UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended: June 30, 2002
[ ] Transition Report Pursuant to 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) (Zip Code)
(713) 227-7660
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
6,371,845 shares of the registrants' common stock, par value $.01 per share,
--------------------------------------------------------------------------------
were outstanding at August 13, 2002.
------------------------------------
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET -UNAUDITED
June 30, 2002
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 (the "Company" or "Blue Dolphin") included herein have been
prepared by the Company, 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. The Company follows 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. The Company believes 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 U.S. generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations.
The accompanying condensed consolidated financial statements of the Company
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Annual Report on Form 10-KSB for the year ended
December 31, 2001.
2
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET - UNAUDITED
ASSETS
Current assets:
Cash and cash equivalents $ 720,859
Accounts receivable, net of allowance of $197,500 1,193,425
Prepaid expenses and other assets 258,161
------------
TOTAL CURRENT ASSETS 2,172,445
Property and Equipment at cost:
Oil and Gas properties, including $71,488
of unproved leasehold cost (full-cost method) 27,141,910
Pipelines 3,639,940
Onshore separation and handling facilities 1,664,128
Land 860,275
Other property and equipment 272,091
------------
33,578,344
Accumulated depletion, depreciation and amortization (27,287,637)
------------
6,290,707
Deferred federal income tax 244,444
Other assets 460,501
------------
TOTAL ASSETS $ 9,168,097
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 1,126,193
Accrued expenses and other liabilities 3,455,903
------------
TOTAL CURRENT LIABILITIES 4,582,096
Note payable 750,000
Contingencies --
Common Stock, ($.01 par value, 10,000,000 shares authorized,
6,371,845 shares issued and outstanding) 63,718
Additional Paid-in Capital 26,107,141
Accumulated Deficit (22,334,858)
------------
3,836,001
TOTAL LIABILITES AND
STOCKHOLDERS' EQUITY $ 9,168,097
============
See accompanying notes to the condensed consolidated financial statements.
3
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLODATED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months
Ended June 30,
2002 2001
----------- -----------
Revenue from operations:
Oil and gas sales $ 689,482 $ 1,462,015
Pipeline operations 357,456 231,878
----------- -----------
1,046,938 1,693,893
----------- -----------
Cost of operations:
Lease operating expenses 175,212 293,626
Pipeline operating expenses 142,719 118,210
Depletion, depreciation, amortization and abandonment 263,190 424,646
General and administrative 791,540 777,661
----------- -----------
1,372,661 1,614,143
----------- -----------
INCOME (LOSS) FROM OPERATIONS (325,723) 79,750
Other income (expense):
Interest and other expense (105,923) (164,402)
Interest and other income 42,058 44,352
----------- -----------
LOSS BEFORE MINORITY INTEREST,
AND INCOME TAXES (389,588) (40,300)
Minority interest -- (29,106)
Income taxes -- --
----------- -----------
Net loss $ (389,588) $ (69,406)
=========== ===========
Loss per common share-basic and diluted $ (0.06) $ (0.01)
=========== ===========
Weighted average number of common shares
Outstanding - basic and diluted 6,371,845 6,020,051
=========== ===========
See accompanying notes to the condensed consolidated financial statements.
4
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLODATED STATEMENTS OF OPERATIONS - UNAUDITED
Six months
Ended June 30,
2002 2001
----------- -----------
Revenue from operations:
Oil and gas sales $ 1,267,751 $ 3,252,867
Pipeline operations 686,753 554,076
----------- -----------
1,954,504 3,806,943
----------- -----------
Cost of operations:
Lease operating expenses 392,859 627,390
Pipeline operating expenses 287,435 268,948
Depletion, depreciation, amortization and abandonment 552,757 2,002,808
Impairment of assets 339,984 --
General and administrative 1,376,155 1,596,164
----------- -----------
2,949,190 4,495,310
----------- -----------
LOSS FROM OPERATIONS (994,686) (688,367)
Other income (expense):
Interest and other expense (121,715) (329,642)
Bad debt expense (197,500) --
Gain on sale of assets -- 1,417,626
Interest and other income 56,648 97,473
----------- -----------
INCOME (LOSS) BEFORE MINORITY INTEREST,
AND INCOME TAXES (1,257,253) 497,090
Minority interest (55,746) (13,582)
Income taxes -- --
----------- -----------
Net income (loss) $(1,312,999) $ 483,508
=========== ===========
Earnings (loss) per common share-basic $ (0.21) $ 0.08
=========== ===========
Earnings (loss) per common share-diluted $ (0.21) $ 0.08
=========== ===========
Weighted average number of common shares outstanding:
Basic 6,293,022 6,018,440
=========== ===========
Diluted 6,293,022 6,037,458
=========== ===========
See accompanying notes to the condensed consolidated financial statements.
