UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended: SEPTEMBER 30, 2005
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from _______________to ________________
Commission File Number: 0-15905
BLUE DOLPHIN ENERGY COMPANY
(Exact name of small business issuer as specified in its charter)
DELAWARE 73-1268729
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 TRAVIS, SUITE 2100, HOUSTON, TEXAS 77002
(Address of principal executive offices)
(713) 227-7660
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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. Yes [X]
No [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of November 14, there were 9,939,302 shares of the registrant's common stock,
par value $.01 per share, outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements of Blue Dolphin Energy Company
and subsidiaries (referred to herein, with its predecessors and subsidiaries, as
"Blue Dolphin," "the Company," "we," "us" and "our") included herein have been
prepared by us, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC") and, in the opinion of management,
reflect all adjustments necessary to present a fair statement of operations,
financial position and cash flows. We follow the full-cost method of accounting
for oil and gas properties, wherein costs incurred in the acquisition,
exploration and development of oil and gas reserves are capitalized. We believe
that the disclosures are adequate and the information presented is not
misleading, although certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles in the United States of America have been condensed or
omitted pursuant to such rules and regulations.
Our accompanying condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in our Annual Report on Form 10-KSB, as amended, for the year ended
December 31, 2004.
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2
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET - UNAUDITED
SEPTEMBER 30, 2005
ASSETS
Current assets:
Cash and cash equivalents $ 1,301,420
Accounts receivable 754,062
Prepaid expenses and other assets 117,868
------------
TOTAL CURRENT ASSETS 2,173,350
Property and Equipment, at cost:
Oil and Gas properties, including $62,023 of unproved leasehold cost 557,364
(full-cost method)
Pipelines 4,542,707
Onshore separation and handling facilities 1,664,128
Land 860,275
Other property and equipment 263,983
------------
7,888,457
Less: Accumulated depletion, depreciation, amortization and impairment 2,813,662
------------
5,074,795
Other Assets 11,359
------------
TOTAL ASSETS $ 7,259,504
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 515,569
Notes payable 450,000
Current portion of long-term debt 120,000
Accrued expenses and other liabilities 94,631
------------
TOTAL CURRENT LIABILITIES 1,180,200
Long-term debt 530,000
Asset retirement obligations 1,735,245
Common Stock, ($.01 par value, 25,000,000 shares authorized, 9,939,302 shares 99,393
issued and outstanding)
Additional Paid-in Capital 27,915,674
Accumulated Deficit (24,201,008)
------------
TOTAL STOCKHOLDERS' EQUITY 3,814,059
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,259,504
============
See accompanying notes to the condensed consolidated financial statements.
3
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months
Ended September 30,
2005 2004
----------- -----------
Revenue from operations:
Pipeline operations $ 342,740 $ 187,911
Oil and gas sales 1,764,828 67,878
Gain on sale of oil and gas property - -
----------- -----------
2,107,568 255,789
----------- -----------
Cost of operations:
Pipeline operating expenses 290,981 207,965
Lease operating expenses 56,914 24,296
Depletion, depreciation and amortizaton 122,513 91,675
General and administrative 547,400 437,970
Accretion expense 30,475 26,881
----------- -----------
1,048,283 788,787
----------- -----------
INCOME (LOSS) FROM OPERATIONS 1,059,285 (532,998)
Other income (expense):
Interest and other expense (29,775) (90,545)
Interest and other income 938 108,878
Equity in loss of affiliate - (25,830)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 1,030,448 (540,495)
Income taxes - -
----------- -----------
Net income (loss) $ 1,030,448 $ (540,495)
=========== ===========
Income (loss) per common share
- basic $ 0.11 $ (0.08)
=========== ===========
- diluted $ 0.11 $ (0.08)
=========== ===========
Weighted average number of common shares outstanding
- basic 9,341,582 6,748,237
=========== ===========
- diluted 9,431,608 6,748,237
=========== ===========
See accompanying notes to the condensed consolidated financial statements.
4
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Nine Months
Ended September 30,
2005 2004
----------- -----------
Revenue from operations:
Pipeline operations $ 991,448 $ 585,448
Oil and gas sales 1,844,579 349,048
Gain on sale of oil and gas property - 25,809
----------- -----------
2,836,027 960,305
----------- -----------
Cost of operations:
Pipeline operating expenses 779,030 856,497
Lease operating expenses 114,773 91,322
Depletion, depreciation and amortizaton 293,398 346,183
General and administrative 2,156,226 1,334,211
Accretion expense 79,284 73,523
----------- -----------
3,422,711 2,701,736
----------- -----------
LOSS FROM OPERATIONS (586,684) (1,741,431)
Other income (expense):
Interest and other expense (110,406) (316,207)
Interest and other income 329,278 248,331
Equity in loss of affiliate - (74,200)
----------- -----------
LOSS BEFORE INCOME TAXES (367,812) (1,883,507)
Income taxes - -
----------- -----------
Net loss $ (367,812) $(1,883,507)
=========== ===========
Loss per common share
- basic and diluted $ (0.04) $ (0.28)
=========== ===========
Weighted average number of common shares outstanding
- basic and diluted 8,367,226 6,708,060
=========== ===========
See accompanying notes to the condensed consolidated financial statements.
