Borrowings under the credit agreement bear interest, at the Partnership’s option, at either the reserve-adjusted eurodollar rate (as defined in the credit agreement) plus an applicable margin that ranges from 2.0% to 3.25% or the alternate base rate (the highest of the agent bank’s prime rate, the federal funds effective rate plus 0.5%, and the 30-day eurodollar rate plus 1.0%) plus an applicable margin that ranges from 1.0% to 2.25%.  The Partnership pays a per annum fee on all letters of credit issued under the credit agreement, which fee equals the applicable margin for loans accruing interest based on the eurodollar rate, and the Partnership pays a commitment fee ranging from 0.375% to 0.5% on the unused commitments under the credit agreement.  The applicable margins for the Partnership’s interest rate, the letter of credit fee and the commitment fee vary quarterly based on the Partnership’s consolidated total leverage ratio (as defined in the credit agreement, being generally computed as the ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges).

The credit agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter.

From and after the date on which the Partnership issues qualified senior notes in an aggregate principal amount (when combined with all other qualified senior notes previously or concurrently issued) that equals or exceeds $200.0 million, the maximum permitted consolidated total leverage ratio is 5.00 to 1.00; provided that from and after the fiscal quarter ending immediately preceding the fiscal quarter in which a specified acquisition occurs to and including the last day of the second full fiscal quarter following the fiscal quarter in which such acquisition occurred, the maximum permitted consolidated total leverage ratio will be 5.50 to 1.00.

The maximum permitted consolidated senior secured leverage ratio (as defined in the credit agreement, but generally computed as the ratio of consolidated total secured debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) is 3.50 to 1.00, but this covenant is only tested from and after the date on which the Partnership issues qualified senior notes in an aggregate principal amount (when combined with all other qualified senior notes previously or concurrently issued) that equals or exceeds $200.0 million.

Management evaluates whether conditions and/or events raise substantial doubt about the Partnership’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued (the “assessment period”). In performing this assessment, management considered the risk associated with its ongoing ability to meet the financial covenants.

Based on the Partnership’s forecasted credit agreement EBITDA during the assessment period, management believes that it will meetremain in compliance with these financial covenants (as described below). However, there are certain inherent risks associated with ourthe continued ability to comply with ourthe consolidated total leverage ratio covenant. These risks relate, among other things, to potential future (a) decreases in storage volumes and rates as well as throughput and transportation rates realized; (b) weather phenomenon that may potentially hinder the Partnership’s asphalt business activity; and (c) other items affecting forecasted levels of expenditures and uses of cash resources. Violation of the consolidated total leverage ratio covenant would be an event of default under the credit agreement, which would cause our $252.6the $271.6 million in outstanding debt, as of March 31, 2019,2020, to become immediately due and payable. If this were to occur, the Partnership would not expect to have sufficient liquidity to repay these outstanding amounts then due, which could cause the lenders under the credit facility to pursue other remedies. Such remedies could include exercising their collateral rights to the Partnership’s assets.

Based on management’s current forecasts, management believes the Partnership will be able to comply with the consolidated total leverage ratio during the assessment period. However, the Partnership cannot make any assurances that it will be able to achieve management’s forecasts. If the Partnership is unable to achieve management’s forecasts, further actions may be necessary to remain in compliance with the Partnership’s consolidated total leverage ratio covenant including, but not limited to, cost reductions, common and preferred unitholder distribution curtailments, and/or asset sales. The Partnership can make no assurances that it would be successful in undertaking these actions or that the Partnership will remain in compliance with the consolidated total leverage ratio during the assessment period.

The credit agreement permits the Partnership to make quarterly distributions of available cash (as defined in the Partnership’s partnership agreement) to unitholders so long as no default or event of default exists under the credit agreement on a pro forma basis after giving effect to such distribution, provided, however, commencing with the fiscal quarter ending September 30, 2018, in no event shall aggregate quarterly distributions in any individual fiscal quarter exceed $10.7 million through, and including, the fiscal quarter ending December 31, 2019.distribution. The Partnership is currently allowed to make distributions to its unitholders in accordance with this covenant; however, the Partnership will only make distributions to the extent it has sufficient cash from operations after establishment of cash reserves as determined by the Board of Directors (the “Board”) of Blueknight Energy Partners G.P., L.L.C. (the “general partner”) in accordance with the Partnership’s cash distribution policy, including the establishment of any reserves for the proper conduct of the Partnership’s business.  See Note 97 for additional information regarding distributions.