5
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLODATED STATEMENTS OF CASH FLOWS - UNAUDITED
Six Months
Ended June 30,
2002 2001
----------- -----------
OPERATING ACTIVITIES
Net income (loss) $ (1,312,999) $ 483,508
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depletion, depreciation, amortization, abandonment 552,757 2,002,808
Minority interest 55,746 13,582
Gain on sale of as sets -- (1,417,626)
Impairment of assets 339,984 --
Bad debt expense 197,500 --
Changes in operating assets and liabilities:
Accounts receivable (132,686) 957,069
Prepaid expenses and other assets (94,336) (169,482)
Abandonment costs incurred -- (1,473,960)
Trade accounts payable, accrued expenses, and other
liabilities (1,380,809) 51,013
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,774,843) 446,912
----------- -----------
INVESTING ACTIVITIES
Purchases of property and equipment -- (1,602,571)
Exploration and development costs (604,461) (387,000)
Purchase of minority interest from subsidiary (254,786) --
Net proceeds from sale of assets -- 4,625,000
Funds escrowed for abandonment costs -- (34,347)
Release of escrowed funds for abandonment -- 1,451,446
Development costs - Petroport -- (49,510)
Development costs - New Avoca (1,615) (158,497)
Acquisition of additional interest in Drillmar, net of cash acquired -- (270,529)
Other assets -- (214,140)
----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (859,862) 3,359,852
----------- -----------
FINANCING ACTIVITIES
Net proceeds from borrowings -- 100,000
Payments on borrowings -- (2,218,412)
Other 12,004 (6,656)
----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 12,004 (2,125,068)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,622,701) 1,681,696
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,343,560 2,071,682
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 720,859 $ 3,753,378
=========== ===========
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid $ -- $ 98,500
=========== ===========
NON CASH INVESTING AND FINANCING ACTIVITIES:
Purchases of property and equipment financed with debt $ 750,000 $ --
=========== ===========
See accompanying notes to the condensed consolidated financial statements.
6
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. Related Party Transactions
In May 2002, the Company terminated its agreement with Drillmar, effective as of
May 1, 2002, whereby it provided office space and certain management and
administrative services to Drillmar for approximately $40,000 per month.
Also in May 2002, the Company and Drillmar entered into a new agreement
effective as of May 1, 2002, whereby the Company will provide office space and
minimal accounting and administrative services to Drillmar for $2,000 per month.
The agreement can be terminated upon 30 days notice or by the mutual agreement
of the parties.
Due to Drillmar's working capital deficiency and delays in securing capital
funding, the Company has elected to record a full impairment of its investment
in Drillmar of approximately $340,000 and a full reserve for the accounts
receivable amount owed from Drillmar, $197,500 at March 31, 2002.
Ivar Siem, Chairman of the Company, and Harris A. Kaffie, a Director of the
Company, are owners of 30.3% and 30.6%, respectively, of Drillmar's common
stock. As of March 31, 2002, Messrs. Siem and Kaffie provided funding to
Drillmar of $525,000 and $425,000, respectively, and were issued unsecured
promissory notes from Drillmar. The promissory notes are due June 30, 2002 and
bear interest at the rate of 10% per annum. Along with the promissory notes,
Drillmar issued detachable warrants to Messrs. Siem and Kaffie of 52,500 and
42,500, respectively. Each warrant provides for the purchase of one share of
Drillmar common stock at $5 per share and are exercisable for three years from
issuance. The promissory notes issued by Drillmar are nonrecourse to the
Company.
2. Contingencies
As a result of the decision to cease operating activities in the Buccaneer
Field, the Company's leases in or on the Buccaneer Field terminated in January
2001. The Company must plug and abandon all remaining wells and remove platform
facilities within one year from the termination of the leases. In 2001, the
Company plugged its remaining wells at a cost of approximately $1.4 million.
During 2001 the Company also commenced operations to remove the Buccaneer Field
platform complexes at a cost of approximately $0.4 million. After the Company
commenced removal operations, discussions were initiated with the Texas Parks
and Wildlife Department ("TP&W") in an effort to leave certain of the underwater
portions of the platform complexes in place as artificial reefs. In December
2001, operations to remove the platform complexes were suspended while the
Company continues its discussions with the TP&W.
The Company expects that the TP&W will make a decision whether the Company can
leave portions of the Buccaneer Field platform complexes in place as artificial
reefs in the second half of 2002. If one or both of the platform complexes are
left in place as an artificial reef, certain site clearance costs would be
eliminated. The Company requested and has received an extension from the MMS
until October 1, 2002 to complete the removal and site clearance of the platform
complexes. The Company still believes that its provision for abandonment costs
of $4.6 million is adequate.
7
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material effect on the Company's
financial position, results of operations or cash flows.
On May 8, 2000, American Resources Offshore, Inc., a subsidiary of the
registrant ("American Resources"), and its former chief financial officer, were
named in a lawsuit in the United States District Court for the Southern District
of Texas, Houston Division, styled H&N Gas, Limited Partnership, et al. v.
Richard Hale, et al. (Case No. H-00-1371). The lawsuit alleged, among other
things, that H&N Gas ("H&N") was defrauded by American Resources in connection
with gas purchase options and gas price swap contracts entered into from
February 1998 through September 1999. H&N alleged unlawful collusion between
American Resources' prior management and then president of H&N, Richard Hale
("Hale"), to the detriment of H&N. H&N generally alleged that Hale directed H&N
to purchase illusory options from American Resources that bore no relation to
any physical gas business and that American Resources did not have the financial
resources and/or sufficient quantity of gas to perform. H&N further alleged that
American Resources and Hale colluded with respect to swap transactions that were
designed to benefit American Resources at the expense of H&N. H&N also alleged
civil conspiracy against all of the defendants.
