Blue Dolphin Energy Company (BDCO)

[snow]

Our problem In my view earnings per share and the changes of them from quarter to quarter matter much more than revenues if a company is reasonably profitable. Why is the pps so low? I think there are many reasons for it. I think the pps would have been not miuch below 2 dollars per share if the earnings per share had been around one dollar per share, which was the expectation based on the prices of crude oil, jet fuel and diesel during the third quarter. Instead earnings per share were not even 50% of what they were during the preceding quarter. In such a situalton it is normal that the stock price reflects the weak performance when it comes to what matters most.

Why were earnings per share less than 50% of what we had reason to expect? There could be several explanations. One possibility derives from the fact that the price of crude is down a good del during past months. If the company has speculated that that price would increase and has bought substantial quantities on that basis a big crack spread could possibly result in a loss instead. We have to see the numbers for the current quarter and what all the stored crude sells for once refined to get a better handle on the situation.

If future earnings per share come in at a much lower level than expected on the basis of the second quarter it will take a lot longer to pay back the debt that is in default. The uncertainty in this respect probably wiighs on the pps. Generally refiners are regarded as being in a sunset industry which results in very low multiples. If I remember correctly RD not long ago mentioned an example of that from Europe. It may also matter that this company is still on the otc which does not seem a good place to be right now. If there has been heavy naked shorting in this stock this could have had a strong imåpact too. Thus there are lots of reasons why the pps is so low in relation to earnings per share so far this year.