In addition to other customary events of default, the credit agreement includes an event of default if:

If an event of default relating to bankruptcy or other insolvency events occurs with respect to the general partner or the Partnership, all indebtedness under the credit agreement will immediately become due and payable.  If any other event of default exists under the credit agreement, the lenders may accelerate the maturity of the obligations outstanding under the credit agreement and exercise other rights and remedies.  In addition, if any event of default exists under the credit agreement, the lenders may commence foreclosure or other actions against the collateral.

If any default occurs under the credit agreement, or if the Partnership is unable to make any of the representations and warranties in the credit agreement, the Partnership will be unable to borrow funds or to have letters of credit issued under the credit agreement. 

Debt issuance costs are being amortized over the term of the credit agreement. Interest expense related to debt issuance cost amortization for each ofboth the three months ended March 31, 20182020 and 2019, was $0.3$0.3 million.

During the three months ended March 31, 20182019 and 2019,2020, the weighted average interest rate under the Partnership’s credit agreement was 4.96%6.43% and 6.43%4.90%, respectively, resulting in interest expense of approximately $3.9$4.3 million and $4.3$3.4 million, respectively.

For purposes of calculating earnings per unit, the excess of distributions over earnings or excess of earnings over distributions for each period are allocated to the Partnership’s general partner based on the general partner’s ownership interest at the time. The following sets forth the computation of basic and diluted net income per common unit (in thousands, except per unit data): 

On April 22, 2019, the Partnership announced that16, 2020, the Board approved a cash distribution of $0.17875 per outstanding Preferred Unitpreferred unit for the three months ended March 31, 2019.2020.  The Partnership will pay this distribution on May 14, 20192020, to unitholders of record as of May 3, 20194, 2020. The total distribution will be approximately $6.4$6.4 million, with approximately $6.3$6.3 million and $0.1$0.1 million paid to the Partnership’s preferred unitholders and general partner, respectively.

In addition, the Board approved a cash distribution of $0.04 per outstanding common unit for the three months ended March 31, 2019.2020. The Partnership will pay this distribution on May 14, 20192020, to unitholders of record on May 3, 20194, 2020. The total distribution will be approximately $1.7$1.7 million, with approximately $1.6 million and less than $0.1 million to be paid to the

The Partnership leases asphalt facilities and provides asphalt terminalling services to Ergon. For the three months ended March 31, 20182019 and 2019,2020, the Partnership recognized related-party revenues of $14.0$9.1 million and $9.1$9.0 million, respectively, for services provided to Ergon. As of December 31, 2018,2019, and March 31, 2019,2020, the Partnership had receivables from Ergon of $1.0$1.1 million and $0.9$0.9 million, respectively, net of allowance for doubtful accounts.respectively. As of December 31, 2018,2019, and March 31, 2019,2020, the Partnership had unearned revenues from Ergon of $6.5$5.1 million and $16.8$4.8 million, respectively.

Effective April 1, 2018, the Partnership entered into an agreement with Ergon under which the Partnership purchases crude oil in connection with its crude oil marketing operations. For the three months ended March 31, 2019 and 2020, the Partnership made purchases of crude oil under this agreement totaling $29.7 million.$29.7 million and $27.8 million, respectively. As of March 31, 2019,2020, the Partnership had payables to Ergon related to this agreement of $11.9$7.3 million related to the March crude oil settlement cycle, and this balance was paid in full on April 19, 2019.

In May 2018, the Partnership, along with Kingfisher Midstream and Ergon, have an agreement (the “Agreement”) that gives each party rights concerningannounced the purchase or saleexecution of Ergon’s interest indefinitive agreements to form Cimarron Express, subject to certain terms and conditions.Express. Cimarron Express was planned to be a new 16-inch diameter, 65-mile crude oil pipeline running from northeastern Kingfisher County, Oklahoma to the Partnership’s Cushing, Oklahoma crude oil terminal, with an originallyoriginal anticipated in-service date in the second half of 2019. Ergon formed a Delaware limited liability company, Ergon - Oklahoma Pipeline, LLC (“DEVCO”), which holdsheld Ergon’s 50% membership interest in Cimarron Express. UnderThe Partnership and Ergon had an agreement (the “Agreement”) that gave each party certain rights to obligate the Agreement,counterparty to either sell or purchase the Partnership has the right, at any time, to purchase 100% of the authorized and outstanding membermembership interests in DEVCO from Ergon for the Purchase Price (as defined in the Agreement), which shall bea purchase price computed by taking Ergon’s total investment in the Cimarron Express plus interest, by giving written noticesubject to Ergon (the “Call”). Ergon hascertain terms and conditions as described in the right to require the Partnership to purchase 100% of the authorized and outstanding member interests of DEVCO for the Purchase Price (the “Put”) at any time beginning the earlier of (i) 18 months from the formation, May 9, 2018, of the joint venture company to build the pipeline, (ii) six months after completion of the pipeline, or (iii) the event of dissolution of Cimarron Express. Upon exercise of the Call or the Put, the Partnership and Ergon will execute the Member Interest Purchase Agreement, which is attached to the Agreement as Exhibit B. Upon receipt of the Purchase Price, Ergon shall be obligated to convey 100% of the authorized and outstanding member interests in DEVCO to the Partnership or its designee. As of March 31, 2019, neither Ergon nor the Partnership has exercised their options under the Agreement.