In May 2002, the Company, American Resources and members of prior management of
American Resources, including its former chief financial officer, entered into a
settlement agreement with H&N. American Resources paid approximately $0.3
million in settlement of this litigation and additionally released funds of
approximately $0.7 million it was holding that were due to H&N. The settlement
agreement and the payments made thereunder were made in compromise of disputed
claims and are not an admission of wrongdoing or of liability of any kind.
3. Acquisition of assets
In February 2002, the Company acquired a 1/3 interest in the Blue Dolphin
Pipeline System and the inactive Omega Pipeline from MCNIC Pipeline and
Processing Company ("MCNIC"). Pursuant to the terms of the purchase and sale
agreement, Blue Dolphin issued MCNIC a $750,000 promissory note due December 31,
2006, with required monthly payments to be made out of 90% of the net revenues
of the interest acquired. The note bears interest at the rate of 6% per annum
and is secured by the interest acquired. As of June 30, 2002, net resources were
insufficient to provide any pricipal payments. Additionally, an aggregate
contingent payment of up to $750,000 will be made, if the promissory note is
retired before its maturity date. The contingent payments will be payable
annually after the promissory note is retired until December 31, 2006 out of 50%
of the net revenues from the interest acquired. The termination date, December
31, 2006, will be extended by one additional year, up to a maximum of two years,
for years in which non-recurring, extraordinary expenditures attributable to the
interest acquired exceeds $200,000, in the aggregate, during any year.
On December 2, 1999, the Company, through Blue Dolphin Exploration, acquired a
75% ownership interest in American Resources by purchasing approximately 39.5
million shares of American Resources common stock. On February 19, 2002, the
Company completed its acquisition of American Resources, pursuant to the Amended
and Restated Agreement and Plan of Merger dated as of December 19, 2001 (the
"Merger Agreement"). Pursuant to the Merger Agreement, American Resources became
a wholly owned subsidiary of the Company and each outstanding share of (i)
American Resources common stock, par value $.00001 per share, was converted into
8
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
the right to receive, at the option of the holder, either $.06 per share in cash
or .0362 of a share of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), and (ii) American Resources Series 1993 Preferred Stock, par
value $12.00 per share, was converted into the right to receive, at the option
of the holder, either $.07 in cash or .0301 of a share of Common Stock.
As a result of elections made by American Resources' stockholders, the Company
issued 273,336 shares of Common Stock and paid approximately $255,000 in cash.
4. Other Liabilities
In December 1999, American Resources received approximately $4.5 million from
Blue Dolphin Exploration for American Resources common stock representing a 75%
ownership interest and $24.2 million from Fidelity Oil for an 80% interest in
its Gulf of Mexico assets. American Resources senior secured debt was held by
Den norske Bank ("Den norske"). Den norske sold the senior debt to the Company
for the right to receive a possible future payment. The payment due to Den
norske was determined to be approximately $0.8 million net to American
Resources; however, in June 2002, Den norske agreed to accept $0.6 million as
full payment, which American Resources paid.
5. Earnings Per Share
The Company applies the provisions of Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings per Share". SFAS 128 requires the
presentation of basic earnings per share ("EPS") which excludes dilution and is
computed by dividing 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.
The following table provides a reconciliation between basic and diluted earnings
per share:
9
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
Weighted-
Average Number
of Common Shares
Outstanding
and Potential Per
Net Income Dilutive Share
(Loss) Common Shares Amount
---------------- ---------------- ---------------
Six Months ended June 30, 2002
Basic and diluted loss per share $ (1,312,999) 6,293,022 $ (0.21)
================ ================ ===============
Six Months ended June 30, 2001
Basic earnings per share $ 483,508 6,018,440 $ 0.08
Effect of dilutive stock options 19,018
---------------- ---------------- ---------------
Diluted earnings per share $ 483,508 6,037,458 $ 0.08
================ ================ ===============
Quarter ended June 30, 2002
Basic and diluted loss per share $ (389,588) 6,371,845 $ (0.06)
================ ================ ===============
Quarter ended June 30, 2001
---------------- ---------------- ---------------
Basic and diluted loss per share $ (69,406) 6,020,051 $ (0.01)
================ ================ ===============
5. Business Segment Information
The Company's income producing operations are conducted in two principal
business segments: oil and gas exploration and production; and pipeline
operations. There were no intersegment revenues during the periods presented.
