (loss) of ($5.0) million, or $ (0.34) per share, in 2024. The $0.3 million, or $0.03 per share, increase in net income (loss) between the periods was the result impairment of fixed assets partially offset by more favorable refining margins.
Total Revenue from Operations. Total revenue from operations was $70.4 million for 2025 compared to total revenue from operations of $82.1 million for 2024, representing a decrease of $11.8. The decrease in 2025 related to declines in both refinery operations and tolling and terminaling revenue. Refinery operations revenue in 2025 decreased primarily due to lower market pricing and lower sales volume. Tolling and terminaling revenue in 2025 declined primarily due to lower tank rental fees.
Total Cost of Goods Sold. Total cost of goods sold was $70.3 million for 2025 compared to total cost of goods sold of $85.4 million for 2024, representing a decrease of 17.7%. The decrease in 2025 related to market pricing associated with product sales mix, and a 10%, or $7.9 million decrease in sales volumes.
Gross Profit. Gross profit totaled $0.0 million for 2025 compared to gross profit of ($3.3) million for 2024. More favorable refining margins offset by a decrease in sales volume positively impacted refinery operations gross profit in 2025 compared to 2024.
LEH Operating Fee, Related Party. For 2025 the LEH operating fee, related party totaled $0.3 million compared to $0.2 million for 2024.
General and Administrative Expenses. General and administrative expenses totaled $1.6 million in 2025 compared general and administrative expenses of $1.0 million in 2024. The $0.6 million, or 56.9%, increase in 2025 primarily related to regulatory penalties, which includes the reversal of Civil Penalty G-2024-010, as well as professional service fees and insurance.
Interest and Other Non-Operating Expenses, Net. Total other expense in 2025 was $0.8 million compared to $1.5 million in 2024.
| Management’s Discussion and Analysis (Continued) |
Consolidated EBITDA. Consolidated EBITDA in 2025 totaled ($4.4) million compared to ($4.1) million in 2024 representing an decrease of $0.3 million. The decrease in 2025 was related to an impairment of fixed assets partially offset by more favorable refining margins. See Non-GAAP Measures, below, for a reconciliation to GAAP.
| Three Months Ended |
||||||||
| September 30, |
||||||||
| 2025 |
2024 |
|||||||
| Total revenue from operations |
$ | 70,355 | $ | 82,109 | ||||
| Total costs of good sold |
70,323 | 85,426 | ||||||
| Gross profit |
32 | (3,317 | ) | |||||
| LEH operating fee, related party |
279 | 202 | ||||||
| Other operating expenses |
117 | 177 | ||||||
| General and administrative expenses |
1,633 | 1,041 | ||||||
| Depreciation and amortization |
74 | 61 | ||||||
| Impairment of fixed assets |
3,026 | - | ||||||
| Interest, net |
849 | 1,548 | ||||||
| Total costs and expenses |
5,978 | 3,029 | ||||||
| Income before income taxes |
(5,946 | ) | (6,346 | ) | ||||
| Income tax benefit (expense) |
1,270 | 1,346 | ||||||
| Net income (loss) |
$ | (4,676 | ) | $ | (5,000 | ) | ||
| Income (loss) per common share |
||||||||
| Basic |
$ | (0.31 | ) | $ | (0.34 | ) | ||
| Diluted |
$ | (0.31 | ) | $ | (0.34 | ) | ||
| Three Months Ended |
||||||||
| September 30, |
||||||||
| 2025 |
2024 |
|||||||
| Income before income taxes |
$ | (5,946 | ) | $ | (6,346 | ) | ||
| Add: depreciation and amortization |
718 | 705 | ||||||
| Add: interest, net |
849 | 1,548 | ||||||
| Consolidated EBITDA |
$ | (4,379 | ) | $ | (4,093 | ) | ||
| Management’s Discussion and Analysis (Continued) |
YTD 2025 Versus YTD 2024.
Overview. Net income (loss) for YTD 2025 was ($4.2) million, or ($0.28) per share, compared to net income (loss) of ($4.7) million, or ($0.32) per share, in YTD 2024. The $0.6 million, or $0.04 per share, increase in net loss between the periods was the primarily the result an asset impairment partially offset by more favorable refining margins.
Total Revenue from Operations. Total revenue from operations was $210.6 million for YTD 2025 compared to total revenue from operations of $242.8 million for YTD 2024, representing a decrease of 13.2%. The decrease in YTD 2025 related to declines in both refinery operations and tolling and terminaling revenue. Refinery operations revenue in YTD 2025 decreased primarily due to lower market pricing and decreased sales volumes; tolling and terminaling revenue in YTD 2025 declined primarily due to lower tank rental fees.
Total Cost of Goods Sold. Total cost of goods sold was $204.0 million for YTD 2025 compared to total cost of goods sold of $239.6 million for YTD 2024, representing a decrease of 14.9%. The decrease in YTD 2025 related to lower market pricing associated with product sales mix, and a 12%, or $25.9 million, decrease in sales volumes.
Gross Profit. Gross profit totaled $6.7 million for YTD 2025 compared to gross profit of $3.2 million for YTD 2024. More favorable refining margins positively impacted refinery operations gross profit in YTD 2025 compared to YTD 2024.
LEH Operating Fee, Related Party. For YTD 2025, the LEH operating fee, related party totaled $0.7 million compared to $0.6 million for YTD 2024.
General and Administrative Expenses. General and administrative expenses totaled $3.7 million in YTD 2025 compared to general and administrative expenses of $3.5 million in YTD 2024. The $0.2 million, or 5.6% increase, in YTD 2025 primarily related to regulatory penalties, which includes the reversal of Civil Penalty G-2024-010, as well as professional service fees and insurance.
Interest and Other Non-Operating Expenses, Net. Total other expense was $3.9 million in YTD 2025 compared to $4.4 million in YTD 2024.