In December 2018, the Partnership and Ergon were informed that Kingfisher Midstream made the decision to suspend future investments in Cimarron Express as Kingfisher Midstream determined that the anticipated volumes from the currently dedicated acreage, and the resultant project economics, did not support additional investment from Kingfisher Midstream. As of December 31, 2018, Cimarron Express had spent approximately $30.6 million on the pipeline project, primarily related to the purchase of steel pipe and equipment, rights of way and engineering and design services. Cimarron Express recorded a $20.9 million impairment charge in the fourth quarter of 2018 to reduce the carrying amount of its assets to their estimated fair value. In addition to its capital contributions to Cimarron Express, Ergon’s interest in DEVCO includes internal Ergon labor and capitalized interest that bring its investment in DEVCO to approximately $17.8 million through March 31, 2019. Ergon recorded a $10.0 million other-than-temporary impairment on its investment in Cimarron Express as of December 31, 2018 to reduce its investment to its estimated fair value. As a result, theThe Partnership considered the SEC staff’s opinions outlined in SAB 107 Topic 5.T Accounting for Expenses or Liabilities Paid by Principal Stockholders. TheStockholders, and, as the Agreement was designed to have the Partnership, ultimately and from the onset, bear any risk of loss on the construction of the pipeline project and eventually own a 50% interest in the pipeline. As a result,pipeline, the Partnership recorded impairments on a push downpush-down basis a $10.0 million impairment of Ergon’s investment in Cimarron Express in its consolidated results of operations during the year ended December 31, 2018, and a contingent liability payable to Ergon as of December 31, 2018. In April 2019, assets from the project were sold to a third-party for approximately $1.4 million over the fair market value that was estimated at December 31, 2018. As a result, the Partnership will record in April 2019, on a push down basis, a gain on the sale based on Ergon’s 50% interest in Cimarron Express. During the assets.three months ended March 31, 2019, the Partnership recorded impairment expense of $0.8 million related to the Agreement, which included a change in estimate and accrued interest.  The Partnership’s contingent liability as of December 31, 2019, consisted of Ergon’s $10.2 million investment plus accrued interest of $2.0 million.  In November 2019, Ergon and Kingfisher Midstream wound up the business, distributed assets, and dissolved Cimarron Express. On January 2, 2020, Ergon exercised its right under the Agreement to require the Partnership to purchase the outstanding member interest in DEVCO, and the Partnership paid the amount in full on January 3, 2020.  This cash payment is reflected as an acquisition of DEVCO in the investing cash flows section on the Partnership’s condensed consolidated statement of cash flows for the three months ended March 31, 2020.

In July 2007, the general partner adopted the Long-Term Incentive Plan (the “LTIP”), which is administered by the compensation committee of the Board. Effective April 29, 2014, the Partnership’s unitholders approved an amendment to the LTIP to increase the number of common units reserved for issuance under the incentive plan to 4,100,000 common units, subject to adjustments for certain events.  Although other types of awards are contemplated under the LTIP, currently outstanding awards include “phantom” units, which convey the right to receive common units upon vesting, and “restricted” units, which are grants of common units restricted until the time of vesting. The phantom unit awards also include distribution equivalent rights (“DERs”).

Subject to applicable earning criteria, a DER entitles the grantee to a cash payment equal to the cash distribution paid on an outstanding common unit prior to the vesting date of the underlying award. Recipients of restricted and phantom units are entitled to receive cash distributions paid on common units during the vesting period which are reflected initially as a reduction of partners’ capital. Distributions paid on units which ultimately do not vest are reclassified as compensation expense.  Awards granted to date are equity awards and, accordingly, the fair value of the awards as of the grant date is expensed over the vesting period.  

Restricted common units are granted to the independent directors.directors on each anniversary of joining the Board. The units vest in one-third increments over three years. The following table includes information on outstanding grants made to the directors under the LTIP: