UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):
June 14, 2012

Blue Dolphin Energy Company
 
(Exact name of registrant as specified in its charter)
 
Delaware
(State or Other Jurisdiction
of Incorporation)
0-15905
(Commission File Number)
73-1268729
(IRS Employer
 Identification No.)

801 Travis Street, Suite 2100
Houston, TX 77002
(Address of principal executive office and zip code)
 
(713) 568-4725
(Registrant’s telephone number, including area code)
 
(Not Applicable)
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
 
[    ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[    ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[    ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[    ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
 
Item 1.01         Entry into a Material Definitive Agreement.

On June 10, 2012, Blue Dolphin Energy Company (“Blue Dolphin”) entered into a Letter Agreement (the “Letter Agreement”) to purchase a 180 day option to acquire an idled refinery located in Ingleside, Texas (the “Refinery”) from Lazarus Energy Holdings, LLC, a Delaware limited liability company and Blue Dolphin’s largest shareholder (“LEH”).  The Refinery is currently owned by Lazarus Texas Refinery I, LLC, a Delaware limited liability company and a wholly-owned subsidiary of LEH (“LTRI”).

Pursuant to the terms of the Letter Agreement, Blue Dolphin will pay LEH a fully refundable sum of $100,000 cash as consideration for the option. If Blue Dolphin chooses to exercise the option, Blue Dolphin will acquire all out the outstanding interests of LTRI for cash or a note payable or a combination of the two.  Further, under the terms of any Purchase and Sale Agreement entered into by the parties: (a) Blue Dolphin will assume all outstanding liabilities associated with the Refinery, (b) Blue Dolphin will reimburse the costs of LTRI and LEH associated with the acquisition, refurbishment and environmental remediation of the Refinery, and (c) LEH will credit the full amount of the option consideration towards the purchase price.

If Blue Dolphin and LEH are unable to negotiate and execute a mutually acceptable Purchase and Sale Agreement within the time frame of the option, LEH will return the option consideration to Blue Dolphin.  Further, if after the Environmental Protection Agency has approved the remediation cleanup of the Refinery, there is a difference between the amount spent by LEH to remediate environmental problems at the Refinery and what Blue Dolphin is willing to pay to acquire the interests of LTRI, then LEH will return the option consideration to Blue Dolphin.

Certain of the Refinery assets are currently subject to a Lease Agreement (the “Lease Agreement”) with Superior Crude Gathering, Inc., a Texas corporation (“Superior”).  If Blue Dolphin chooses to exercise the option, then any cash consideration that must be paid to Superior in connection with the termination of the Lease Agreement would be the responsibility of Blue Dolphin.
 
 
Item 9.01 Financial Statements and Exhibits.
   
  (d) 
Exhibits
   
  10.1  Letter Agreement dated June 10, 2012, between Lazarus Energy Holdings, LLC and Blue Dolphin Energy Company. 
   
  99.1  Blue Dolphin Energy Company Press Release Issued June 11, 2012. 
 

   
 
 
 


 

 
SIGNATURE
 
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 hereunto duly authorized.
 
Date:           June 14, 2012
 
 
Blue Dolphin Energy Company
 
   
 
/s/JONATHAN P. CARROLL
 
Jonathan P. Carroll
Chief Executive Officer, President,
Assistant Treasurer and Secretary
(Principal Executive Officer)


 
 
 
 

INDEX TO EXHIBITS
 
                               
Exhibit
Description of Exhibit
 
10.1
Letter Agreement dated June 10, 2012, between Lazarus Energy Holdings, LLC and Blue Dolphin Energy Company.

99.1
Blue Dolphin Energy Company Press Release Issued June 11, 2012.




 
 
 
Lazarus Energy Holdings, LLC
801 Travis, Suite 2100
Houston, Texas 77002
(713)850-0513
 
 
June 10, 2012

Mr. Ivar Siem
Chairman
Blue Dolphin Energy Company
801 Travis, Suite 2100
Houston, Texas 77002

 
In Re:
Ingleside Refinery

Dear Mr. Siem:

Representatives of Lazarus Energy Holdings, LLC (LEH) and Blue Dolphin Energy Company (Blue Dolphin) have discussed the prospect of Blue Dolphin purchasing from LEH Lazarus Texas Refinery I, LLC, (“LTRI”) a Delaware Limited Liability company, comprised of land, equipment, pipelines and barge facility located in Ingleside, San Patricio County, Texas and commonly known as the InglesideRefinery (“Ingleside”).

Blue Dolphin has requested of LEH and LEH does hereby grant Blue Dolphin a 180 day exclusive option period to inspect and, if appropriate, negotiate a Purchase and Sale Agreement (PSA), which would contain mutually agreeable terms and provisions, as follows:

1.  
Option Consideration : As consideration for the exclusive option period, simultaneously with the execution and delivery of this Letter Agreement, Blue Dolphin shall pay LEH the fully refundable sum of One Hundred Thousand Dollars ($100,000.00) cash.

2.  
Financial Terms : The financial terms for Blue Dolphin’s acquisition of LTRIshall consists of cash and/or a note payable and provided as follows:

a.  
Cash and assumption of all outstanding liabilities
b.  
Reimbursement of all cost associated with the acquisition, refurbishment and environmental remediation of Ingleside by LTRI and LEH.
c.  
LEH will credit the full amount of the Option Consideration towards the purchase price of LTRI by Blue Dolphin.

3.  
Give Back : If LEH and Blue Dolphin are unable to negotiate and execute within the time referenced in paragraph 1. above, a mutually agreeable PSA, or if after the EPA has signed off on the remediation cleanup of Ingleside, there is a difference between the amount spent by LEH in cleaning up the Refinery and what Blue Dolphin is willing to pay to acquire the interests of LTRI,then LEH, with no extra consideration from Blue Dolphin, shall return to Blue Dolphin the Option Consideration.
 
 
 
 
 
 

Mr. Ivar Siem
June 10, 2012
Page 2
 
 
 
4.  
Superior Crude Gathering, Inc. Lease Agreement : Blue Dolphin acknowledges that Ingleside is subject to a Lease Agreement with Superior Crude Gathering, Inc. (“Superior”), the terms and provisions of which have been delivered to Blue Dolphin.  Any cash consideration that must be paid to Superior in connection with its termination of the Superior Lease Agreement would be payable by Blue Dolphin.

The foregoing sets forth the understanding of the parties as to the basis by which they are negotiating a PSA, with the understanding that the above provisions comprise negotiating points only and do not constitute a definitive obligation on the part of Blue Dolphin to purchase LTRI from LEH, but rather is merely a statement of intention and the terms and provisions that the parties will be discussing in an attempt to reach a mutual agreeable PSA.

If the foregoing correctly sets forth your understanding of the purpose of this Letter Agreement, then please sign duplicate originals in the space provided below and remit the Option Consideration to LEH.
 
 
 
Very truly yours,
   
 
LAZARUS ENERGY HOLDINGS, LLC
   
   
 
By: /s/ JONATHAN CARROLL                                 
         Jonathan Carroll 
 


BLUE DOLPHIN ENERGY COMPANY

By:
/s/ IVAR SIEM                                         
 
Ivar Siem, Chairman


By:
/s/ JONATHAN CARROLL                   
 
Jonathan Carroll, President


 
 
 
 
 
BLUE DOLPHIN ENERGY COMPANY
  		 
 
PRESS RELEASE
FOR IMMEDIATE RELEASE
June 11, 2012

BLUE DOLPHIN PURCHASES OPTION TO ACQUIRE INGLESIDE REFINERY SITE
 
HOUSTON, June 11, 2012 (GLOBE NEWSWIRE) -- Blue Dolphin Energy Company (OTCQX:BDCO) ("Blue Dolphin"), an independent energy company with refining, midstream and upstream operations, today announced its purchase of a 180 day option to acquire an idled refinery located in Ingleside, Texas (the “Refinery”) from Lazarus Energy Holdings, LLC (“LEH”) , its largest shareholder. The Refinery is currently owned by Lazarus Texas Refinery I, LLC (“LTRI”), a wholly-owned subsidiary of LEH.
 
The Refinery was constructed between 1978 and 1980 and was operated only intermittently thereafter.  During its operating phase the Refinery had an operating capacity of approximately 40,000 barrels per day, producing naphtha, jet fuel, kerosene diesel and fuel oil. The Refinery consists of crude oil and condensate processing equipment, pipeline connections, trucking terminals and related storage, as well as a barge dock and receiving facility (the “Barge Dock”), which gives the Refinery access to the Gulf Intracoastal Waterway at Redfish Bay near Corpus Christi, Texas.  An 8-inch active pipeline, approximately half a mile in length, connects the Refinery to the Barge Dock.
 
Blue Dolphin also owns a refinery in Wilson County, Texas (the “Nixon Facility” or “Nixon”), located in the Eagle Ford Shale play, which is currently running approximately ten thousand (10,000) barrels per day of a light Eagle Ford crude oil (condensate).
 
“There is significant strategic value to the combined crude processing, transportation, as well as supply and distribution capabilities of the refineries at Nixon and Ingleside, Texas , ” said Jonathan Carroll, Blue Dolphin’s Chief Executive Officer and President .

The Refinery sits on over 100 acres of land, including approximately 87 acres surrounding the Refinery on FM 2725 and approximately 15 acres with the Barge Dock.  

The Refinery initially had 31 above ground storage tanks with a total capacity of 1,179,250 barrels. Currently, the Refinery has 210,000 barrels of storage capacity under a short term lease and another 475,000 barrels of storage capacity that is currently being refurbished and should be completed and available for lease over the next several months.

Historically, several pipeline systems connected the Refinery to other sites like the Harbor Island terminal, the former Bronco and Copano refinery properties and the Flint Hills Resource’s (“FHR”) waterborne terminal. FHR’s waterborne terminal in Ingleside, Texas ties into the Koch Pipeline System which also traverses the Nixon Facility.  

“Access to the Barge Dock creates additional product marketing outlets for the Nixon Facility.  We expect this water access to expand our midstream opportunities, also creating crude oil marketing opportunities for the Eagle Ford Shale producers near Nixon and other nearby locations.  The storage, terminal, pipeline, barge, and processing aspects of the Refinery can be restarted and operated independently of each other depending on the business case.  This flexibility is what makes this option so valuable to us , ” noted Mr. Carroll.
 
 
 
 
 
 
The Refinery requires refurbishment and re-commissioning similar to the work conducted by Blue Dolphin at Nixon. All of the Refinery’s tanks, vessels, pumps, piping, wiring, instrumentation and equipment will require inspection, repair and/or replacement prior to operation.  In addition, certain areas of the Refinery require additional environmental remediation prior to operation.  Blue Dolphin, should it exercise the option, will be required to reimburse LEH or LTRI for the cost of any refurbishment, re-commissioning or environmental remediation associated with the Refinery.
 
Blue Dolphin Energy Company (OTCQX:BDCO) is engaged in crude oil and condensate processing, as well as the gathering and transportation and the exploration and production of oil and natural gas. For additional company information, visit Blue Dolphin's corporate website at http://www.blue-dolphin-energy.com.
 
Contact:
Jonathan P. Carroll
Chief Executive Officer and President
713-568-4725

Certain of the statements included in this press release, which express a belief, expectation or intention, as well as those regarding future financial performance or results, or which are not historical facts, are “forward-looking” statements as that term is defined in the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.  These forward-looking statements are not guarantees of future performance or events and such statements involve a number of risks, uncertainties and assumptions, including but not limited to: key supplier failure; loss of market share with or by a key customer; failure to comply with forbearance agreements relating to long-term indebtedness under which Blue Dolphin is in default; failure to realize anticipated benefits of acquired operations; volatility of refining margins; and the factors set forth under the heading “Risk Factors” in Part I, Item 1A of Blue Dolphin’s annual report on Form 10-K for the twelve month period ended December 31, 2011 and the heading “Risk Factors” in Part II, Item 1A of Blue Dolphin’s quarterly report on Form 10-Q for the three month period ended March 31, 2012.  Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated in the forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  Unless legally required, Blue Dolphin undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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