5
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Nine Months
Ended September 30,
2005 2004
----------- -----------
OPERATING ACTIVITIES
Net loss $ (367,812) $(1,883,507)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depletion, depreciation and amortization 293,398 346,183
Amortization of debt issue costs 36,712 53,543
Gain on sale of oil and gas property (140,409) (25,809)
Accretion of asset retirement obligations 79,284 73,523
Gain on modification of McNic note (132,368) -
Equity in loss of affiliate - 74,200
Common stock issued for services 804,368 112,001
Compensation from issuance of warrants - 76,768
Changes in operating assets and liabilities:
Accounts receivable (437,698) 164,429
Prepaid expenses and other assets 11,803 22,955
Accounts payable and other liabilities (141,294) (1,471,053)
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 5,984 (2,456,767)
----------- -----------
INVESTING ACTIVITIES
Property, equipment and other assets (10,247) (2,197)
Exploration and development costs (80,123) (7,828)
Proceeds from sale of assets 214,632 34,183
Development costs - New Avoca - (69,167)
----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 124,262 (45,009)
----------- -----------
FINANCING ACTIVITIES
Payments on Borrowings (400,000) -
Proceeds from Borrowings - 750,000
Financing costs (2,275) (160,629)
Proceeds received from exercise of stock options 12,900 3,750
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (389,375) 593,121
DECREASE IN CASH AND CASH EQUIVALENTS (259,129) (1,908,656)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,560,549 2,702,892
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,301,420 $ 794,236
=========== ===========
See accompanying notes to the condensed consolidated financial statements.
6
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
SEPTEMBER 30, 2005
1. LIQUIDITY
Because of our recurring losses and negative cash flows from operations, our
independent registered public accounting firm included a "going concern"
explanatory paragraph in their report on our audited financial statements as of
December 31, 2004 and for the two-year period ended December 31, 2004. There was
substantial doubt at that time about our ability to continue as a going concern.
At September 30, 2005, our available working capital was $993,150. This is a
significant change from our working capital deficit of approximately $200,000 at
June 30, 2005. The change is primarily due to our receipt of $1,310,195 during
September for our after-payout working interest in High Island Block 37. Even
though performance of our pipeline assets continues to be poor, we currently
believe that we have sufficient resources in order to meet our working capital
and capital expenditure requirements for the twelve months ending September 30,
2006. We must increase the utilization of our existing assets or acquire other
assets with positive cash flows in order to satisfy our cash requirements
thereafter.
During April 2005, we arranged an extension of the maturity date and deferred
the payment of interest on $450,000 aggregate principle amount of promissory
notes we originally issued pursuant to the Note and Warrant Purchase Agreement
dated September 8, 2004. Under the revised terms, these promissory notes will
now mature on June 30, 2006 and all interest is deferred until maturity.
In July 2005, we entered into gas and condensate transportation and handling
agreements with Manti Operating Company to deliver production through the Blue
Dolphin Pipeline System. Deliveries of production from Manti commenced in August
2005.
In September 2005, two wells in High Island Block A-7 were successfully
recompleted. Production resumed at a significantly higher rate compared to
production from the single well prior to the recompletion, but the wells were
shut-in for a portion of the month due to Hurricane Rita. Only one of the wells
is producing currently. The second well has been temporarily shut-in to limit
production while 3rd party transporters make repairs to their facilities
following Hurricane Rita. Our working interest is 8.984% in both wells.
Also in September 2005, we received a payment of $1,310,195 for our approximate
2.7% after-payout working interest in two wells currently producing in High
Island Block 37. The initial payment was for production net of expenses from the
wells for the period from the estimated payout date of July 1, 2004 through May
2005. The two wells are currently producing at a combined rate of approximately
25 MMcf per day.
In October 2005, we entered into gas and condensate transportation and handling
agreements with two additional new customers to deliver production into the Blue
Dolphin Pipeline System. Transportation services for both new customers are
expected to commence late in the fourth quarter. Volumes to be transported are
not yet known.
7
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
SEPTEMBER 30, 2005
The net cash provided by or used in operating, investing and financing
activities is summarized below:
Nine Months Ended September 30,
(amounts in thousands)
-------------------------------
2005 2004
------- ----------
Net cash provided by (used in):
Operating activities $ 6 $ (2,457)
Investing activities 124 (45)
Financing activities (389) 593
------- ---------
Net decrease in cash $ (259) $ (1,909)
======= =========
2. CONTINGENCIES
We are involved in various claims and legal actions arising in the ordinary
course of business. In our opinion, the ultimate disposition of these matters
will not have a material effect on our financial position, results of operations
or cash flows.
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8
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
SEPTEMBER 30, 2005
3. EARNINGS PER SHARE
We apply the provisions of Statement of Financial Accounting Standards No. 128
"Earnings per Share" ("SFAS 128"). SFAS 128 requires the presentation of basic
earnings per share ("EPS") which excludes dilution and is computed by dividing
net income (loss) available to common stockholders by the weighted-average
number of shares of common stock outstanding for the period. SFAS 128 requires
dual presentation of basic EPS and diluted EPS on the face of the income
statement and requires a reconciliation of the numerators and denominators of
basic EPS and diluted EPS.
Employee stock options and stock warrants were not included in the computation
of diluted earnings per share for the nine months ended September 30, 2005 and
the quarter and nine months ended September 30, 2004 because the effect of their
assumed exercise would have an antidilutive effect on the computation of diluted
loss per share.