Consolidated EBITDA. Consolidated EBITDA in YTD 2025 totaled $0.8 million compared to $0.5 million in YTD 2024 representing an increase of $0.2 million. The increase in YTD 2025 was related more favorable refining margins and lower tolling and terminaling total revenue. See Non-GAAP Measures, below, for a reconciliation to GAAP.
| Nine Months Ended |
||||||||
| September 30, |
||||||||
| 2025 |
2024 |
|||||||
| Total revenue from operations |
$ | 210,630 | $ | 242,790 | ||||
| Total costs of good sold |
203,975 | 239,619 | ||||||
| Gross profit |
6,655 | 3,171 | ||||||
| LEH operating fee, related party |
737 | 628 | ||||||
| Other operating expenses |
361 | 457 | ||||||
| General and administrative expenses |
3,692 | 3,495 | ||||||
| Depreciation and amortization |
222 | 184 | ||||||
| Impairment of fixed assets |
3,026 | - | ||||||
| Interest, net |
3,865 | 4,354 | ||||||
| Total costs and expenses |
11,903 | 9,118 | ||||||
| Income before income taxes |
(5,248 | ) | (5,947 | ) | ||||
| Income tax benefit (expense) |
1,094 | 1,221 | ||||||
| Net income (loss) |
$ | (4,154 | ) | $ | (4,726 | ) | ||
| Income (loss) per common share |
||||||||
| Basic |
$ | (0.28 | ) | $ | (0.32 | ) | ||
| Diluted |
$ | (0.28 | ) | $ | (0.32 | ) | ||
| Management’s Discussion and Analysis (Continued) |
| Nine Months Ended |
||||||||
| September 30, |
||||||||
| 2025 |
2024 |
|||||||
| Income before income taxes |
$ | (5,248 | ) | $ | (5,947 | ) | ||
| Add: depreciation and amortization |
2,149 | 2,114 | ||||||
| Add: interest, net |
3,865 | 4,354 | ||||||
| Consolidated EBITDA |
$ | 766 | $ | 521 | ||||
Downstream Operations. Our refinery operations business segment is owned by LE. Assets within this segment consist of a light sweet-crude, 15,000-bpd crude distillation tower, petroleum storage tanks, loading and unloading facilities, and approximately 56 acres of land. Refinery operations revenue is derived from refined product sales.
Q3 2025 Versus Q3 2024
Total refined product sales by distillation (from light to heavy) for the periods indicated consisted of the following:
| Three Months Ended September 30, |
||||||||||||||||
| 2025 |
2024 |
|||||||||||||||
| (in thousands, except percent amounts) |
||||||||||||||||
| LPG mix |
$ | - | 0.0 | % | $ | 188 | 0.2 | % | ||||||||
| Naphtha |
17,032 | 24.5 | % | 26,731 | 32.9 | % | ||||||||||
| Jet fuel |
24,525 | 35.2 | % | 31,171 | 38.4 | % | ||||||||||
| HOBM |
10,770 | 15.5 | % | 3,672 | 4.5 | % | ||||||||||
| AGO |
17,263 | 24.8 | % | 19,518 | 24.0 | % | ||||||||||
| $ | 69,590 | 100.0 | % | $ | 81,280 | 100.0 | % | |||||||||
Refinery Downtime. Refinery downtime decreased to 2 days in Q3 2025 from 3 days in Q3 2024. Refinery downtime in Q3 2024 related to maintenance and repairs.
Refinery Operations Revenue. Refinery operations revenue was $69.6 million for Q3 2025 compared to $81.0 million for Q3 2024, representing a decrease of 14.1%. The decrease in 2025 related to lower market pricing.
Cost of Goods Sold. Cost of goods sold for refinery operations was $70.6 million for Q3 2025 compared to $85.6 million for Q3 2024, representing a decrease of 17.5%. The decrease in Q3 2025 was related to the product sales mix and lower crude pricing.
LEH Operating Fee, Related Party. LEH operating fee for Q3 2025 was $0.3 million compared to $0.2 million for Q3 2024.
Refining EBITDA. Refining EBITDA was ($1.5) million in Q3 2025 compared to ($4.5) million in Q3 2024, representing an increase of 63.6%. The significant increase in 2025 was related to more favorable refining margins. See Non-GAAP Measures, below, for a reconciliation to GAAP.
| Management’s Discussion and Analysis (Continued) |
Refining Operations EBITDA per Bbl. On a per barrel basis, refining EBITDA was ($1.60) for 2025 compared to ($4.39) for 2024, representing an increase of $2.79 per barrel. The increase in 2025 related to more favorable refining margins.
| Three Months Ended |
||||||||
| September 30, |
||||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| Refinery operations revenue |
$ | 69,590 | $ | 81,280 | ||||
| Crude oil, fuel use, and chemicals |
62,279 | 80,069 | ||||||
| Other conversion costs |
7,998 | 5,243 | ||||||
| Depreciation and amortization |
302 | 302 | ||||||
| Cost of goods sold |
70,579 | 85,614 | ||||||
| LEH operating fee, related party |
279 | 202 | ||||||
| General and administrative expenses |
529 | 305 | ||||||
| Interest, net |
249 | 900 | ||||||
| Total costs and expenses |
71,636 | 87,021 | ||||||
| Income (loss) before income taxes |
(2,046 | ) | (5,741 | ) | ||||
| Add: depreciation and amortization |
302 | 302 | ||||||
| Add: interest, net |
249 | 900 | ||||||
| Refining EBITDA |
$ | (1,495 | ) | $ | (4,539 | ) | ||
| Sales (Mbbls) |
934 | 1,034 | ||||||
| Refining operations EBITDA per bbl |
$ | (1.60 | ) | $ | (4.39 | ) |
||
YTD 2025 Versus YTD 2024
Total refined product sales by distillation (from light to heavy) for the periods indicated consisted of the following:
| Nine Months Ended September 30, |
||||||||||||||||
| 2025 |
2024 |
|||||||||||||||
| (in thousands, except percent amounts) |
||||||||||||||||
| LPG mix |
$ | - | 0.0 | % | $ | 304 | 0.1 | % | ||||||||
| Naphtha |
38,058 | 18.3 | % | 59,513 | 24.8 | % | ||||||||||
| Jet fuel |
76,869 | 36.9 | % | 84,591 | 35.3 | % | ||||||||||
| HOBM |
35,195 | 16.9 | % | 30,573 | 12.8 | % | ||||||||||
| AGO |
58,131 | 27.9 | % | 64,762 | 27.0 | % | ||||||||||
| $ | 208,253 | 100.0 | % | $ | 239,743 | 100.0 | % | |||||||||
Refinery Downtime. Refinery downtime decreased from 21 days in YTD 2024 to 17 days in YTD 2025. Refinery downtime in YTD 2025 related to maintenance and repairs. Refinery downtime in YTD 2024 related to weather (3 days of freezing temperatures in January 2024) and 18 days related to maintenance and repairs.
Refinery Operations Revenue. Refinery operations revenue was $208.3 million for YTD 2025 compared to $239.7 million for YTD 2024, representing a decrease of 13.1%. The decrease in YTD 2025 related to lower market pricing and lower sales volumes.
Cost of Goods Sold. Cost of goods sold for refinery operations was $204.4 million for YTD 2025 compared to $239.4 million for YTD 2024, representing a decrease of 14.6%. The decrease in YTD 2025 was related to the product sales mix and lower crude pricing.
| Management’s Discussion and Analysis (Continued) |
LEH Operating Fee, Related Party. For YTD 2025 the LEH operating fee was $0.7 million compared to $0.6 million in YTD 2024.
Refining EBITDA. Refining EBITDA was $2.5 million in YTD 2025 compared to ($0.3) million in YTD 2024, representing a $2.8 million or 953.2% increase. The significant increase in YTD 2025 was related to the product sales mix partially offset by a $0.5 million increase in General and administrative expenses. See Non-GAAP Measures, below, for a reconciliation to GAAP.
Refining Operations EBITDA per Bbl. On a per barrel basis, refining EBITDA was $0.96 for YTD 2025 compared to ($0.11) for YTD 2024, representing a increase of $1.07 per barrel. The increase in YTD 2025 is primarily related to product sales mix partially offset by a $0.5 million increase in General and administrative expenses.
| Nine Months Ended |
||||||||
| September 30, |
||||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| Refinery operations revenue |
$ | 208,253 | $ | 239,743 | ||||
| Crude oil, fuel use, and chemicals |
187,524 | 221,558 | ||||||
| Other conversion costs |
16,000 | 16,917 | ||||||
| Depreciation and amortization |
901 | 904 | ||||||
| Cost of goods sold |
204,425 | 239,379 | ||||||
| LEH operating fee, related party |
737 | 628 | ||||||
| General and administrative expenses |
1,448 | 933 | ||||||
| Interest, net |
2,013 | 2,440 | ||||||
| Total costs and expenses |
208,623 | 243,380 | ||||||
| Income (loss) before income taxes |
(370 | ) | (3,637 | ) | ||||
| Add: depreciation and amortization |
901 | 904 | ||||||
| Add: interest, net |
2,013 | 2,440 | ||||||
| Refining EBITDA |
$ | 2,544 | $ | (293 | ) | |||
| Sales (Mbbls) |
2,642 | 2,753 | ||||||
| Refining operations EBITDA per bbl |
$ | 0.96 | $ | (0.11 | ) | |||
Midstream Operations. Our tolling and terminaling business segment is owned by LRM and NPS. Assets within this segment include petroleum storage tanks and loading and unloading facilities. Tolling and terminaling revenue is derived from storage tank rental fees, ancillary services fees (such as in-tank blending), and tolling and reservation fees for use of the naphtha stabilizer.
2025 Versus 2024
Tolling and Terminaling Total Revenue. Tolling and terminaling total revenue was $1.5 million in Q3 2025 compared to $1.8 million in Q3 2024, representing a decrease of 16.7%. The decrease in Q3 2025 related to lower tank rental fees and a decrease in the number of tanks rented.
| Management’s Discussion and Analysis (Continued) |
Tolling and Terminaling EBITDA. We had tolling and terminaling EBITDA of $1.3 million in Q3 2025 compared to $1.3 million in Q3 2024.
| Three Months Ended |
||||||||
| September 30, |
||||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| Tolling and terminaling revenue |
$ | 1,537 | $ | 1,759 | ||||
| Tolling and terminaling costs |
174 | 400 | ||||||
| Depreciation and amortization |
342 | 342 | ||||||
| Cost of goods sold |
516 | 742 | ||||||
| General and administrative expenses |
70 | 69 | ||||||
| Interest, net |
437 | 512 | ||||||
| Total costs and expenses |
1,023 | 1,323 | ||||||
| Income before income taxes |
514 | 436 | ||||||
| Add: depreciation and amortization |
342 | 342 | ||||||
| Add: interest, net |
437 | 512 | ||||||
| Tolling and terminaling EBITDA |
$ | 1,293 | $ | 1,290 | ||||
YTD 2025 Versus YTD 2024
Tolling and Terminaling Total Revenue. Tolling and terminaling total revenue was $4.3 million in YTD 2025 compared to $5.1 million in YTD 2024, representing a decrease of 15.7%. The decrease in YTD 2025 related to lower tank rental fees and a decrease in the number of tanks rented.
Tolling and Terminaling EBITDA. We had tolling and terminaling EBITDA of $3.6 million in YTD 2025 compared to $3.7 million in YTD 2024.
| Nine Months Ended |
||||||||
| September 30, |
||||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| Tolling and terminaling revenue |
$ | 4,289 | $ | 5,053 | ||||
| Tolling and terminaling costs |
436 | 1,220 | ||||||
| Depreciation and amortization |
1,026 | 1,026 | ||||||
| Cost of goods sold |
1,462 | 2,246 | ||||||
| General and administrative expenses |
230 | 161 | ||||||
| Interest, net |
1,358 | 1,506 | ||||||
| Total costs and expenses |
3,050 | 3,913 | ||||||
| Income before income taxes |
1,239 | 1,140 | ||||||
| Add: depreciation and amortization |
1,026 | 1,026 | ||||||
| Add: interest, net |
1,358 | 1,506 | ||||||
| Tolling and terminaling EBITDA |
$ | 3,623 | $ | 3,672 | ||||
| Management’s Discussion and Analysis (Continued) |
Non-U.S. GAAP Measures.
The following are non-U.S. GAAP measures we present for the periods ended three and nine months ended September 30, 2025 and 2024:
Consolidated EBITDA. Income before interest, taxes, and depreciation and amortization on a consolidated basis.
Refining EBITDA. Income before interest, taxes, and depreciation and amortization for our refinery operations business segment.
Refining operations EBITDA per bbl. Refining EBITDA divided by sales (Mbbls) for the reporting period.
Tolling and terminaling EBITDA. Income before interest, taxes, and depreciation and amortization for our tolling and terminaling business segment.
We present these measures because they provide management and investors with (i) important supplemental indicators of the operational performance of our business, (ii) additional criteria for evaluation of our performance relative to our peers, and (iii) supplemental information to investors about certain material non-cash and other items that may not continue at the same level in the future. EBITDA has limitations as an analytical tool and should not be considered in isolation or as substitutes for analysis of our results as reported under U.S. GAAP or as alternatives to net income, operating income, gross margin, or any other measure of financial performance presented in accordance with U.S. GAAP.
| Three Months Ended |
||||||||||||||||||||||||||||||||
| September 30, |
||||||||||||||||||||||||||||||||
| 2025 |
2024 |
|||||||||||||||||||||||||||||||
| Refinery Operations |
Tolling & Terminaling |
Corporate & Other |
Total |
Refinery Operations |
Tolling & Terminaling |
Corporate & Other |
Total |
|||||||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||||||||||
| Income (loss) before income taxes |
$ | (2,046 | ) | $ | 514 | $ | (4,414 | ) | $ | (5,946 | ) | $ | (5,741 | ) | $ | 436 | $ | (1,041 | ) | $ | (6,346 | ) | ||||||||||
| Add: depreciation and amortization |
302 | 342 | 74 | 718 | 302 | 342 | 61 | 705 | ||||||||||||||||||||||||
| Add: interest, net |
249 | 437 | 163 | 849 | 900 | 512 | 136 | 1,548 | ||||||||||||||||||||||||
| EBITDA |
$ | (1,495 | ) | $ | 1,293 | $ | (4,177 | ) | $ | (4,379 | ) | $ | (4,539 | ) | $ | 1,290 | $ | (844 | ) | $ | (4,093 | ) | ||||||||||
| Nine Months Ended |
||||||||||||||||||||||||||||||||
| September 30, |
||||||||||||||||||||||||||||||||
| 2025 |
2024 |
|||||||||||||||||||||||||||||||
| Refinery Operations |
Tolling & Terminaling |
Corporate & Other |
Total |
Refinery Operations |
Tolling & Terminaling |
Corporate & Other |
Total |
|||||||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||||||||||
| Income (loss) before income taxes |
$ | (370 | ) | $ | 1,239 | $ | (6,117 | ) | $ | (5,248 | ) | $ | (3,637 | ) | $ | 1,140 | $ | (3,450 | ) | $ | (5,947 | ) | ||||||||||
| Add: depreciation and amortization |
901 | 1,026 | 222 | 2,149 | 904 | 1,026 | 184 | 2,114 | ||||||||||||||||||||||||
| Add: interest, net |
2,013 | 1,358 | 494 | 3,865 | 2,440 | 1,506 | 408 | 4,354 | ||||||||||||||||||||||||
| EBITDA |
$ | 2,544 | $ | 3,623 | $ | (5,401 | ) | $ | 766 | $ | (293 | ) | $ | 3,672 | $ | (2,858 | ) | $ | 521 | |||||||||||||
Capital Resources and Liquidity
Working Capital.
As of September 30, 2025 and the filing date of this report, certain conditions and events existed, in the aggregate, that caused management to evaluate Blue Dolphin's ability to continue as a going concern. Those conditions and events included historical and current working capital deficits and significant debt in default. Management believes that we have sufficient liquidity to meet our obligations as they become due through the generation of cash flows from operations and liquidation of current working capital amounts for a reasonable period (defined as one year from the issuance of these financial statements). Management acknowledges that uncertainty remains related to future operating margins; however, management has a reasonable expectation of Blue Dolphin's ability to generate adequate working capital for, amongst other requirements, purchasing crude oil and condensate and making payments on our long-term debt.
| Management’s Discussion and Analysis (Continued) |
Liquidity. Cash and cash equivalents totaled $2.3 million and $0.1 million at September 30, 2025 and December 31, 2024, respectively, representing an increase of $2.2 million. A significant portion of our liquidity at September 30, 2025 was invested in inventory. Restricted cash, current totaled $1.0 million at both September 30, 2025 and December 31, 2024. Restricted cash, current related to a Veritex payment reserve account. Accounts receivable—related party, which was associated with the sale of jet fuel to LEH, totaled $8.1 million and $5.2 million at September 30, 2025 and December 31, 2024, respectively.
We generally rely on revenue from operations, including sales of refined products and rental of petroleum storage tanks, Affiliates, and financing to meet our liquidity needs. Our short-term working capital needs are primarily related to: (i) purchasing crude oil and condensate to operate the Nixon refinery, (ii) reimbursing LEH for direct operating expenses and paying the LEH operating fee under the Fourth Amended and Restated Operating Agreement, (iii) servicing debt, (iv) maintaining and improving the Nixon facility through capital expenditures, and (v) meeting regulatory compliance requirements and associated civil penalties. Our long-term working capital needs are primarily related to repayment of long-term debt obligations.
We continue efforts to improve our balance sheet. In March 2025, we fully repaid our debt obligation to the Kissick Noteholder, and we continue to engage with potential lenders to obtain additional funding to refinance and restructure debt. However, there can be no assurance that we will be able to raise additional capital on acceptable terms, or at all.
Refining margins, which are affected by commodity prices and refined product demand, are volatile, and a reduction in refining margins will adversely affect the amount of cash we will have available for working capital. Similarly, capital, credit, and commodity markets, tariffs, as well as armed conflicts in the Middle East and Europe continue to evolve, and the extent to which these factors may impact our working capital, commodity prices, refined product demand, supply chain, financial condition, liquidity, results of operations, and prospects will depend on future developments, which cannot be predicted with any degree of confidence. In the long term, we may not be able to manage business disruptions or execute our business strategy. We may have to consider other options, such as selling assets, raising additional debt or equity capital, filing bankruptcy, or ceasing operations.
Sources and Use of Cash.
Components of Cash Flows.
| Nine Months Ended |
||||||||
| September 30, |
||||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| Cash Flows Provided By (Used In): |
||||||||
| Operating activities |
$ | (2,531 | ) | $ | (16,500 | ) | ||
| Investing activities |
(336 | ) | - | |||||
| Financing activities |
5,110 | (535 | ) | |||||
| Increase (decrease) in Cash and Cash Equivalents |
$ | 2,243 | $ | (17,035 | ) | |||
Cash Flow from Operations. We used $2.5 million in cash flow from operations during the nine months ended September 30, 2025 compared to using $16.5 million in cash flow from operations during the nine months ended September 30, 2024. The $14.0 million decrease in cash flow used from operations between the periods was primarily due to smaller buildup of inventory in 2025 and no expenditures for asset retirement obligations. Inventory balance remains elevated primarily to unfavorable product pricing, limited opportunities for customers who export to Mexico, and an intentional buildup of inventory by us during periods of low refining margins.
Capital Expenditures. We spent $0.3 million in capital expenditures for both the three and nine months ended September 30, 2025 and 2024, however, we incurred $0.1 million in vendor financed capital expenditures during the three months ended March 31, 2025. Due to continued uncertainties surrounding general macroeconomic conditions related to inflation, tariffs, interest rates, capital and credit markets, and geopolitical tensions (including military conflicts in Ukraine and Israel and escalations in the Middle East), we anticipate continuing to limit capital expenditures for the remainder of 2025. However, to the extent we can capitalize on green energy growth opportunities, we may finance capital expenditures through project-based government loans.
We account for capital expenditures in accordance with U.S. GAAP. We also classify capital expenditures as ‘maintenance’ if the expenditure maintains capacity or throughput or as ‘expansion’ if the expenditure increases capacity or throughput capabilities. Although classification is generally a straightforward process, in certain circumstances the determination is a matter of management judgment and discretion. We budget for maintenance capital expenditures throughout the year on a project-by-project basis. Management determines projects based on maintaining safe and efficient operations, meeting customer needs, complying with operating policies and applicable law, and producing economic benefits, such as increasing efficiency or lowering future expenses.
| Management’s Discussion and Analysis (Continued) |
Financing Activities. During the nine months ended September 30, 2025, Blue Dolphin made payments on debt principal totaling $3.6 million compared to payments on debt principal totaling $3.0 million for the nine months ended September 30, 2024. Proceeds from debt totaled $8.7 million for the nine months ended September 30, 2025 compared to proceeds from debt totaling $2.5 for the nine months ended September 30, 2024. In 2025, proceeds from debt related to the Second Amended and Restated Affiliate Revolving Credit Agreement. See "Note (15) for additional disclosures related to the Second Amended and Restated Affiliate Revolving Credit Agreement.
Debt and Lease Obligations.
Debt Agreements.
Related-Party Agreements Summary. Blue Dolphin and certain subsidiaries are parties to the following debt agreements with related parties:
| Original |
Monthly |
||||||
| Principal |
Payment |
||||||
| Loan Description |
Parties |
(in millions) |
Maturity Date |
(in millions) |
Interest Rate |
Loan Purpose |
|
| Second Amended and Restated Affiliate Revolving Credit Agreement |
Blue Dolphin and Subsidiaries |
$15 maximum(1) |
April 2026 |
Set-off against other obligations Borrower owes to Lender |
WSJ Prime + 2.00% |
Working capital |
|
| LEH and Subsidiaries |
|||||||
| Amended and Restated BDPL-LEH Loan Agreement |
LEH |
$4.0 |
April 2027 | $0.25 |
12.00% |
Working capital |
|
| BDPL |
| (1) |
Effective June 1, 2025, the maximum borrowing limit under the agreement was increased to $15.0 million; see "Note (15)" for additional disclosures. |
| Management’s Discussion and Analysis (Continued) |
Third-Party Agreements Summary. Blue Dolphin and certain subsidiaries are parties to the following debt agreements with third parties:
| Original |
Monthly Principal |
|||||||||
| Principal |
and Interest Payment |
|||||||||
| Loan Description |
Parties |
(in millions) |
Maturity |
(in millions) |
Interest Rate |
Loan Purpose |
||||
| Veritex Loans |
||||||||||
| LE Term Loan Due 2034 (in default)(1) |
LE |
$25.0 |
June 2034 |
$0.3 |
WSJ Prime + 2.75% |
Capital improvements |
||||
| Veritex |
||||||||||
| LRM Term Loan Due 2034 (in default)(1) |
LRM |
$10.0 |
December 2034 |
$0.1 |
WSJ Prime + 2.75% |
Capital improvements |
||||
| Veritex |
||||||||||
| GNCU Loan |
||||||||||
| NPS Term Loan Due 2031 (in default)(2) |
NPS |
$10.0 |
October 2031 |
$0.1 |
5.75% |
Working capital |
||||
| GNCU |
||||||||||
| SBA Economic Injury Disaster Loans |
||||||||||
| Blue Dolphin Term Loan Due 2051(3) |
Blue Dolphin |
$2.0 |
June 2051 |
$0.01 |
3.75% |
Working capital |
||||
| SBA |
||||||||||
| LE Term Loan Due 2050(4) |
LE |
$0.15 |
August 2050 |
$0.0007 |
3.75% |
Working capital |
||||
| SBA |
||||||||||
| NPS Term Loan Due 2050(4) |
NPS |
$0.15 |
August 2050 |
$0.0007 |
3.75% |
Working capital |
||||
| SBA |
||||||||||
| Equipment Loan Due 2025(5) |
LE |
$0.07 |
October 2025 |
$0.0013 |
4.5% |
Equipment Purchase |
||||
| Texas First |
||||||||||
| Equipment Loan Due 2031 (6) |
LE |
$0.138 |
March 2031 |
$0.0028 |
12.7% |
Equipment Purchase |
||||
| Ritchie Bros. Financial Services |
| (1) |
Our secured loan agreements with Veritex are subject to certain financial and non-financial covenants. As of September 30, 2025, LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034. With respect to non-financial covenants, we are required to have a balance of $1.0 million in a payment reserve account held by Veritex. At both September 30, 2025 and December 31, 2024 restricted cash totaled $1.0 million. |
| (2) |
Loan required monthly interest-only payments for the first thirty-six (36) months. Afterwards, principal and interest payments are due monthly through loan maturity. First payment commenced in November 2024. As of September 30, 2025 and the filing date of this report, the NPS Term Loan Due 2031 was in default due to non-financial covenant violations. |
| (3) |
Original principal amount was $0.5 million; the Blue Dolphin Term Loan Due 2051 was modified to increase the principal amount by $1.5 million. Payments deferred for thirty (30) months; first payment commenced in November 2023; interest accrues during deferral period; loan not forgivable. |
| (4) |
Payments deferred for thirty (30) months; first payment commenced in February 2023; interest accrued during deferral period; loan not forgivable. |
| (5) |
In October 2020, LE entered into the Equipment Loan Due 2025 to purchase a backhoe; the backhoe is used at the Nixon facility. |
| (6) | In March 2025, LE entered into the Equipment Loan Due 2031 to purchase mobile offices; the mobile offices are used at the Nixon facility. |
| Management’s Discussion and Analysis (Continued) |
Guarantees and Security.
| Loan Description |
Guarantees |
Security |
|
| Veritex Loans |
|||
| LE Term Loan Due 2034 (in default) |
● USDA |
● | First priority lien on Nixon facility’s business assets (excluding accounts receivable and inventory) |
| ● Jonathan Carroll(1) |
● | Assignment of all Nixon facility contracts, permits, and licenses |
|
| ● Affiliate cross-guarantees |
● | Absolute assignment of Nixon facility rents and leases, including tank rental income |
|
| ● | $5.0 million life insurance policy on Jonathan Carroll |
||
| LRM Term Loan Due 2034 (in default) |
● USDA |
● | Second priority lien on rights of LE in crude distillation tower and other collateral of LE |
| ● Jonathan Carroll(1) |
● | First priority lien on real property interests of LRM |
|
| ● Affiliate cross-guarantees |
● | First priority lien on all LRM fixtures, furniture, machinery, and equipment |
|
| ● | First priority lien on all LRM contractual rights, general intangibles, and instruments, except with respect to LRM rights in its leases of certain specified tanks for which Veritex has second priority lien |
||
| ● | Substantially all assets |
||
| GNCU Loan |
|||
| NPS Term Loan Due 2031 (in default) |
● USDA |
● | Deed of trust lien on approximately 56 acres of land and improvements owned by LE |
| ● Jonathan Carroll(1) |
● | Leasehold deed of trust lien on certain property leased by NPS from LE |
|
| ● Affiliate cross-guarantees |
● | Assignment of leases and rents and certain personal property |
|
| Amended and Restated BDPL-LEH Loan Agreement | --- | Certain BDPL property | |
| SBA EIDL |
|||
| Blue Dolphin Term Loan Due 2051 |
--- |
● | Business assets (e.g., machinery and equipment, furniture, fixtures, etc.) |
| LE Term Loan Due 2050 |
--- |
● | Business assets (e.g., machinery and equipment, furniture, fixtures, etc.) |
| NPS Term Loan Due 2050 |
--- |
● | Business assets (e.g., machinery and equipment, furniture, fixtures, etc.) |
| Equipment Loan Due 2025 |
--- |
● | First priority security interest in the equipment (backhoe). |
| Equipment Loan Due 2031 | --- | ● | First priority security interest in the mobile offices. |
| (1) |
Jonathan Carroll was required to personally guarantee repayment of borrowed funds and accrued interest. |
Lease Agreements.
Office Lease. We maintain our corporate headquarters in Houston, Texas. In October 2024, BDSC signed a new 24-month extension, the sixth amendment, to its operating lease. The sixth amendment was deemed to be a separate contract and not a lease modification. The first two months of the lease cover the holdover period of September and October 2024 wherein management negotiated the lease with the landlord; BDSC was not subject to a holdover rate during the holdover period. During months 3 through 12, which began on November 1, 2024, the landlord reduced the annual base rent to $29.00 per square foot. During months 13 through 24 the annual base rent will increase to $30.00 per square foot. As additional rent, BDSC will pay a proportionate share of basic building costs (e.g., utilities) up to a maximum of $1,500 per month. The total rental area under the sixth amendment is 9,961 square feet, an increase of 2,268 square feet to accommodate additional personnel. Under the lease amendment, BDSC will receive an improvement allowance of $1.50 per square foot; the improvement allowance will expire six months from the lease signing date. See "Part I, Item 1. Financial Statements —Note (11)" to our consolidated financial statements for additional disclosures related to the BDSC office lease.
An Affiliate, LEH, sub-leases a portion of the Houston office space. BDSC received sub-lease income from LEH totaling $0.03 million for both nine months ended September 30, 2025 and 2024. NPS received ground lease income from LEH totaling $0.045 million and $0.0 million for the three and nine months ended September 30, 2025 and 2024.
Tank Lease. LE leases tanks from Ingleside under the Second Amended and Restated Master Services Agreement. Lease expense associated with the Second Amended and Restated Master Services Agreement totaled $0.3 million for both the nine months ended September 30, 2025 and 2024, respectively. See "Part I, Item 1. Financial Statements —Note (3)" to our consolidated financial statements for additional disclosures related to the Second Amended and Restated Master Services Agreement.
| Management’s Discussion and Analysis (Continued) |
Outstanding Original Principal, Debt Issue Costs, and Accrued Interest. Related-party and third-party long-term debt, including outstanding original principal and accrued interest, as of the dates indicated was as follows:
Outstanding Principal.
| September 30, | December 31, | |||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| Veritex Loans |
||||||||
| LE Term Loan Due 2034 (in default) |
$ | 17,853 | $ | 18,753 | ||||
| LRM Term Loan Due 2034 (in default) |
7,450 | 7,793 | ||||||
| Kissick Debt (1) |
- | 1,432 | ||||||
| GNCU Loan |
||||||||
| NPS Term Loan Due 2031 (in default) |
8,800 | 9,671 | ||||||
| LEH |
||||||||
| Line of credit payable, related party |
11,925 | 3,250 | ||||||
| Amended and Restated BDPL-LEH Loan Agreement |
4,000 | 4,000 | ||||||
| SBA Economic Injury Disaster Loans |
||||||||
| Blue Dolphin Term Loan Due 2051 |
2,000 | 2,000 | ||||||
| LE Term Loan Due 2050 |
150 | 150 | ||||||
| NPS Term Loan Due 2050 |
150 | 150 | ||||||
| Equipment Loan Due 2025 |
3 | 14 | ||||||
| Equipment Loan Due 2031 |
131 | - | ||||||
| 52,462 | 47,213 | |||||||
| Less: Line of credit, related party |
(11,925 | ) | (3,250 | ) | ||||
| Less: Current portion of long-term debt, net |
(35,087 | ) | (37,379 | ) | ||||
| Less: Unamortized debt issue costs |
(1,591 | ) | (1,743 | ) | ||||
| $ | 3,859 | $ | 4,841 | |||||
| (1) | Kissick Debt was paid in full in March 2025. |
We classified the debt associated with the LE Term Loan Due 2034, LRM Term Loan Due 2034, and NPS Term Loan Due 2031 within long-term debt, current portion on our consolidated balance sheets at September 30, 2025 and December 31, 2024 due to being in default.
Debt Issue Costs. Unamortized debt issue costs associated with the Veritex and GNCU loans as of the dates indicated consisted of the following:
| September 30, |
December 31, |
|||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| Veritex Loans |
||||||||
| LE Term Loan Due 2034 (in default) |
$ | 1,674 | $ | 1,674 | ||||
| LRM Term Loan Due 2034 (in default) |
768 | 768 | ||||||
| GNCU Loan |
||||||||
| NPS Term Loan Due 2031 (in default) |
730 | 730 | ||||||
| Less: Accumulated amortization |
(1,581 | ) | (1,429 | ) | ||||
| $ | 1,591 | $ | 1,743 | |||||
Amortization expense was less than $0.1 million for the three months ended September 30, 2025 and 2024 and $0.2 million for both the nine months ended September 30, 2025 and 2024.
| Management’s Discussion and Analysis (Continued) |
Accrued Interest. Related-party and third-party accrued interest payable associated with long-term debt in our consolidated balance sheets, as of the dates indicated consisted of the following:
| September 30, | December 31, | |||||||
| 2025 |
2024 |
|||||||
| (in thousands) |
||||||||
| LEH |
||||||||
| Amended and Restated BDPL-LEH Loan Agreement |
$ | 96 | $ | 1,308 | ||||
| Jonathan Carroll |
||||||||
| Guaranty fee agreements |
185 | 129 | ||||||
| Veritex Loans |
||||||||
| LE Term Loan Due 2034 (in default) |
45 | 48 | ||||||
| LRM Term Loan Due 2034 (in default) |
57 | 61 | ||||||
| GNCU Loan |
||||||||
| NPS Term Loan Due 2031 (in default) |
18 | 17 | ||||||
| SBA Economic Injury Disaster Loans |
||||||||
| Blue Dolphin Term Loan Due 2051 |
59 | 93 | ||||||
| LE Term Loan Due 2050 |
5 | 8 | ||||||
| NPS Term Loan Due 2050 |
5 | 8 | ||||||
| Equipment Loan Due 2025 |
- | - | ||||||
| 470 | 1,672 | |||||||
| Less: Accrued interest payable, current portion |
(470 | ) | (1,672 | ) | ||||
| Long-term interest payable, net of current portion |
$ | - | $ | - | ||||
Defaults. As of September 30, 2025 and through the filing date of this report, LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034. NPS was in default related to non-financial covenants under the NPS Term Loan Due 2031. Defaults may permit lenders to declare the amounts owed under the related loan agreements immediately due and payable, exercise their rights with respect to collateral securing obligors’ obligations, and exercise any other rights and remedies available. We can provide no assurance that: (i) our assets or cash flow will be sufficient to fully repay borrowings under the secured loan agreements that are in default, either upon maturity or if accelerated, (ii) LE or NPS will be able to refinance or restructure the debt, or (iii) the third party will provide a future forbearance or default waiver. Any exercise by lenders of their rights and remedies under secured loan agreements that are in default could have a material adverse effect on our business operations, including crude oil and condensate procurement and our customer relationships; financial condition; and results of operations. In such a case, the trading price of our Common Stock and the value of an investment in our Common Stock could significantly decrease, which could lead to holders of our Common Stock losing their investment in our Common Stock in its entirety. If we are unable to manage this, we may have to consider other options, such as selling assets, raising additional debt or equity capital, filing bankruptcy, or ceasing operations.
Proceeds from Debt. Proceeds from debt totaled $8.7 million for the nine months ended September 30, 2025 compared to proceeds from debt totaling $2.5 for the nine months ended September 30, 2024. In 2025, proceeds from debt related to the Second Amended and Restated Affiliate Revolving Credit Agreement. See "Part II, Item 1. Financial Statements —Note (15)" for additional disclosures related to the Second Amended and Restated Affiliate Revolving Credit Agreement.
| Management’s Discussion and Analysis (Continued) |
Concentration of Customer Risk
We routinely assess the financial strength of our customers. To date, we have not experienced significant write-downs in accounts receivable balances. We believe that our accounts receivable credit risk exposure is limited.
| Portion of |
||||||||||||
| Accounts |
||||||||||||
| Number of |
% Total |
Receivable at |
||||||||||
| Significant |
Revenue |
September 30, |
||||||||||
| Three Months Ended |
Customers |
from Operations |
(in millions) |
|||||||||
| September 30, 2025 |
4 | 94.3 | % | $ | 8.7 | |||||||
| September 30, 2024 |
4 | 75.1 | % | $ | 0.3 | |||||||
| Portion of |
||||||||||||
| Accounts |
||||||||||||
| Number of |
% Total |
Receivable at |
||||||||||
| Significant |
Revenue |
September 30, |
||||||||||
| Nine Months Ended |
Customers |
from Operations |
(in millions) |
|||||||||
| September 30, 2025 |
2 | 65.0 | % | $ | 7.6 | |||||||
| September 30, 2024 |
3 | 72.5 | % | $ | 0.3 | |||||||
One of our significant customers is LEH, an Affiliate. LEH purchases most of our jet fuel under the Amended and Restated Jet Fuel Sales Agreement and sells the jet fuel to the DLA under preferential pricing terms due to its HUBZone certification. The Affiliate lifts the jet fuel, which is stored at the Nixon Facility, as needed. LEH accounted for 40.8% and 26.5% of our total revenue from operations for the Three Months Ended September 30, 2025 and 2024 respectively. LEH accounted for 37.4% and 31.4% of our total revenue from operations for the nine months ended September 30, 2025 and 2024, respectively. The Affiliate represented $8.0 million and $0.0 million in accounts receivable, related party at September 30, 2025 and December 31, 2024, respectively.
Bank Accounts. Financial instruments that potentially subject us to concentrations of risk consist primarily of cash, trade receivables and payables. We maintain cash balances at financial institutions in Houston, Texas. The FDIC insures certain financial products up to a maximum of $250,000 per depositor. At September 30, 2025 and December 31, 2024, our cash balances (including restricted cash) exceeded the FDIC insurance limit per depositor by $2.8 million and $0.7 million, respectively. Instability and volatility in the capital, credit, and commodity markets, as well as with financial institutions, could adversely affect our cash balances (including restricted cash) in excess of FDIC insurance limits per depositor. In the event that banks in which we maintain our cash balances (including restricted cash) fail, there can be no assurance that the federal government and the Federal Reserve would intervene.
Regulatory Activities.
BOEM. See "Part II, Item 1. Legal Proceedings —Unresolved Matters—BOEM Supplemental Pipeline Surety Bonds" and "Part II, Item 1. Legal Proceedings—Unresolved Matters—RLI Corp. Surety Bonds."
BSEE. See “Part I, Item 1. Financial Statements –Notes (11) and (14)” and “Part II, Item 1. Legal Proceedings—Unresolved Matters—BSEE Offshore Platform Inspections, Decommissioning Obligations, and Civil Penalties.”
TCEQ. See "Part II, Item 1. Legal Proceedings—Resolved Matters—TCEQ Final Agreed Order."
Off-Balance Sheet Arrangements. None.
Accounting Standards.
Critical Accounting Policies and Estimates
Significant Accounting Policies. Our significant accounting policies relate to use of estimates; cash, cash equivalents, and restricted cash; accounts receivable and allowance for credit losses; financial instruments and fair value measurements; inventory; property and equipment; leases; revenue recognition; income taxes; impairment or disposal of long-lived assets; asset retirement obligations; contract balances; and computation of earnings per share.
Estimates. The nature of our business requires that we make estimates and assumptions in accordance with U.S. GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Although commodity price volatility, recession, inflation, tariffs, armed conflicts in the Middle East and Europe and associated sanctions on Russian crude products, and severe weather resulting from climate change may impact our estimates and assumptions, we are continually working to mitigate future risks. However, the extent to which these factors may impact our business, financial condition, liquidity, results of operations, and prospects will depend on future developments, which cannot be predicted with any degree of certainty.
We assessed certain accounting matters that require consideration of forecasted financial information in context with information reasonably available to us as of September 30, 2025 and through the filing date of this report. The accounting matters assessed included, but not limited to, our allowance for credit losses, inventory, and related reserves, and the carrying value of long-lived assets.
| Management’s Discussion and Analysis (Continued) |
New Accounting Standards and Disclosures
New Pronouncements Adopted. During the nine months ended September 30, 2025 we did not adopt any ASUs.
New Pronouncements Issued, Not Yet Effective. We expect to adopt the following ASUs in future periods:
| ● |
ASU 2024-03 — Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"). In November 2024, the FASB issued ASU 2024-03, requiring additional disclosure of certain costs and expenses within the notes to the consolidated financial statements. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. We are evaluating the provisions of ASU 2024-03 and the incremental disclosures that will be required in our consolidated financial statements. |
| ● |
ASU 2023-09 — Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). In December 2023, the FASB issued ASU 2023-09, requiring us to disclose specified additional information in our income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require us to disaggregate our income taxes paid disclosure by federal and state taxes, with further disaggregation required for significant individual jurisdictions. ASU 2023-09 allows for adoption using either a prospective or retrospective transition method. We will adopt ASU 2023-09 for our financial statements covering the annual period ending December 31, 2025. We do not anticipate the pronouncement will change total reported tax expense, tax assets or tax liabilities. However, we expect the pronouncement will require expanded income tax disclosures. |
Evaluation of Disclosure Controls and Procedures
Under the supervision of, and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Treasurer (principal financial officer and principal accounting officer), we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on our evaluation, our Chief Executive Officer (principal executive officer) and Treasurer (principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the nine months ended September 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| Legal Proceedings (Continued) |
| Legal Proceedings (Continued) |
BSEE Civil Penalties. BDPL has the following open civil penalty referrals from BSEE:
| ● |
Civil Penalty G-2024-054. In August 2024, BDPL received a civil penalty referral letter from BSEE for failing to remove its GA-288C junction platform offshore in federal waters. The civil penalty referral is associated with BSEE INC No. G-114 issued in October 2023. In March 2025, BSEE calculated a proposed civil penalty of $1.0 million against BDPL, and BSEE reserved its rights to assess additional civil penalties in the amount of $3,097 per day per violation until the referenced INC is fully remediated. In April 2025, BDPL exercised its right to request a meeting with the penalty reviewing officer to submit additional information for consideration. BSEE held the meeting on June 11, 2025. On July 21, 2025, BSEE sent BDPL a final decision letter that assigned a civil penalty of $1.3 million against BDPL. The revised amount included assessment of additional civil penalties in the amount of $3,097 per day for which the company booked an accrual through September 30, 2025. |
| ● |
Civil Penalty G-2024-056. In August 2024, BDPL received a civil penalty referral letter from BSEE for failing to flush, fill, and abandon its lateral pipeline from GA-245 to the GA-273 subsea tie-in (Pipeline Segment No. 15635) offshore in federal waters. The civil penalty referral is associated with BSEE INC No. G-802 issued in November 2023. In January 2025, BSEE calculated a proposed civil penalty of $0.4 million against BDPL, and BSEE reserved its right to assess additional civil penalties in the amount of $3,097 per day per violation until the referenced INC is fully remediated. In March 2025, BDPL exercised its right to request a meeting with the penalty reviewing officer to submit additional information for consideration. BSEE held the meeting, which reviewing officers combined with Civil Penalty G-2024-054 above, on June 11, 2025. On July 21, 2025, BSEE sent BDPL a final decision letter that assigned a civil penalty of $0.9 million against BDPL. The revised amount included assessment of additional civil penalties in the amount of $3,097 per day for which the company booked an accrual through September 30, 2025. |
BDPL had 60 days from receipt of BSEE's final decisions to: (1) pay the civil penalties, (2) request an informal resolution with the reviewing officers' next-level supervisor, or (3) appeal BSEE's decisions to the IBLA. In September 2025, BDPL requested an informal follow up meeting with the reviewing officers' next-level supervisor; the next-level supervisor confirmed receipt of the requests. As of the filing date of this report, the parties were working to schedule the informal follow up meeting to review Civil Penalties G-2024-054 and G-2024-056.
BDPL remains subject to additional civil penalties until the violation(s) have been corrected. At September 30, 2025, we accrued $2.7 million on our balance sheet within accrued expenses and other current liabilities related to BSEE civil penalties. We will record a liability of approximately $0.3 million per quarter for each of Civil Penalties G-2024-054 and G-2024-056 for potential future civil penalties.
The following BDPL civil penalty referral was closed:
| ● |
Civil Penalty G-2024-010. In April 2024, BDPL received a civil penalty referral letter from BSEE for failing to remediate certain BSEE INCs issued in September 2023 associated with its GA-288C junction platform offshore in federal waters. Specifically, remediation is associated with BSEE INC Nos. E120 (physically boarding platform monthly, performing visual inspections for environmental pollution, and maintaining monthly inspection records), G112 (removing 55-gallon drum leaking oil on platform deck), L141 (flushing and filling Pipeline Segment No. 13101 with inhibited seawater), and L142 (decommissioning in place Pipeline Segment No. 13101). In March 2025, BSEE calculated a proposed civil penalty of $1.1 million against BDPL. In April 2025, BDPL exercised its right to request a meeting with the penalty reviewing officer to submit additional information for consideration. BSEE held the meeting, which reviewing officers combined with Civil Penalties G-2024-054 and G-2024-056 above, on June 11, 2025. On July 16, 2025, BSEE sent BDPL a Notice of Civil Penalty Case Dismissal that indicated that no penalty would be assessed against BDPL based on the underlying INCs. For the nine months ended September 30, 2025, we reversed the previous accrual for penalties associated with this matter in General and administrative expenses. |
Default under a Secured Loan Agreement. As of September 30, 2025 and the filing date of this report, certain of our bank debt to Veritex was in default related to a financial covenant violation, and bank debt to GNCU was in default related to non-financial covenant violations. See “Note (10)” to our consolidated financial statements for additional disclosures related to third-party debt, default on such debt, and the potential effects of such a default on our business, financial condition, and results of operations. If the lenders exercises their rights and remedies due to the defaults under our secured loan agreement, our business, financial condition, and results of operations will be materially adversely affected.
In addition to the other information set forth in this Quarterly Report, careful consideration should be given to the risk factors discussed under “Part I, Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the SEC. These risks and uncertainties could materially and adversely affect our business, financial condition, and results of operations. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business. There have been no material changes in our assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibits Index
| No. | Description | |
| 31.1* |
Jonathan P. Carroll Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
|
| 31.2* |
Bryce D. Klug Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
|
| 32.1* | Jonathan P. Carroll Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2* | Bryce D. Klug Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS** |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document. |
|
| 101.SCH** |
Inline XBRL Taxonomy Extension Schema Document. |
|
| 101.CAL** |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
| 101.LAB** |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
| 101.PRE** |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
| 101.DEF** |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
| 104 ** | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibition 101). |
* Filed herewith.
** Submitted electronically herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
| BLUE DOLPHIN ENERGY COMPANY |
|||
| (Registrant) |
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| November 14, 2025 | By: | / s / BRYCE D. KLUG | |
| Bryce D. Klug Treasurer and Assistant Secretary |
|||
| (Principal Financial and Accounting Officer) | |||
FAQ
What were Blue Dolphin (BDCO) Q3 2025 results?
How much cash did BDCO have at quarter end?
What is BDCO’s debt position as of September 30, 2025?
Which BDCO loans are in default?
Did BDCO record impairments or new obligations in Q3 2025?
How many BDCO shares are outstanding?
What does management say about liquidity?
