BDCO 10-K & 10-Q changes, risk factors and insider trading

Excluding accrued interest, we had current related-party and third-party debt of $40.6$44.4 million and $39.4$40.6 million as of December 31, 20242025 and 2023,2024, respectively. Our significant debt in current liabilities, certain of which was in default at December 31, 2024,2025, consisted of bank debt to VeritexHuntington (LE Term Due 2034 and LRM Term Loan Due 2034) and GNCU (NPS Term Loan Due 2031) and related-party debt. We classified the debt associated with the LE Term Loan Due 2034, LRM Term Loan Due 2034, and NPS Term Loan Due 2031 within long-term debt, current portion on our consolidated balance sheets at December 31, 20242025 and 20232024 due to being in default.

As described elsewhere in this report, certain of our secured loan agreements with third parties require us to meet financial covenants. Financial covenants applicable to our secured loan agreements with Veritex and GNCU require us to maintain covenants related to debt to tangible net worth, current assets to current liabilities, debt service coverage, and current ratio. At December 31, 20242025 and through the filing date of this report, NPS was in default related to non-financial covenants under the NPS Term Loan Due 2031. LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034, respectively. Defaults may permit lenders to declare amounts owed under the related loan agreement immediately due and payable, exercise their rights with respect to collateral securing obligors’ obligations, and exercise any other rights and remedies available. We can provide no assurance that: (i) our assets or cash flow will be sufficient to fully repay borrowings under the secured loan agreements that are in default, either upon maturity or if accelerated, (ii) NPS, LE, or LRM will be able to refinance or restructure the debt, or (iii) the lender will provide a future forbearance or default waiver. Any exercise by the lender of their rights and remedies under the secured loan agreements that are in default could have a material adverse effect on our business operations, including crude oil and condensate procurement and our customer relationships; financial condition; and results of operations. In such a case, the trading price of our Common Stock and the value of an investment in our Common Stock could significantly decrease, which could lead to holders of our Common Stock losing their investment in our Common Stock in its entirety. If we are unable to manage this, we may have to consider other options, such as selling assets, raising additional debt or equity capital, filing bankruptcy, or ceasing operations.

WeJonathan haveCarroll, anour indirectChief controllingExecutive stockholder.Officer, As a related party ofand an Affiliate, Jonathantogether Carrollcontrolled indirectly owned 83.7%84.4% of the voting power of our Common Stock as of the filing date of this report, and by virtue of such stock ownership, Mr. Carroll can control or exert substantial influence over us, including:

There is finite capacity in the commercial insurance industry engaged in underwriting energy industry risk, and factors impacting cost and availability include: (i) losses inwithin ourthe industries,industry, (ii) natural disasters, (iii) specific losses incurred by us, and (iv) inadequate investment returns earned by the insurance industry. If the supply of commercial insurance is curtailed, we may not be able to continue our present limits of insurance coverage, obtain sufficient insurance capacity to adequately insure our risks, or we may be unable to obtain and maintain adequate insurance at a reasonable cost. There is no assurance that our insurers will renew their insurance coverage on acceptable terms, if at all, or that we will be able to arrange for adequate alternative coverage in the event of non-renewal. The unavailability of full insurance coverage to cover events in which we suffer significant losses or cancellation of insurance policies could have a material adverse effect on our business, financial condition, and results of operations.

Crude oil refining is primarily a margin-based business. To improve margins, we must maximize yields of higher value finished petroleum products and minimize costs of feedstocks and operating expenses. When the spread between these commodity prices decreases, our margins are negatively affected. Although an increase or decrease in the commodity price for crude oil and other feedstocks generally results in a similar increase or decrease in commodity prices for finished petroleum products, typically there is a time lag between the two. For example, if the price per barrel of crude oil decreases, the price of jet fuel per barrel will also generally decreases,decrease, as jet fuel is a refined product derived from crude oil. Therefore, the effect of crude oil commodity price changes on our finished petroleum product commodity prices depends, in part, on how quickly and how fully the market adjusts to reflect these changes. Unfavorable margins may have a material adverse effect on our earnings, cash flows, and liquidity.

OnPursuant December 29, 2023, we enteredto a new crude supply agreement with MVP,MVP effective January 1, 2024.2024, This agreement provides a firmwe source of light-sweet Eagle Ford crude oil tofor the Nixon facilityfacility. under improved credit terms, and theThe crude supply agreement renews on a quarterly evergreen basis. Related to the crude supply agreement, MVP stores crude oil at the Nixon facility under a terminal services agreement. Management believes that MVP can provide us with adequate amounts of crude oil and condensate for the foreseeable future. Because we obtain our crude oil and condensate without the benefit of a long-term crude supply agreement, our exposure to the risks associated with volatile crude oil prices may increase, crude oil transportation costs could increase, and our liquidity may be reduced. Similarly, if producers experience crude supply constraints and increased transportation costs, our crude acquisition costs may rise, or we may not receive sufficient amounts to meet our needs, which could result in refinery downtime and could materially affect our business, financial condition, and results of operations. If we are unable to manage this, we may have to consider other options, such as selling assets, raising additional debt or equity capital, filing bankruptcy, or ceasing operations.

The Nixon refinery periodically undergoes planned shutdowns to repair, restore, refurbish, or replace refinery equipment. Occasionally, unplanned temporary shutdowns occur. Unplanned downtime can occur for a variety of reasons; however, common reasons for unplanned downtime includeincluding repair/replacement of disabled equipment, crude deficiencies associated with cash constraints, extreme temperatures, weather, and power outages. We are particularly vulnerable to operation disruptions because all our refining operations occur at a single facility. Any scheduled or unscheduled downtime results in lost margin opportunity, reduced refined products inventory, and potential increased maintenance expense, all of which could reduce our ability to meet our payment obligations.

Our operations depend on the reliable supply of electricity. We consume significant amounts of electricity to operate the Nixon facility, and electricity price has a measurable effect on the total cost of our operations. Additionally, the availability and cost of electricity has been, and could continue to be, affected by numerous events, such as government regulations, weather (e.g., hurricanes and periods of considerable heat or cold, such as Winter Storm Uri in 2021), logistics interruptions, electric grid outages, cybersecurity incidents, intermittent electricity generation (particularly from wind and solar), hostilities, sanctions, human error, and supply and demand imbalances for electricity. For example, the real-time market structure of the primary grid provider in Texas exposes the Nixon facility and our other locations in Texas to “scarcity pricing” during periods of supply and demand imbalance. As electrification continues to grow, or if there are increased restrictions or costs imposed on the ability of utilities or power suppliers to utilize certain energy sources (such as through restrictions on fossil fuel or nuclear-generated electricity or environmental, social, and governance pressure not to use such sources of electricity generation), there will likely be increased strains on and risks to the integrity, reliability, and resilience of electrical grids, and increased volatility and tightness in electricity supplies across the world. These events could negatively affect the cost, reliability, and availability of our electricity supply and may cause sporadic outages that disrupt our operations. Growing electrification and rapidly developing and increasing technology use (such as artificial intelligence, computer processing, cryptocurrency mining, and cloud storage, and the data centers and power supplies required to support these activities) will also likely increase the intermittency and decrease the reliability of electricity supplies, particularly for grids highly dependent upon wind and solar power, which would exacerbate the foregoing challenges. Additionally, increased government regulations and public opposition to pipeline construction and electricity generation and transmission projects have resulted in, and could continue to result in, the underinvestment in, or unavailability of, the infrastructure and logistics assets needed to obtain natural gas feedstocks and electricity in a reliable and cost-efficient manner. Increases in prices for electricity, or disruptions to our supply thereof, have in the past, and could again, materially and adversely affect our business, financial condition, results of operations, and liquidity.

We have a significant amount of long-lived assets on our consolidated balance sheet. Under generallyU.S. accepted accounting principles,GAAP, long-lived assets are required to be reviewed for impairment annually or whenever adverse events or changes in circumstances indicate a possible impairment. If business conditions or other factors cause the undiscounted estimated pretax cash flows for long-lived assets to fall below their carrying value, we may be required to record non-cash impairment charges. Events and conditions that could result in impairment in the value of our long-lived assets include lower realized refining margins, decreased refinery production, other factors leading to a reduction in expected long-term sales or profitability, or significant changes in the manner of use for the assets or the overall business strategy.

We have historically relied on Affiliates for funding when revenue from operations and availability under bank facilities were insufficient to meet our liquidity and working capital needs. During such times, Affiliate borrowings are reflected in our consolidated balance sheets in accounts payable, related party, or long-term debt, related party. Accounts payable, related party totaled approximately $0.0 million and $0.9 million at December 31, 2024 and 2023, respectively. Accounts payable, related party at December 31, 2023 reflected tank rental fees owed by LE to Ingleside under the LE Amended and Restated Master Services Agreement plus amounts owed to LTRI for previously purchased refinery equipment. No amounts for either period related to Affiliate borrowings for working capital.

If we are unable to generate sufficient cash flows from operations, obtain additional external financing, or secure sufficient liquidity from Affiliates, we may not be able to meet our short- and long-term working capital needs. Our short-term working capital needs are primarily related to: (i) purchasing crude oil and condensate to operate the Nixon refinery, (ii) reimbursing LEH for direct operating expenses and paying the LEH operating fee under the ThirdFourth Amended and Restated Operating Agreement, (iii) servicing debt, (iv) meeting regulatory compliance mandates, and (v) maintaining the Nixon facility through capital expenditures. Our long-term working capital needs are primarily related to repayment of long-term debt obligations. There can be no assurance that Affiliates will continue to fund our working capital requirements. If we are unable to generate sufficient working capital or raise additional capital on acceptable terms, or at all, we may not, in the short term, be able to purchase crude oil and condensate or meet debt payment obligations. In the long term, we may not be able to withstand business disruptions, or execute our business strategy. We may have to consider other options, such as selling assets, raising additional debt or equity capital, seeking bankruptcy protection, or ceasing operations.

Our business strategy to leverage existing infrastructure and capitalize on green energy growth depends on our ability to find commercial partners and government loans as vehicles to enter the renewable energy space. The plans are subject to business, economic and competitive uncertainties, many of which are beyond our control. Additionally, we may be forced to develop or implement recent technologies at substantial costs to achieve our strategy. While the Biden Administration advanced significant climate-related initiatives, including incentives to promote renewable energy, recent changes under the Trump Administration following the 2024 U.S. presidential election have begun to, and may further shift,shifted regulatory priorities away from renewable energy. Through executive orders and regulatory rollbacks, certain Biden-era initiatives have been curtailed or reevaluated and incentives to increase fossil fuel production have been promoted, creating a more uncertain regulatory landscape which may materially impact our plans to capture renewable energy opportunities. Throughout 2024,2025, management had meaningful discussions with potential commercial partners. However, reductions or modifications to, or the elimination of, governmental incentives or policies that support renewable energy or the imposition of additional taxes, tariffs, duties, or other assessments on renewable energy projects, has and could continue to result in, among other things, the lack of a satisfactory market for the development or financing of new renewable energy projects and us abandoning the development of renewable energy projects.

In February 2025, the Trump Administration imposed tariffs on imports to the U.S. from Canada, China, and Mexico as part of an emergency response to countries deemed national threats. While the Trump Administration initially negotiated a temporary stay in implementation of the tariffs against Canada and Mexico, the tariffs went into effect in March 2025. In response to U.S. tariffs, Canada, China, and Mexico each imposed retaliatory tariffs on certain U.S. goods. While we obtain our crude oil and condensate from the Eagle Ford Shale (domestically sourced crude), U.S. refiners that have historically sourced heavy crude oil from Canada and Mexico are identifying lighter, domestic crude oil to use as an alternative in their refining processes. The shift in demand for U.S.-sourced crude oil could adversely impact the cost and supply of crude oil and condensate that we acquire from the Eagle Ford Shale, as well as the price for our refined products, which may lower our refining margins and could have a material adverse effect on our financial results and financial condition.

We recorded an ARO liability related to future asset retirement costs associated with dismantling, relocating, or disposing of our offshore platform, pipeline systems, and related onshore facilities, as well as for plugging and abandoning wells and restoring the seafloor. We based asset retirement cost estimates on regulatory requirements and then current market rates for decommissioning and removal of assets with our given structural and water depth specifications. Estimating future costs are difficult and require management to make judgments that are subject to future revisions based upon numerous factors, including changing technology, political, and regulatory environments. In addition, dive operation market rates are subject to fluctuations based on season, fuel costs, insurance rates, equipment availability, and industry changes, and actual work performed is subject to cost overruns due to unforeseen events and conditions, such as severe weather. A significant change in any of these factors could increase our ARO liability, which could have a material adverse effect on our business, financial condition, and results of operations. See Risk Factor C5. within this "Item 1A. Risk Factors" section and "Part II, Item 8—Financial Statements and Supplementary Data -- Notes (11), (15), and (16)" for additional disclosures related to our AROs.

Although the Biden Administration focused on reducing GHG emissions by: (i) having the U.S. rejoin the Paris Agreement (February 2021), (ii) announcing a new U.S. target to achieve a 50% to 52% reduction from 2005 levels in economy-wide net GHG pollution by 2030 (April 2021), and (iii) signing into law the Inflation Reduction Act of 2022, which includes nearly $370 billion in climate-related provisions that provide funding, programs, and incentives to accelerate the U.S.'s transition to a clean energy economy, President Trump signed an executive order directing the U.S. to withdraw from the Paris Agreement (January 2025), and it is expected that Presidentthe Trump Administration and the Republican-led Congress willhave divergetaken fromsteps theto rescind previous administration’s positions and GHG commitments.

Jonathan Carroll, our Chief Executive Officer, and an Affiliate together controlled 83.7%84.4% of the voting power of our Common Stock as of the filing date of this report. An Affiliate also operates and manages all Blue Dolphin properties, funds working capital requirements during periods of working capital deficits, guarantees certain of our third-party secured debt, and is a significant customer. Blue Dolphin and certain subsidiaries are currently parties to various agreements with Affiliates. See “Part I, Item 1A. Risk Factors” and “Part II, Item 8. Financial Statements and Supplementary Data – NoteNotes (3), (15), and (16)” for additional disclosures related to Affiliate agreements, arrangements, and risks associated with working capital deficits.

For the twelve months ended December 31, 2024,2025, refining margins were lessmore favorable compared to the twelve months ended December 31, 2023.2024. LessMore favorable refining margins on lower sales volumes contributed to Blue Dolphin reporting a net loss of $5.6 million, or $0.38 per share, for the twelve months ended December 31, 2025 ("2025") compared a net loss of $8.6 million, or $0.58 per share, for the twelve months ended December 31, 2024 ("“2024") compared net income of $31.0 million, or $2.08 per share, for the twelve months ended December 31, 2023 (“2023”). Our full operating results for 20242025 and 2023,2024, including operating results by segment, can be found within ‘Results of Operations.’

Uncertainties remain surrounding general macroeconomic conditions related to inflation, tariffs, interest rates, capital and credit markets, and geopolitical tensions (including military conflicts in Ukraine and Israel and escalations in the Middle East). We do not operate or own assets in Russia, Ukraine, or the Middle East. However, the extent to which these factors impact our working capital, commodity prices, refined product demand, supply chain, financial condition, liquidity, results of operations, and future prospects will depend on future developments, which cannot be predicted with any degree of confidence. While it is difficult to predict the ultimate economic impacts of these factors on our operations, below are key factors that impacted our results of operations in 20242025 and will likely impact our results of operations duringfor 20252026:

Optimize Existing Asset Base. During the twelve months ended December 31, 2024,2025, the Nixon facility underwent twoone planned maintenance turnarounds -- one majorturnaround (13 days) and one minor (912 days). Optimizing the Nixon refinery's processing units through maintenance turnarounds leverages our ability to meet customer demand and manage refining margins. Additional improvements to the Nixon facility during the twelve months ended December 31, 2024 included the addition of anti-icing chemical storage, an upgrade to the chiller system, and installation of a 'cool down room' to reduce heat-related injuries for personnel, contractors, and drivers.

Overview. Net loss for 20242025 was $5.6 million, or $0.38 per share, compared to a net loss of $8.6 million, or $0.58 per share, comparedin to2024. netThe income of $31.0$3.0 million, or $2.08$0.20 per share, in 2023. The $39.6 million, or $2.66 per share, decrease in net incomeimprovement between the periods was the result of lessmore favorable refining margins andpartially offset by lower sales volumes. The Nixon refinery was down for 24 days in 2025 relating to a pre-planned maintenance turnaround (12 days), maintenance and repairs (10 days), and inventory management (2 days). The Nixon refinery was down for 27 days in 2024 relating to pre-planned maintenance turnarounds (22 days), maintenance and repairs (2 days), and freezing weather conditions (3 days). The Nixon refinery was down for 12 days in 2023 relating to a pre-planned maintenance turnaround (3 days) and maintenance and repairs (9 days).

Total Revenue from Operations. Total revenue from operations was $317.5$279.4 million for 20242025 compared to total revenue from operations of $396.0$317.5 million for 2023,2024, representing a decrease of 19.8%.12.0%. The decrease in 20242025 related to declines in both refinery operations and tolling and terminaling revenue. Refinery operations revenue in 20242025 decreased primarily due to lower market pricing and nearly 11% lower sales volumes of nearly 11%; tolling and terminaling revenue in 20242025 declined primarily due to lower tank rental fees. Tank rental fees for 2023 included temporary terminal service fees associated with Pilot.

Gross Profit. Gross profit totaled $3.9$8.7 million for 20242025 compared to gross profit of $42.1$3.9 million for 2023.2024. LessMore favorable commodity prices andpartially nearlyoffset 11%by lower sales volume adversely impacted refinery operations gross profit in 20242025 compared to 2023.2024.

LEH Operating Fee, Related Party. For 20242025 the LEH operating fee, related party totaled $0.8$1.0 million compared to $0.5$0.8 million for 2023,2024, representing a 52.2%27.4% increase. The increase related to turnaround expenses and higher conversion costs.costs, primarily from trucking expense.

Other Operating Expenses. Other operating expenses totaled $0.6 million for 20242025 compared to $0.2$0.6 million for 2023.2024. The $0.4less million,than or$0.1 207.7%million increasedecrease, was related to decommissioning of ourless pipeline assets.decommissioning expense.

General and Administrative Expenses. General and administrative expenses totaled $6.4$5.3 million in 20242025 compared to other operating and general and administrative expenses of $3.1$6.4 million in 2023.2024. The $3.3$1.2 million, or 105.6%,17.9%, increasedecrease in 20242025 primarily related to a decrease in regulatory expense partially offset by an increase in professional service fees, insurance, and regulatory penalties.

Interest and Other Non-Operating Expenses, Net. Total other expense in 20242025 was flat$5.4 million compared to 2023, totaling $5.9 million forin both2024, periods.The Total$0.5 million decrease in other expense primarily relates to interest expense associated with related party-party and third-party secured loan agreements.

Consolidated EBITDA. Consolidated EBITDA in 20242025 totaled $1.5$1.3 million compared to $39.2($1.5) million in 2023,2024, representing a decreaseincrease of $40.7$2.8 million. The significant decreaseincrease in 20242025 was related to less favorable refining margins, 10.7%a lower sales volume, an $8.3$1.1 million reduction in inventory impairment due to recognizing inventory at the lower of cost or net realizable value, and a $0.8 million reduction in maintenance turnaround expenses, and lower tolling and terminaling total revenue.expenses.

Refinery Downtime. Refinery downtime increaseddecreased from 12 days in 2023 to 27 days in 2024.2024 to 24 days in 2025. Refinery downtime in 2025 related to pre-planned maintenance turnarounds (12 days), maintenance and repairs (10 days), and inventory management (2 days). Refinery downtime in 2024 related to a pre-planned maintenance turnaroundsturnaround (22 days), maintenance and repairs (2 days), and freezing weather conditions (3 days). Refinery downtime in 2023 related to a pre-planned maintenance turnaround (3 days) and maintenance and repairs (9 days).

LEH Operating Fee, Related Party. For 20242025 the LEH operating fee, related party totaled $0.8$1.0 million compared to $0.5$0.8 million for 2023,2024, representing a 52.2%27.4% increase. The increase is related to turnaround expenses and higher conversion costs.costs was related to less pipeline decommissioning expense.

Refining EBITDA. Refining EBITDA was $2.3$2.9 million in 20242025 compared to $38.6($0.4) million in 2023,2024, representing a decreaseincrease of 94.2%.854.0%. The significant decreaseincrease in 20242025 was related to less favorable refining marginsmargins, anda 10.7% lower sales volume. Refining EBITDA was adversely impacted by maintenance turnaround expenses and an $8.3$1.1 million reduction in inventory impairment due to recognizing inventory at the lower of cost or net realizable value.value, and a $0.8 million reduction in maintenance turnaround expenses.

Refining Operations EBITDA per Bbl. On a per barrel basis, refining EBITDA was $0.61$0.80 for 20242025 compared to $9.37($0.10) for 2023,2024, representing aan decreaseincrease of $8.76$0.90 per barrel. The decreaseincrease in 20242025 related to lessmore favorable refining margins and 10.7% lower sales volume compared to the same period a year earlier.margins.

Tolling and Terminaling Total Revenue. Tolling and terminaling total revenue was $3.9 million in 2024 compared to $6.0 million in 2023,2025 compared to $6.6 million in 2024, representing a decrease of 34.7%.9.4%. The decrease in 20242025 related to lower tank rental fees. Tank rental fees in 2023 included temporary terminal service fees associated with Pilot.

Tolling and Terminaling EBITDA. We had tolling and terminaling EBITDA of $2.1$5.1 million in 20242025 compared to $4.3$4.7 million in 2023,2024, representing a decreaseincrease of $2.2$0.4 million. The significant7.4% decreaseincrease in 20242025 compared to 20232024 related to lower tolling and terminaling total revenue.costs.