Weighted-
Average Number
of Common Shares
Outstanding and Per
Net Income Potential Dilutive Share
(Loss) Common Shares Amount
----------- ------------------ ------
Nine Months ended September 30, 2005
Basic and diluted loss per share $ (367,812) 8,367,226 $(0.04)
----------- --------- ------
Nine Months ended September 30, 2004
Basic and diluted loss per share $(1,883,507) 6,708,060 $(0.28)
----------- --------- ------
Quarter ended September 30, 2005
Basic earnings per share $ 1,030,448 9,341,582 $ 0.11
Effect of dilutive stock options 90,026
----------- --------- ------
Diluted earnings per share $ 1,030,448 9,431,608 $ 0.11
=========== ========= ======
Quarter ended September 30, 2004
Basic and diluted loss per share $ (540,495) 6,748,237 $(0.08)
=========== ========= ======
9
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
SEPTEMBER 30, 2005
4. BUSINESS SEGMENT INFORMATION
Our income producing operations are conducted in two principal business
segments: pipeline transportation services and oil and gas exploration and
production. There were no intersegment revenues during the periods presented.
Information concerning these segments for the nine months and three months ended
September 30, 2005 and 2004 are as follows:
Operating Depletion,
Income Depreciation and
Revenues (Loss)* Amortization
----------- ---------- ----------------
Nine months ended September 30, 2005
Pipeline operations $ 991,448 (432,479) 243,470
Oil and gas exploration and production 1,844,579 1,045,464 42,777
Other - (1,199,669) 7,151
----------- ---------- -------
Consolidated 2,836,027 (586,684) 293,398
----------- -------
Other income, net 218,872
-----------
Loss before income taxes (367,812)
Nine months ended September 30, 2004
Pipeline operations $ 585,448 (1,143,779) 245,545
Oil and gas exploration and production 349,048 (184,419) 91,855
Other 25,809 (413,233) 8,783
----------- ---------- -------
Consolidated 960,305 (1,741,431) 346,183
----------- -------
Other loss, net (142,076)
----------
Loss before income taxes (1,883,507)
Quarter ended September 30, 2005
Pipeline operations $ 342,740 180,828 81,675
Oil and gas exploration and production 1,764,828 1,103,641 38,472
Other - (225,184) 2,366
----------- ---------- -------
Consolidated 2,107,568 1,059,285 122,513
----------- -------
Other loss, net (28,837)
----------
Income before income taxes 1,030,448
Quarter ended September 30, 2004
Pipeline operations $ 187,911 (342,891) 81,874
Oil and gas exploration and production 67,878 (63,249) 7,067
Other - (126,858) 2,734
----------- ---------- -------
Consolidated 255,789 (532,998) 91,675
----------- -------
Other loss, net (7,497)
----------
Loss before income taxes (540,495)
10
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
SEPTEMBER 30, 2005
September 30, 2005
------------------
Identifiable assets:
Pipeline operations $ 5,448,461
Oil and gas exploration and production 692,591
Other 1,118,452
-----------
Consolidated $ 7,259,504
===========
* Consolidated loss from operations includes $1,192,519 and $430,259 in
unallocated general and administrative expenses, and unallocated
depletion, depreciation and amortization of $7,151 and $8,783 for the
nine months ended September 30, 2005 and 2004, respectively. All
unallocated amounts are included in "Other."
Consolidated income/loss from operations includes $222,819 and $124,124
in unallocated general and administrative expenses, and unallocated
depletion, depreciation and amortization of $2,366 and $2,734 for the
quarters ended September 30, 2005 and 2004, respectively. All
unallocated amounts are included in "Other."
5. STOCK COMPENSATION
We account for stock-based compensation granted under our long-term incentive
plans using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No.
25") and related interpretations. Stock-based compensation expense of $774,368
was recognized in the nine months ended September 30, 2005. Recognition of this
non-cash expense is required by Financial Accounting Standards Board
Interpretation No. 44 "Accounting for Certain Transactions involving Stock
Compensation - - An Interpretation of APB Opinion No. 25" ("FIN 44"). Pursuant
to FIN 44, stock options exercised in a "cashless" manner by surrendering a
portion of the option shares issued to pay the option exercise price, trigger
variable accounting treatment, requiring the measurement of compensation expense
at a period beyond the date of grant.
In the fiscal quarter ending March 31, 2006, we will begin accounting for
stock-based compensation under Statement of Financial Accounting Standards No.
123R "Share-Based Payment" ("SFAS 123R"). SFAS 123R is a revision to Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation," and eliminates the ability to account for share-based
compensation transactions using APB Opinion No. 25. It requires that such
transactions be accounted for using a fair value-based method.
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11
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
SEPTEMBER 30, 2005
The following table illustrates the effect on net income/(loss) and
income/(loss) per share if we had applied the fair value recognition provisions
of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" to stock-based employee compensation:
Three months ended Nine months ended
September 30 September 30,
------------------ ------------------
2005 2004 2005 2004
-------- ------- -------- -------
(in thousands, except per share amounts)
Net income (loss), as reported.................................... $ 1,030 $ (540) $ (368) $(1,884)
Add: Total stock-based employee compensation
included in reported net loss, net of related tax effects...... 88 77 774 77
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for awards, net of related tax effects................... - (99) (66) (99)
-------- ------- -------- -------
Pro forma net income (loss)...................................... $ 1,118 $ (562) $ 340 $(1,906)
======== ======= ======== =======
Net income (loss) per share:
Basic - as reported $ 0.11 $ (0.08) $ (0.04) $ (0.28)
======== ======= ======== =======
Basic - pro forma $ 0.11 $ (0.08) $ 0.04 $ (0.28)
======== ======= ======== =======
Diluted - as reported $ 0.11 $ (0.08) $ (0.04) $ (0.28)
======== ======= ======== =======
Diluted - pro forma $ 0.12 $ (0.08) $ 0.04 $ (0.28)
======== ======= ======== =======
During the nine months ended September 30, 2005, 289,321 stock options were
exercised, with exercise prices ranging from $.35 per share to $1.90 per share.
Most of the stock options exercised were done so by using the quoted market
value of the shares of common stock issued to pay the option exercise price. As
a result, 57,431 shares of common stock issued were surrendered to us for
payment of the option exercise price. At September 30, 2005 there were 146,997
stock options outstanding with exercise prices ranging from $.35 per share to
$6.00 per share.
6. EXERCISE OF WARRANTS
As of January 1, 2005, there were 3,100,000 warrants outstanding that were
issued pursuant to the Note and Warrant Purchase Agreement dated September 8,
2004. During the nine months ended September 30, 2005, all 3,100,000 warrants
were exercised.
The exercise of the warrants was accomplished via net exercises, whereby holders
surrendered their right to purchase a portion of the shares of common stock,
resulting in 279,631 shares of common stock being surrendered to us for payment
of the warrant exercise price and 2,820,369 shares issued to warrant holders.
12
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
SEPTEMBER 30, 2005
7. RECENT ACCOUNTING DEVELOPMENTS
In December, 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123R, "Share-Based Payment," that addresses the accounting for share-based
payment transactions in which a company receives employee services in exchange
for equity instruments of the company, such as stock options and restricted
stock. SFAS No. 123R eliminates the ability to account for share-based
compensation transactions using APB Opinion No. 25 and requires instead that
such transactions be accounted for using a fair value-based method. We currently
account for stock-based compensation using the intrinsic method pursuant to APB
Opinion No. 25. SFAS No. 123R requires that all stock-based payments to
employees, including grants of employee stock options and restricted stock, be
recognized as compensation expense in the financial statements based on their
fair values. Public entities that file as small business issuers will be
required to apply SFAS No. 123R in the first interim or annual reporting period
that begins after December 15, 2005. Accordingly, we will be required to apply
SFAS No. 123R beginning in the fiscal quarter ending March 31, 2006.
The FASB has issued FASB Statement of Financial Accounting Standards No. 154,
"Accounting Changes and Error Corrections" ("SFAS No. 154"). This new standard
replaces Accounting Principles Board Opinion No. 20, "Accounting Changes," and
FASB Statement of Financial Accounting Standards No. 3, "Reporting Accounting
Changes in Interim Financial Statements," and represents another step in the
FASB's goal to converge its standards with those issued by the International
Accounting Standards Board. Among other changes, SFAS No. 154 requires that a
voluntary change in accounting principle be applied retrospectively with all
prior period financial statements presented on the new accounting principle,
unless it is impracticable to do so. SFAS No. 154 also provides that (1) a
change in method of depreciating or amortizing a long-lived non-financial asset
be accounted for as a change in estimate (prospectively) that was effected by a
change in accounting principle, and (2) correction of errors in previously
issued financial statements should be termed a "restatement." The new standard
is effective for accounting changes and correction of errors made in fiscal
years beginning after December 15, 2005.
On March 30, 2005, FASB Interpretation No. 47, "Accounting for Conditional Asset
Retirement Obligations - An Interpretation of FASB Statement No. 143" ("FIN 47")
was issued. The FASB issued FIN 47 to address diverse accounting practices that
developed with respect to the timing of liability recognition for legal
obligations associated with the retirement of a tangible long-lived asset when
the timing and (or) method of settlement of the obligation are conditional on a
future event. For example, some entities recognize the fair value of the
obligation prior to the retirement of the asset with the uncertainty about the
timing and (or) method of settlement incorporated into the fair value of the
liability. Other entities recognize the fair value of the obligation only when
it is probable the asset will be retired as of a specified date using a
specified method or when the asset is actually retired. FIN 47 concludes that an
entity is required to recognize a liability for the fair value of a conditional
asset retirement obligation when incurred if the liability's fair value can be
reasonably estimated.
We are currently assessing the impact on our consolidated financial statements
of all the recent accounting developments discussed above in this note.
13
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Forward Looking Statements. Certain of the statements included in this quarterly
report on Form 10-QSB, including those regarding future financial performance or
results or that are not historical facts, are "forward-looking" statements as
that term is defined in Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933 (the
"Securities Act"), as amended. The words "expect," "plan," "believe,"
"anticipate," "project," "estimate," and similar expressions are intended to
identify forward-looking statements. Blue Dolphin Energy Company (referred to
herein, with its predecessors and subsidiaries, as "Blue Dolphin," "we," "us"
and "our") cautions readers that these statements are not guarantees of future
performance or events and such statements involve risks and uncertainties that
may cause actual results and outcomes to differ materially from those indicated
in forward-looking statements. Some of the important factors, risks and
uncertainties that could cause actual results to vary from forward-looking
statements include:
- the level of utilization of our pipelines;
- availability and cost of capital;
- actions or inactions of third party operators for properties where
we have an interest;
- the risks associated with exploration;
- the level of production from oil and gas properties;
- gas and oil price volatility;
- uncertainties in the estimation of proved reserves and in the
projection of future rates of production and timing of development
expenditures;
- regulatory developments; and
- general economic conditions.
Additional factors that could cause actual results to differ materially from
those indicated in the forward-looking statements are discussed under the
caption "Risk Factors" in our annual report on Form 10-KSB, as amended, for the
year ended December 31, 2004. Readers are cautioned not to place undue reliance
on these forward-looking statements which speak only as of the date thereof. We
undertake no duty to update these forward-looking statements. Readers are urged
to carefully review and consider the various disclosures made by us which
attempt to advise interested parties of the additional factors which may affect
our business, including the disclosures made under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
this report.
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14
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
EXECUTIVE SUMMARY
We are engaged in two lines of business: (i) pipeline transportation services
for producer/shippers, and (ii) oil and gas exploration and production. We
conduct our operations through our subsidiaries. Our assets are located offshore
and onshore in the Texas Gulf coast area. As a result of our liquidity problems,
our independent, registered public accounting firm, UHY Mann Frankfort Stein &
Lipp CPAs, LLP added an explanatory paragraph in their opinion on our
consolidated financial statements as of and for the year ended December 31,
2004, indicating that substantial doubt exists about our ability to continue as
a going concern. In addition to satisfying our liquidity and capital needs, our
focus in 2005 has been to increase utilization of our pipelines, identify
strategic acquisition opportunities and continue cost management. Our long-term
goal is to create greater value for our stockholders through the addition of
assets. Although we continue to have interest in oil and gas properties and will
consider acquiring interests in producing oil and gas properties, as a result of
implementing cost savings measures in 2004, we are primarily focused on our
pipeline business.
Since the end of the second quarter, several events have contributed to an
improvement in our financial condition and may increase utilization of our
pipelines. We have entered into transportation and handling agreements with
three new customers on the Blue Dolphin Pipeline System, one of which commenced
shipments in August 2005. Transportation services for the two other new
customers are expected to commence late in the fourth quarter.
In addition, we have recently seen a significant increase in our revenues from
sales of gas and oil from our non-operated working interests in two High Island
blocks in the Gulf of Mexico. The increase in revenues has been magnified by
increased prices for oil and gas. High Island Block 37 is currently producing
approximately 25 MMcf of gas per day from two wells. We have an approximate 2.7%
working interest in both wells. The successful recompletions of two wells in
High Island Block A-7 occurred in August, resulting in a significant increase in
production. We have a non-operated working interest of 8.984% in both of these
wells. Only one of the wells is producing currently. The second well has been
shut-in to limit production while third party transporters make repairs to their
facilities following Hurricane Rita.
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15
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 2005, we generated total revenues of
approximately $2,836,000 while operating costs and general administrative
expenses totaled approximately $3,422,000. Our financial condition has been
negatively affected by the poor performance of our pipeline assets and our
indebtedness. Although our pipeline assets remain under utilized, our working
interests in our oil and gas properties have recently generated revenues and
significantly improved our financial condition and three new customers have
contracted with us for provision of transportation services in our pipeline
business. Production and resulting cash flows from the High Island properties
and the new shippers/producers will decline naturally over time, therefore, we
will need to acquire assets with positive cash flows in the future to generate
sufficient working capital to meet our obligations.
On February 28, 2005 (effective as of January 1, 2005), we entered into an
amendment to our purchase agreement with MCNIC. Under the terms of the original
purchase agreement, we acquired MCNIC's one-third interests in both the Blue
Dolphin Pipeline System and the inactive Omega Pipeline. Pursuant to the terms
of the amendment, the original promissory note was exchanged for a new
promissory note in the principal amount of $250,000, and all accrued interest on
the original promissory note was forgiven, approximately $132,000. We made a
principal payment on the new promissory note of $30,000 upon the execution of
the amendment. Under the terms of the new promissory note, we will make monthly
principal payments of $10,000 through its maturity date of December 31, 2006. In
addition, MCNIC may receive additional payments of up to $500,000 from 50% of
the net profits, if any, realized from the one-third interest in the Blue
Dolphin Pipeline System through December 31, 2006. The principal amount of the
new promissory note may be increased by up to $500,000, if 50% or more of our
83% interest in the Blue Dolphin Pipeline System is sold before December 31,
2006.
In July 2005, we entered into gas and condensate transportation and handling
contracts with Manti Operating Company to deliver production into the Blue
Dolphin Pipeline System in Galveston area state tract 348. We began providing
services related to these contracts in August 2005.
On August 1, 2005, we made our final payment to Tetra Applied Technologies, Inc.
("Tetra"). In August 2004, we restructured our indebtedness to Tetra for the
abandonment/reefing of the Buccaneer Field. Under the revised terms, on
September 1, 2004 we began paying Tetra the outstanding balance in twelve
monthly installments of $55,667 plus interest on the outstanding balance at the
rate of six percent per annum.
In September 2005, two wells in High Island Block A-7 were successfully
recompleted and production resumed at a significantly higher rate. Both wells
were shut-in for a period of time due to Hurricane Rita. Currently, one well is
producing and the other remains shut-in awaiting additional transportation
capacity to bring the gas ashore.
Also in September 2005, we received our first payment for our after-payout
working interest in High Island Block 37. The payment of $1,310,195 represented
our interest in production net of expenses from the estimated payout on July 1,
2004 through May 2005. The two wells are currently producing at a combined rate
of approximately 25 MMcf per day.
16
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
In 2004, we sold promissory notes in an aggregate principal amount of $750,000
(the "Promissory Notes") and 2,800,000 warrants ("Warrants") to purchase shares
of our common stock at a purchase price of $0.003 per Warrant. We received
proceeds of $758,400 from the issuance of the Promissory Notes and the Warrants.
The Promissory Notes originally matured on September 8, 2005, and accrued
interest at a rate of 12.0% per annum, of which 4.0% is payable monthly and 8.0%
is payable at maturity. In September 2005, we retired Promissory Notes in an
aggregate principal amount of $300,000. However, the holders of the remaining
$450,000 aggregate principal amount of Promissory Notes agreed to extend the
maturity date of their Promissory Notes to June 30, 2006 and to defer the
payment of all interest on their Promissory Notes until maturity. As of
September 30, 2005, all of the Warrants, as well as an additional 300,000
warrants ("Director Warrants") issued to certain directors in connection with
the sale of the Promissory Notes and Warrants, have been exercised. We have
issued 2,820,369 shares of common stock as a result of the cashless exercise of
Warrants and Director Warrants.
The following table summarizes certain of our contractual obligations and other
commercial commitments at September 30, 2005 (amounts in thousands):
Payments Due by Period
---------------------------------------------
Contractual Obligations and Other 1 year After
Commercial Commitments Total or less 1-3 years 3-5 years 5 years
--------------------------------- ------ ------- --------- ------------ -------
Notes Payable and Long-Term Debt $1,143 613 530 - -
Operating Leases, net of sublease 209 156 41 12 -
Abandonment - Costs 1,735 - 237 - 1,498
------ --- --- -- -----
Total Contractual Obligations
and Other Commercial Commitments $3,087 769 808 12 1,498
====== === === == =====
17
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
The following table summarizes our financial position for the periods indicated
(amounts in thousands):
September 30, December 31,
2005 2004
--------------- ---------------
Amount % Amount %
------ --- ------ -----
Working Capital $ 993 17 $ 404 7
Property and equipment, net 5,075 83 5,324 93
Other noncurrent assets 11 - 11 -
------ --- ------ ---
Total $6,079 100 $5,739 100
====== === ====== ===
Long-term Liabilities $2,265 37 $2,374 41
Stockholders' equity 3,814 63 3,365 59
------ --- ------ ---
Total $6,079 100 $5,739 100
====== === ====== ===
Our financial condition continues to be adversely affected by the poor
performance of our pipeline assets. We have previously been unable to generate
sufficient cash from operations to cover operating costs and general and
administrative expenses. Natural gas transportation throughput on our Blue
Dolphin Pipeline System is currently 12 MMBtu per day representing approximately
6% of system capacity. However, we believe that the Blue Dolphin Pipeline System
and the Omega pipeline are in geographic market areas that are experiencing an
increased level of interest by oil and gas operators based on recent leasing and
drilling activity in the lease blocks surrounding the pipelines. Effective
October 1, 2004, we renegotiated the gas transportation rates on the Blue
Dolphin Pipeline System due to operating losses incurred. As a result, gas
transportation revenues from the Blue Dolphin Pipeline System for the first
three quarters of 2005 totaled approximately $671,667. Without the increased
rates, gas transportation revenues would have been approximately $181,443 for
this same period. Future utilization of our pipelines and related facilities
will depend upon the success of drilling programs around our pipeline systems,
and attraction and retention of producer/shippers to the systems. Three new
successful wells have recently been drilled in lease blocks in the vicinity of
the Blue Dolphin Pipeline System. We have entered into transportation and
handling agreements with all three of the operators of these wells. As a result
of current and anticipated drilling activity around the Blue Dolphin Pipeline
System, we expect that utilization of the Blue Dolphin Pipeline System will
increase late in the fourth quarter of 2005 or early in the first quarter of
2006.
During the nine months ended September 30, 2005, we incurred workover costs
estimated at approximately $77,000 for two wells in High Island Block A-7. Both
workovers were successful. In 2008, we expect to incur total abandonment costs
of approximately $237,000 for the wells in High Island Blocks 37 and A-7
combined. If oil and gas operators in the geographic areas surrounding the
Omega pipeline are successful in their exploration efforts, we may return that
pipeline to service. Presently, we are unable to determine if we will
reactivate the Omega pipeline or the costs of reactivation.
18
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
RESULTS OF OPERATIONS
We reported a net loss for the nine months ended September 30, 2005 ("current
period") of $367,812 compared a net loss of $1,883,507 reported for the nine
months ended September 30, 2004 ("previous period"). For the three months ended
September 30, 2005 ("current quarter"), we reported net income of $1,030,448,
compared to a net loss of $540,495 for the three months ended September 30, 2004
("previous quarter").
NINE MONTHS OF 2005 COMPARED TO NINE MONTHS OF 2004
Revenue from pipeline operations. Revenues from pipeline operations increased by
$406,000 or 69.3% in the current period to $991,448. Revenues in the current
period from the Blue Dolphin Pipeline System totaled approximately $810,000
compared to approximately $355,855 in the previous period primarily as a result
of an increase in our average gas transportation rates on the Blue Dolphin
Pipeline System effective as of October 2004. The increased rates will decrease
as our net operating results from the Blue Dolphin Pipeline System improve, but
in any case, the rates will be no lower than the rates that were in effect prior
to the increase in October 2004.