Information concerning these segments for the six months and quarters ended June
30, 2002 and 2001, and at June 30, 2002 are as follows:
10
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
Depletion,
Depreciation,
Amortization,
Abandonment,
Operating Income and
Revenues (3) (Loss)(1)(3) Impairment (2)(3)
----------------- ----------------- -----------------
Six months ended June 30, 2002:
Oil and gas exploration and production $ 1,267,751 93,103 457,534
Pipeline operations 686,753 139,155 84,511
Other -- (1,226,944) 10,712
----------------- ----------------- -----------------
Consolidated 1,954,504 (994,686) 552,757
----------------- -----------------
Other Expense (262,567)
-----------------
Loss before minority interest and income taxes (1,257,253)
Six months ended June 30, 2001:
Oil and gas exploration and production $ 3,252,867 (167,317) 1,896,995
Pipeline operations 554,076 1,459,676 90,491
Other -- (563,100) 15,322
----------------- ----------------- -----------------
Consolidated
3,806,943 729,259 2,002,808
----------------- -----------------
Other expense (232,169)
-----------------
Income before minority interest and income taxes 497,090
Quarter ended June 30, 2002:
Oil and gas exploration and production $ 689,482 138,541 225,101
Pipeline operations 357,456 103,910 32,733
Other -- (568,174) 5,356
----------------- ----------------- -----------------
Consolidated
1,046,938 (325,723) 263,190
----------------- -----------------
Other expense (63,865)
-----------------
Loss before minority interest and income taxes (389,588)
Quarter ended June 30, 2001:
Oil and gas exploration and production $ 1,462,015 364,289 383,703
Pipeline operations 231,878 10,307 36,684
Other -- (294,846) 4,259
----------------- ----------------- -----------------
Consolidated
1,693,893 79,750 424,646
----------------- -----------------
Other expense (120,050)
-----------------
Loss before minority interest and income taxes (40,300)
June 30, 2002
-------------
Identifiable assets:
Oil and Gas exploration and
production $ 2,872,623
Pipeline operations 5,189,921
Other 1,105,553
-------------
Consolidated $ 9,168,097
=============
11
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED - CONTINUED
1. Consolidated income (loss) from operations includes $876,249 and
$547,780 in unallocated general and administrative expenses, and
unallocated depletion, depreciation and amortization of $10,712 and
$15,322 for the six months ended June 30, 2002 and 2001, respectively.
Consolidated income (loss) from operations includes $562,818 and
$290,587 in unallocated general and administrative expenses, and
unallocated depletion, depreciation and amortization of $5,356 and
$4,259 for the quarters ended June 30, 2002 and 2001, respectively.
2. Pipeline depreciation and amortization includes a provision for
pipeline abandonment of $9,870 and $9,870 for the six months ended
June 30, 2002 and 2001, respectively. In addition, the Company
recorded an impairment expense of $339,984 for the six months ended
June 30, 2002, of its investment in Drillmar, and an expense of
approximately $1.1 million for the six months ended June 30, 2001, as
a result of a change in the estimated abandonment costs associated
with the Buccaneer Field.
Pipeline depreciation and amortization includes a provision for
pipeline abandonment of $4,935 and $4,935 for the quarters ended June
30, 2002 and 2001, respectively.
3. Pipeline revenues include $49,640 for the six months ended June 30,
2001 from the Black Marlin Pipeline System. Pipeline operations
include $50,107 of operating expenses and depreciation for the six
months ended June 30, 2001 from the Black Marlin Pipeline System.
6. Subsequent Event
In July 2002, American Resources Offshore, Inc., a wholly owned subsidiary of
the Company ("American Resources"), sold its working interest in the South
Timbalier Block 148 property for $2.3 million. As of December 31, 2001, the
Company recorded 1,354 Mmcfe of proved reserves attributable to the South
Timbalier Block 148 property. These proved reserves accounted for approximately
36% of the Company's total net proved reserves on an Mmcfe basis and 37% of the
discounted present value of estimated future net revenues from proved reserves.
Production from this field accounted for 19% and 20% of the Company's oil and
gas sales revenues for the quarters ended June 30, 2002 and 2001, respectively,
and 12% and 17% of the Company's total revenues for these periods. Production
from this field accounted for 17% and 19% of the Company's oil and gas sales
revenues for the six months ended June 30, 2002 and 2001, respectively, and 11%
and 17% of the Company's total revenues for these periods.
7. Recently Issued Accounting Pronouncements
In May 2002, the FASB issued Statement of Financial Accounting Standards No. 145
("SFAS 145"), "Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections". This Statement rescinds FASB
12
Statements No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an
amendment of Statement No. 4 and FASB Statement No. 64, Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds
FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers. This
Statement amends FASB Statement No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. SFAS 145 is effective
for fiscal years beginning after May 15, 2002. The Company's management does not
expect the adoption of SFAS 145 to have a material effect on the Company's
financial condition and results of operations.
In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146 ("SFAS 146"), "Accounting for Costs Associated with Exit or Disposal
Activities". This Statement addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)". SFAS 146 is effective for exit or disposal
activities initiated after December 31, 2002. The Company's management does not
expect the adoption of SFAS 146 to have a material effect on the Company's
financial condition and results of operations.
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 10QSB, 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, and Section 27A of the Securities Act of 1933, as amended. The words
"expect", "plan", "believe", "anticipate", "project", "estimate", and similar
expressions are intended to identify forward-looking statements. The Company
cautions readers that any such 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 the forward-looking statements. Some of the important factors, risks and
uncertainties that could cause actual results to vary from the forward-looking
statements include:
o the risks associated with exploration;
o the level of production from oil and gas properties
o gas and oil price volatility;
o uncertainties in the estimation of proved reserves and in the
projection of future rates of production and timing of development
expenditures;
o the level of utilization of the Company's pipelines;
o availability and cost of capital;
o actions or inactions of third party operators for properties where the
Company has an interest;
o regulatory developments; and
o 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 the Company's Form 10-KSB for the fiscal year ended
December 31, 2001. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. The Company
undertakes no duty to update these forward-looking statements. Readers are urged
to carefully review and consider the various disclosures made by the Company
which attempt to advise interested parties of the additional factors which may
affect the Company's business, including the disclosures made under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in this report.
RECENT DEVELOPMENTS
-------------------
On July 9, 2002, American Resources Offshore, Inc., a wholly owned subsidiary of
the Company ("American Resources"), sold its working interest in the South
Timbalier Block 148 property for $2.3 million. As of December 31, 2001, the
Company reported 1,354 Mmcfe of proved reserves attributable to the South
Timbalier Block 148 property. These proved reserves accounted for approximately
36% of the Company's total net proved reserves on an Mmcfe basis and 37% of the
discounted present value of estimated future net revenues from proved reserves.
For the six months ended June 30, 2002 and the three months ended June 30, 2002,
14
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
production from this property accounted for 17% and 19% respectively, of the
Company's oil and gas sales revenues and 11% of the Company's total revenues for
both periods.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002 the Company's working capital deficit was approximately $2.4
million. The Company's audit report as of and for the year ended December 31,
2001 contained a qualification as to the Company's ability to continue as a
going concern due to its financing needs. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty. As mentioned above, in July 2002 the Company sold its interest in
the South Timbalier Block 148 property for $2.3 million. The Company's cash flow
from operating activities is not sufficient to meet its working capital and
capital expenditure requirements for the remainder of the fiscal year. In order
to satisfy its working capital and capital expenditure requirements for the next
twelve months, the Company believes that it will need to raise between $0.5 and
$1.0 million of capital. The Company will need to arrange external financing
and/or sell assets to raise the necessary capital. Historically, the Company has
relied on the proceeds from the sale of assets and capital raised from the
issuance of debt and equity securities to individual investors and related
parties to sustain its operations. There can be no assurance that the Company
will be able to obtain financing or sell assets on commercially reasonable terms
to meet its capital requirements. The Company's inability to raise capital may
have a material adverse effect on its financial condition, ability to meet its
obligations and operating needs, and results of operations.
The following table summarizes certain of the Company's contractual cash
obligations and other commercial cash commitments at June 30, 2002 (amounts in
thousands):
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Payments Due by Period
----------------------
Contractual Less than After
Obligations Total 1 year 1-3 years 4-5 years 5 years
----------- --------- --------- --------- --------- ---------
Long-Term Debt $ 750 -- -- 750 --
Other Contractual
Obligations 3,510 1,486 1,877 147 --
--------- --------- --------- --------- ---------
Total Contractual
Cash Obligations $ 4,260 1,486 1,877 897 --
========= ========= ========= ========= =========
Amount of Commitment Expiration Per Period
------------------------------------------
Other Commercial Less than After
Commitments Total 1 year 1-3 years 4-5 years 5 years
---------------- --------- --------- --------- --------- ---------
Long-Term Debt $ -- -- -- -- --
Other Commercial
Obligations 2,000 2,000 -- -- --
--------- --------- --------- --------- ---------
Total Commercial
Cash Obligations $ 2,000 2,000 -- -- --
========= ========= ========= ========= =========
The following table summarizes the Company's financial position at June 30, 2002
and December 31, 2001 (amounts in thousands):
June 30, December 31,
-------- ------------
2002 2001
---- ----
Amount % Amount %
------ ------ ------ ------
Property and equipment, net $6,291 90 $5,980 85
Other noncurrent assets 705 10 1,043 15
------ ------ ------ ------
Total $6,996 100 $7,023 100
====== ====== ====== ======
Working capital $2,410 34 $1,197 17
Minority interest -- -- 1,065 15
Long term debt 750 11 -- --
Stockholders' equity 3,836 55 4,761 68
------ ------ ------ ------
Total $6,996 100 $7,023 100
====== ====== ====== ======
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
The change in the Company's financial position from December 31, 2001 to June
30, 2002, was primarily due to acquisitions of the minority interest in American
Resources and the additional interest in the Blue Dolphin Pipeline System.
Historically, the Company has relied on the proceeds from financing activities
and the sale of assets to supplement its capital requirements. During the six
months ended June 30, 2002 ("current period"), the Company financed its
activities from revenues generated from its operating activities, working
capital and debt financing.
The Company's future cash flows are subject to a number of variables, including
the level of production from oil and gas properties that the Company has an
interest in, utilization of its pipeline systems and commodity prices among
others.
The net cash provided by or used in our operatinfg, investing and financing
activities is summarized below (amounts in thousands):
Six Months Ended
June 30,
2002 2001
---------- ----------
Net cash provided by (used in):
Operating activities $ (1,775) $ 447
Investing activities (860) 3,360
Financing activities 12 (2,125)
---------- ----------
Net increase (decrease) in cash $ (2,623) $ 1,682
========== ==========
The Company's cash flow from operating activities decreased by $2.2 million in
the current period compared to the six months ended June 30, 2001 ("previous
period"), due primarily to a decrease in oil and gas revenues of approximately
$2.0 million.
Cash flow used in investing activities during the current period decreased by
approximately $4.2 million compared to the previous period due primarily to
proceeds received from the sale of the Black Marlin Pipeline System in the prior
period of approximately $4.6 million.
Cash flow provided by financing activities during the current period increased
by approximately $2.1 million compared to the previous period. The increase is
due to approximately $2.2 million used in the previous period to retire debt.
In November 2000, the Company elected to abandon the Buccaneer field due to
adverse developments in the field. The Company reached an agreement with Tetra
Applied Technologies, Inc. ("Tetra"), to plug and abandon the wells located in
the Buccaneer Field, which was completed in the first quarter of 2001 for
approximately $1.4 million. In addition, Maritech Resources, Inc. ("Maritech")
an affiliate of Tetra purchased an adjacent lease from Apache Corporation for
which the Company provided production operating services. In December 2000, as a
result of the Company's plans to abandon the Buccaneer Field platform
facilities, the Company and Maritech terminated the operating agreement. The
Company installed a new platform in 2001 at a cost of $1.7 million net to its
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
interest, to operate and maintain the Blue Dolphin Pipeline System, as well as
handle the production from Maritech's lease. The Blue Dolphin System was
previously tied into and operated from the Buccaneer Field platforms.
In August 2001, the Company reached an agreement with Tetra to remove the
Buccaneer Field platforms for a cost of approximately $2.6 million. Pursuant to
the agreement, Tetra and the Company agreed to extended payment terms, whereby
the Company will pay 20% upon completion and 5% per month for twelve months,
with the remaining balance due in the thirteenth month. To provide security for
the extended payment terms, the Company provided Tetra with a first lien on the
50% interest it then owned in the Blue Dolphin Pipeline System. Operations to
remove the platforms commenced in August 2001 and were suspended in December
2001, while the Company continued discussions with the Texas Parks and Wildlife
to leave the underwater portion of the platforms in place as artificial reefs.
The Company expects that the Texas Parks and Wildlife will make a decision as to
whether the Company will be able to leave any of the Buccaneer Field platforms
in place as artificial reefs, in the second half of 2002. The Company requested
and has received an extension from the Minerals Management Service until October
1, 2002, to complete the removal and site clearance of the platform complexes.
After the decision is made by the Texas Parks and Wildlife, Tetra will resume
its removal operations. If a platform complex is left in place as an artificial
reef certain costs associated with the site clearance operations would be
eliminated. The Company believes that its provision for abandonment costs of
$4.6 million at June 30, 2002 is adequate. The Company expects to finance the
remaining abandonment costs from working capital, the private placement of debt
or equity securities, or the sale of assets.
The Company previously announced a gas discovery in High Island Area Block A-7,
in the Gulf of Mexico. The Company owns an 8.9% reversionary working interest in
this field and it will begin to receive revenues from its reversionary interest
after "payout" occurs. Payout occurs after all of the other working interest
owners have recovered their costs and expenses associated with developing the
field from sales of gas and oil production from the field. In mid 2001, there
were three wells producing in this field at a combined rate of approximately 60
Mmcf of natural gas per day. However, two of the three wells stopped producing
and the remaining well is currently producing approximately 8 Mmcf of natural
gas per day. Additionally, two unsuccessful exploratory wells were drilled in
late 2001. Another well was recently drilled and is being completed. Before this
well was drilled, the Company had expected to begin to receive revenues from its
reversionary working interest in this field in 2005, however, subject to the
total cost of this well and its rate of production, the Company cannot
accurately determine when, if at all, it will begin to receive revenues.
In January 2001, the Company and its partners sold the Black Marlin Pipeline
System for $7.3 million and the High Island Block A-5 pipeline for $2.0 million
to Williams Field Services; $3.6 million and $1.0 million, respectively, net to
the Company's interest.
The Company's proved reserves and future net revenues reported at December 31,
2001 reflect estimated capital expenditures totaling $150,000, for the year
ending December 31, 2002. Management will continue to evaluate its capital
expenditure program based on, among other things, field reservoir performance,
availability and cost of drilling and workover equipment, and demand and prices
obtainable for the Company's production, as well as availability of capital
resources. There can be no assurance that reserves will be developed as
currently planned. For the six months ended June 30, 2002, the Company incurred
capital expenditures of approximately $425,000 for development of its proved
18
reserves. The Company is anticipating further planned capital expenditures of
$150,000 in the remainder of 2002 associated with its proved reserves.
In February 2002, the Company acquired a 1/3 interest in the Blue Dolphin
Pipeline System and the inactive Omega Pipeline from MCNIC. Pursuant to the
terms of the purchase and sales agreement, Blue Dolphin issued MCNIC a $750,000
promissory note due December 31, 2006, with required monthly payments to be made
out of 90% of the net revenues of the interest acquired. Additionally, an
aggregate contingent payment of up to $750,000 will be made, if the promissory
note is retired before its maturity date. The contingent payments will be
payable annually after the promissory note is retired until December 31, 2006
out of 50% of the net revenues from the interest acquired. Currently the Company
does not believe that the promissory note will be retired before its maturity
date. See Note 3. Acquisition of Assets, in Part 1., Item 1.
On December 2, 1999, the Company, through Blue Dolphin Exploration, acquired a
75% ownership interest in American Resources by purchasing approximately 39.5
million shares of American Resources common stock. On February 19, 2002, the
Company completed its acquisition of American Resources, pursuant to the Amended
and Restated Agreement and Plan of Merger dated as of December 19, 2001 (the
"Merger Agreement"). Pursuant to the Merger Agreement, American Resources became
a wholly owned subsidiary of the Company and each outstanding share of (i)
American Resources common stock, par value $.00001 per share, was converted into
the right to receive, at the option of the holder, either $.06 per share in cash
or .0362 of a share of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), and (ii) American Resources Series 1993 Preferred Stock, par
value $12.00 per share, was converted into the right to receive, at the option
of the holder, either $.07 in cash or .0301 of a share of Common Stock.
As a result of elections made by American Resources' stockholders, the Company
issued 273,336 shares of Common Stock and paid approximately $255,000 in cash.
In December 1999, American Resources received approximately $4.5 million from
Blue Dolphin Exploration for American Resources common stock representing a 75%
ownership interest and $24.2 million from Fidelity Oil for an 80% interest in
its Gulf of Mexico assets. American Resources senior secured debt was held by
Den norske Bank ("Den norske"). Den norske sold the senior debt to the Company
for the right to receive a possible future payment. The payment due to Den
norske was determined to be approximately $0.8 million net to American
Resources; however, in June 2002, Den norske agreed to accept $0.6 million as
full payment, which American Resources paid in July 2002.
In May 2002, the Company, American Resources and members of prior management of
American Resources, including its former chief financial officer, entered into a
settlement agreement with H&N. American Resources paid approximately $0.3
million in settlement of this litigation and additionally released funds of
approximately $0.7 million it was holding that were due to H&N. The settlement
agreement and the payments made thereunder were made in compromise of disputed
claims and are not an admission of wrongdoing or of liability of any kind. See
Note 2 in Part 1 Item 1.
19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
RESULTS OF OPERATIONS
---------------------
The Company reported a net loss for the six months ended June 30, 2002,
("current period") of $1,312,999, compared to net income of $483,508 reported
for the six months ended June 30, 2001 ("previous period"). The current period
net loss is primarily due to a decrease in oil and gas sales of approximately
$2.0 million, an impairment of the Company's investment in Drillmar along with
associated accounts receivable totaling approximately $0.5 million offset in
part by a decrease in depletion, depreciation, amortization and abandonment
expense in the current period of approximately $1.5 million. A gain on the sale
of the Black Marlin Pipeline System of $1.4 million was reported in the previous
period.
For the quarter ended June 30, 2002 ("current quarter") the Company reported a
net loss of $389,588 compared to a net loss of $69,406 for the quarter ended
June 30, 2001 ("previous quarter"). The increase in the net loss is primarily
due to a decrease in oil and gas sales of approximately $0.8 million, offset in
part by increased pipeline revenues of approximately $0.1 million, lower lease
operating expenses of approximately $0.1 million and a decrease in depletion,
depreciation, amortization and abandonment expense of approximately $0.2
million.
Revenues:
First Half 2002 vs. First Half 2001. Current period revenues from oil and gas
sales decreased by $1,985,116, from those of the previous period due to a 49%
decrease in oil and gas prices, resulting in decreased revenues of $1.2 million
and a decrease in production volumes of 23%, resulting in a $0.7 million
decrease in revenues.
Current period revenues from pipeline operations increased by $132,677 or 24%
from the previous period. The increase is attributable to the Company's
acquisition of the 1/3 interest in the Blue Dolphin Pipeline System in January
2002, resulting in increased revenues of approximately $0.2 million, offset in
part by lower throughput volumes resulting in decreased revenues of
approximately $0.1 million.
Second Quarter 2002 vs. Second Quarter 2001. Current quarter revenues from oil
and gas sales decreased by $772,533, from those of the previous quarter. The
decrease was due to a 44% decrease in oil and gas prices resulting in decreased
revenues of $.6 million, and an 18% decrease in oil and gas volumes resulting in
decreased revenues of $0.2 million.
Current quarter revenues from pipeline operations increased by $125,578 or 54%
from the previous quarter. The increase is attributable to the Company's
acquisition of an additional 1/3 interest in the Blue Dolphin Pipeline System in
January, 2002 resulting in increased revenues of approximately $0.2 million,
offset in part by lower throughput volumes resulting in decreased revenues of
approximately $0.1 million.
Costs and Expenses:
First Half 2002 vs. First Half 2001. Current period lease operating expense
decreased by $234,531 or 37% from the previous period. The decline was primarily
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
due to the elimination of lease operating expense associated with the
disposition of properties in late 2001.
Current period pipeline operating expenses increased by $18,487 or 7% from the
previous period. The increase was primarily due to the purchase of an additional
1/3 interest in the Blue Dolphin Pipeline System effective January 2002.
Current period depletion, depreciation, amortization and abandonment decreased
$1,450,051 from the previous period. In the previous period the Company recorded
an increase in the estimated costs associated with the Buccaneer Field
abandonment of approximately $1.1 million. In addition, depletion expense
decreased in the current period due to a 23% decrease in production volumes
resulting in decreased depletion of $0.1 million and a lower depletion rate used
in 2002 compared to 2001 resulting in decreased depletion of approximately $0.2
million.
Impairment of assets included an impairment of the Company's investment in
Drillmar of $339,984 in the current period. In addition, the Company recorded
bad debt expense of $0.2 million in the current period for accounts receivable
owed by Drillmar.
General and administrative expenses for the current period decreased $220,009
from the previous period. The decrease is primarily due to the Company's cost
reduction plan that resulted in a reduction in staff costs of approximately $0.2
million.
Interest and other expense in the current period decreased $207,927 from the
previous period. In the current period the Company recorded an expense
associated with the settlement of litigation with H&N of approximately $0.3
million offset in part by a reduction of the payment to Den norske Bank of
approximately $0.2 million. Previous period expense included a $0.3 million
increase in the provision for the contingent payment to Den noske Bank
Second Quarter 2002 vs. Second Quarter 2001. Current quarter lease operating
expense decreased by $118,414 or 40% from the previous quarter. The decline was
primarily due to the elimination of lease operating expense associated with the
disposition of properties in late 2001.
Current quarter pipeline operating expenses increased by $24,509 or 20% from the
previous quarter. The increase was primarily due to the purchase of an
additional 1/3 interest in the Blue Dolphin Pipeline System effective January
2002.
Current quarter depletion, depreciation and amortization decreased $161,456 from
the previous quarter. The decrease was primarily due to an 18% decrease in
production volumes resulting in decreased depletion of approximately $0.1
million and a lower depletion rate used in 2002 compared to 2001 of
approximately $0.1 million.
Interest and other expense in the current quarter decreased $58,479 from the
previous quarter. In the current period the Company recorded an expense
associated with the settlement of litigation with H&N of approximately $0.3
million offset in part by a reduction of the payment to Den norske Bank of
approximately $0.2 million. Previous period expense included a $0.15 million
increase in the provision for the contingent payment to Den noske Bank.
21
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET PRICE
The Company is exposed to market risk, including adverse changes in commodity
prices and interest rates as discussed below.
Commodity Price Risk- The Company produces and sells natural gas, crude oil, and
natural gas liquids. As a result, the Company's financial results can be
significantly affected if these commodity prices fluctuate widely in response to
changing market forces. The Company does not use derivative products to manage
commodity price risk.
Interest Rate Risk- The Company currently has no short-term or long-term debt
with floating interest rates, and thus currently is not subject to risk of
interest rate changes.
22
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 8, 2000, American Resources Offshore, Inc., a subsidiary of the
registrant ("American Resources"), and its former chief financial officer, were
named in a lawsuit in the United States District Court for the Southern District
of Texas, Houston Division, styled H&N Gas, Limited Partnership, et al. v.
Richard Hale, et al. (Case No. H-00-1371). The lawsuit alleged, among other
things, that H&N Gas ("H&N") was defrauded by American Resources in connection
with gas purchase options and gas price swap contracts entered into from
February 1998 through September 1999. H&N alleged unlawful collusion between
American Resources' prior management and then president of H&N, Richard Hale
("Hale"), to the detriment of H&N. H&N generally alleged that Hale directed H&N
to purchase illusory options from American Resources that bore no relation to
any physical gas business and that American Resources did not have the financial
resources and/or sufficient quantity of gas to perform. H&N further alleged that
American Resources and Hale colluded with respect to swap transactions that were
designed to benefit American Resources at the expense of H&N. H&N also alleged
civil conspiracy against all of the defendants.
In May 2002, the Company, American Resources and members of prior management of
American Resources, including its former chief financial officer, entered into a
settlement agreement with H&N. American Resources paid approximately $0.3
million in settlement of this litigation and additionally released funds of
approximately $0.7 million it was holding that were due to H&N. This settlement
agreement and the payments to be made thereunder were made in compromise of
disputed claims and are not an admission of wrongdoing or of liability of any
kind.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of shareholders was held on May 14, 2002. The
matters that were voted upon at the meeting, and the number of votes cast for,
against or withheld, as well as the number of abstentions and broker non-votes,
as to such matter, where applicable, are set forth below.
Votes Votes Votes Broker
For Against Withheld Abstentions Non-Votes
----------- ----------- ----------- ----------- -----------
Election of Directors
Ivar Siem 3,387,726 102 2,860,109 16,066 107,842
Michael S. Chadwick 3,387,607 221 2,860,109 16,066 107,842
Harris A. Kaffie 3,387,740 88 2,860,109 16,066 107,842
Robert D. Wagner, Jr. 3,387,719 109 2,860,109 16,066 107,842
23
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
A) Exhibits
99.1 Michael J. Jacobson Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
99.2 G. Brian Lloyd Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
B) Reports on Form 8-K
On June 7, 2002, the Company filed a current report on Form 8-K dated
May 16, 2002, reporting the settlement agreement of the H&N litigation.
The item in such current report was Item 5 (Other Events).
On July 23, 2002, the Company filed a current report on Form 8-K dated
July 9, 2002, reporting it completed the sale of its working interest
in the South Timbalier Block 148 property to Newfield Exploration
Company. The item in such current report was Item 2 (Acquisition or
Disposition of Assets).
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: August 14, 2002 /s/ Michael J. Jacobson
-------------------------------------
Michael J. Jacobson
President and Chief Executive Officer
/s/ G. Brian Lloyd
-------------------------------------
G. Brian Lloyd
Vice President, Treasurer
(Principal Accounting Officer)
25