Revenue from oil and gas sales. Revenues from oil and gas sales increased by
$1,495,531 to $1,844,579 in the current period from those of the previous period
primarily due to recognition of approximately $1,697,000 of revenue for sales of
oil and gas associated with a contractual after-payout working interest of
approximately 2.7% in High Island Block 37 in the Gulf of Mexico. The revenue
represents our interest in production from the estimated payout date of July 1,
2004 through September 2005. High Island Block A-7 ceased production in July
2005. The well, which had been producing, was recompleted in September 2005 to a
new reservoir and a second well was recompleted, also in September 2005. Both
wells produced at a significantly higher combined rate for a portion of
September 2005, but were shut-in due to Hurricane Rita. Only one of the two
wells is producing currently. The second well is temporarily shut-in due to
pipeline curtailment associated with not yet completed repairs to the onshore
processing facilities of the third party transporter of the production. High
Island Block A-7 provided revenues of approximately $148,000 in the current
period compared to approximately $285,000 in the prior period. Previous period
oil and gas sales include approximately $64,000 from our interest in the High
Island Block 34 field, which was sold in June 2004.
Pipeline operating expenses. Pipeline operating expenses in the current period
decreased by $77,467 to $779,030 primarily due to lower repairs and maintenance
costs of approximately $147,000 and lower insurance costs of approximately
$75,000, partially offset by an increase in legal costs of approximately $69,000
and an increase in consulting services of approximately $38,000. The decrease in
insurance costs is due to a refund received for having no claims in the previous
policy period and the elimination of property insurance coverage on our
pipelines. The increase in legal costs is associated with an ongoing action
against us; the outcome of which we do not believe will have a material impact.
However, as this litigation continues we will continue to incur significant
legal expenses which could have a material adverse effect on our financial
condition.
19
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
General and administrative. General and administrative expenses increased by
$822,015 to $2,156,226 in the current period. The increase was primarily due to
recognition of approximately $774,000 of non-cash compensation expense
associated with "cashless" exercises of 319,321 stock options by certain of our
directors and employees and to a lesser extent, by higher legal and consulting
expenses associated with our efforts to raise capital, offset by lower personnel
and other costs as a result of our cost reduction plans implemented in 2003 and
2004. If our business activities expand, we will need to hire additional
employees, and our personnel and associated costs will increase.
Interest and other expense. Interest and other expense decreased $205,801 in the
current period. Other expense in the prior period included approximately
$200,000 in legal and other fees associated with proposed financing transaction
that was subsequently terminated.
Interest and other income. Interest and other income increased $80,947 in the
current period. Other income in the current period includes a gain on the
placement of our interests in the Galveston Block 287/297 leases of
approximately $140,000, a gain on the elimination of accrued interest as a
result of the restructuring of the MCNIC promissory note of approximately
$132,000 and the collection of accounts receivable that were previously written
off of approximately $45,000. Other income in the previous period includes fees
generated for consulting services we provided, associated with the evaluation of
oil and gas properties, of approximately $110,000 and the collection of accounts
receivable that were previously written off of approximately $120,000.
Equity in loss of affiliate. In the previous period we recorded a loss from our
equity interest in New Avoca of $74,200. Our interest in New Avoca was sold in
October 2004.
THIRD QUARTER OF 2005 COMPARED TO THIRD QUARTER OF 2004
Revenue from pipeline operations. Revenues from pipeline operations increased by
$154,829 or 82.4% in the current quarter to $342,740. Revenues in the current
quarter from the Blue Dolphin Pipeline System totaled approximately $294,000
compared to approximately $92,000 in the previous quarter primarily as a result
of an increase in our average gas transportation rates on the Blue Dolphin
Pipeline System effective as of October 2004.
Revenue from oil and gas sales. Revenues from oil and gas sales increased by
$1,696,950 to $1,764,828 in the current quarter from those of the previous
quarter primarily due to recognition of approximately $1,697,000 of revenue for
sales of oil and gas associated with a contractual after-payout interest of
approximately 2.7% in High Island Block 37. The revenue represents our interest
in production from the estimated payout date of July 1, 2004 through September
2005. Two wells in High Island Block A-7 were successfully recompleted in August
and produced at a significantly higher combined rate for a portion of September
but were shut-in due to Hurricane Rita. Only one of the two wells is producing
currently. The second well is temporarily shut-in awaiting completion of repairs
by the third party transporter of the production. The High Island Block A-7
field generated revenues of approximately $68,000 in both the current and prior
periods.
20
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
Pipeline operating expenses. Pipeline operating expenses in the current quarter
increased by $83,016 to $290,981 primarily due to increased insurance and legal
costs. The legal costs are associated with an ongoing action against us; the
outcome of which we do not believe will have a material impact.
General and administrative. General and administrative expenses increased by
$109,430 to $547,400 in the current quarter. The increase was primarily due to
recognition of approximately $88,000 of non-cash compensation expense associated
with "cashless" exercises of stock options by certain employees.
Interest and other income. Interest and other income decreased $107,940 in the
current quarter. Other income in the previous quarter includes fees for
consulting services of $60,000 and $45,000 associated with the collection of
accounts receivable that were previously written off .
Equity in loss of affiliate. In the previous quarter we recorded a loss from our
equity interest in New Avoca of $25,830. Our interest in New Avoca was sold in
October 2004.
RECENT ACCOUNTING DEVELOPMENTS
See Note 7 in Item 1.
ITEM 3. CONTROLS AND PROCEDURES
We have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act), as of the end of the period covered by this report. The
evaluation was accomplished under the supervision and with the participation of
our management, including our Chief Executive Officer and Principal Accounting
and Financial Officer. Based upon this evaluation, the Chief Executive Officer
and Principal Accounting and Financial Officer concluded that as of September
30, 2005, our disclosure controls and procedures were not effective 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.
Subsequent to the end of the period covered by this report, management
determined that a significant deficiency in our internal controls over financial
reporting impacted the adequacy of our disclosure controls and procedures with
respect to the application of generally accepted accounting principles ("GAAP")
to the "cashless" exercise of stock options by certain directors and employees.
We account for stock-based compensation as fixed awards under the Intrinsic
Value Method as prescribed by Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB No. 25"). Under APB No. 25, the
compensation expense associated with option grants that receive fixed accounting
treatment is measured at the grant date. When variable accounting treatment is
applied, compensation expense is measured again and recognized at periods after
the initial measurement date. We have concluded, after consultation with UHY,
that options exercised using the
21
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 3. CONTROLS AND PROCEDURES-CONTINUED
"cashless" exercise method require variable accounting treatment under Financial
Accounting Standards Board Interpretation No. 44 "Accounting for Certain
Transactions involving Stock Compensation - An Interpretation of APB Opinion No.
25" ("FIN 44"). The error in our reporting of compensation expense resulted in
the restatement of the financial information for the quarters ended March 31,
2005 and June 30, 2005. Compensation expense for the period covered by this
Report has been reported using variable accounting consistent with FIN 44.
In response to the identified significant deficiency, we have taken remedial
steps to improve the control processes regarding the application of GAAP and
preparation and review of the consolidated financial statements. Specifically,
key personnel involved in our financial reporting process have enhanced the
process through which authoritative guidance will be monitored on a regular
basis. On-going reviews of authoritative guidance are being conducted in order
to ensure that the guidance is being complied with in the preparation of the
financial statements, related disclosures and periodic filings with the SEC. As
previously disclosed, there were also changes in our internal controls over
financial reporting in the form of more in-depth project status review
procedures. All of these changes were designed to enhance our existing
disclosure controls and procedures. Other than the changes discussed above,
there have been no changes made in our internal control over financial reporting
that materially affected, or is reasonably likely to materially affect, the
internal control over financial reporting.
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22
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS
From August 23, 2005 through September 12, 2005, 808,329 outstanding warrants
were exercised by warrant holders. The exercises were accomplished via net
exercise, whereby holders surrender their right to receive a portion of the
shares of common stock. The rights to receive 61,994 shares of common stock were
surrendered and the Company issued 746,335 shares of common stock upon exercise.
From July 11, 2005 through August 26, 2005, 52,500 stock options were exercised.
These options were granted under the Blue Dolphin 2000 Stock Incentive Plan.
Some 22,500 stock options were accomplished via net exercise, as described
above. The stock options had an exercise price of $.80 per share. The rights to
receive 6,165 shares were surrendered, and the Company issued 16,335 shares of
common stock via net exercise.
These securities were issued in reliance upon the exemption from registration
pursuant to Section 4(2) under the Securities Act of 1933, as amended.
ITEM 5. OTHER INFORMATION
See Part II, Item 2. "UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS."
ITEM 6. EXHIBITS
A) Exhibits
3.1(1) Amended and Restated Certificate of Incorporation of the
Company.
3.2(2) Amended and Restated Bylaws of the Company.
31.1 Ivar Siem Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Gregory W. Starks Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Ivar Siem Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Gregory W. Starks Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act
of 2002.
--------------------
(1) Incorporated herein by reference to Exhibits filed in connection with the
definitive Proxy Statement of Blue Dolphin Energy Company under the
Securities and Exchange Act of 1934, dated October 13, 2004 (Commission
File No. 000-15905).
(2) Incorporated herein by reference to Exhibits filed in connection with Form
10-QSB of Blue Dolphin Energy Company for the quarter ended June 30, 2004
under the Securities and Exchange Act of 1934, dated August 20, 2004
(Commission File No. 000-15905).
23
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
By: BLUE DOLPHIN ENERGY COMPANY
Date: November 14, 2005 /s/ Ivar Siem
------------------------------
Ivar Siem
Chairman and Chief Executive Officer
/s/ Gregory W. Starks
-------------------------------
Gregory W. Starks
Treasurer
(Principal Accounting and Financial Officer)
24
INDEX TO EXHIBITS
3.1 (1) Amended and Restated Certificate of Incorporation of the Company.
3.2 (2) Amended and Restated Bylaws of the Company.
31.1 Ivar Siem Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Gregory W. Starks Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Ivar Siem Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Gregory W. Starks Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
2002.
--------------------
(1) Incorporated herein by reference to Exhibits filed in connection with the
definitive Proxy Statement of Blue Dolphin Energy Company under the
Securities and Exchange Act of 1934, dated October 13, 2004 (Commission
File No. 000-15905).
(2) Incorporated herein by reference to Exhibits filed in connection with Form
10-QSB of Blue Dolphin Energy Company for the quarter ended June 30, 2004
under the Securities and Exchange Act of 1934, dated August 20, 2004
(Commission File No. 000-15905).