As of December 31, 20242025 and the filing date of this report, certain conditions and events existed, in the aggregate, that caused management to evaluate Blue Dolphin's ability to continue as a going concern. Those conditions and events included historical working capital deficits and significant debt in current liabilities, certain of which was in default. Management believes that we have sufficient liquidity to meet our obligations as they become due through the generation of cash flows from operations and liquidation of current working capital amounts for a reasonable period (defined as one year from the issuance of these financial statements). Management acknowledges that uncertainty remains related to future operating margins; however, management has a reasonable expectation of Blue Dolphin's ability to generate adequate working capital for, amongst other requirements, purchasing crude oil and condensate and making payments on our long-term debt.

We had a working capital deficit of $24.4 million at December 31, 2025 compared to a working capital deficit of $19.1 million at December 31, 2024 compared to a working capital deficit of $6.1 million at December 31, 2023,2024, representing a $13.0$5.3 million decrease.increase. Our significant debt in current liabilities at December 31, 20242025 consisted of bank debt to VeritexHuntington and GNCU and related-party debt. Excluding accrued interest, we had current related-party and third-party debt of $40.6$44.4 million and $39.4$40.6 million as of December 31, 20242025 and 2023,2024, respectively. The $1.2$3.8 million increase in current debt between the periods primarily related to a $3.3$8.1 million draw under the Affiliate Revolving Credit Agreement offset by loan payments. We continue to engage with potential lenders to obtain additional funding to refinance and restructure debt and further improve working capital.

Our current assets totaled $44.2 million at December 31, 2025 compared to $44.8 million at December 31, 2024 compared to $49.3 million at December 31, 2023,2024, representing a $4.5$0.6 million decrease. Our current liabilities totaled $68.6 million at December 31, 2025 compared to $63.9 million at December 31, 2024 compared to $55.4 million at December 31, 2023,2024, representing a $8.5$4.7 million increase.increase, primarily related to borrowings in our Affiliate Revolving Credit agreement.

Liquidity. Cash and cash equivalents totaled $0.1$1.0 million and $18.7$0.1 million at December 31, 20242025 and 2023,2024, respectively, representing aan decreaseincrease of $18.6$0.9 million. A significant portion of our liquidity at December 31, 20242025 was invested in inventory. Restricted cash, current totaled $1.0 million andat $0.0 atboth December 31, 20242025 and 2023,2024, respectively. Restricted cash, current related to a VeritexHuntington payment reserve account. Although the payment reserve account had a balance of $0.0 at December 31, 2023, the account was fully replenished on January 2, 2024. Accounts receivable—related party, which was associated with the sale of jet fuel to LEH, totaled $5.2$8.1 million and $4.2$5.2 million at December 31, 20242025 and 2023,2024, respectively.

We generally rely on revenue from operations, including sales of refined products and rental of petroleum storage tanks, Affiliates, and financing to meet our liquidity needs. Our short-term working capital needs are primarily related to: (i) purchasing crude oil and condensate to operate the Nixon refinery, (ii) reimbursing LEH for direct operating expenses and paying the LEH operating fee under the ThirdFourth Amended and Restated Operating Agreement, (iii) servicing debt, (iv) maintaining and improving the Nixon facility through capital expenditures, and (v) meeting regulatory compliance requirements. Our long-term working capital needs are primarily related to repayment of long-term debt obligations.

We continue efforts to improve our balance sheet. During 20242025 and 2023, we entered into payment agreements with the Kissick Noteholder and LEH related to our secured loan agreements, and2024, we continue to engage with potential lenders to obtain additional funding to refinance and restructure debt. However, there can be no assurance that we will be able to raise additional capital on acceptable terms, or at all.

Cash Flow from Operations. We used $0.8 million in cash flow from operations during the twelve months ended December 31, 2025 compared to using $15.7 million in cash flow from operations during the twelve months ended December 31, 2024 compared to generating $20.0 million in cash flow from operations during the twelve months ended December 31, 2023.2024. The $35.7$14.9 million decrease in cash flow used from operations between the periods was primarily due to a buildupreduction of inventory in 20242025 and lowerhigher refining margins. InventoryThough increasedreduced in 2025, inventory remained elevated due primarily to unfavorable product pricing, limited opportunities for customers who export to Mexico, and an intentional buildup of inventory by us during periods of low refining margins.

Capital Expenditures. Capital expenditures totaled $0.0 for the twelve months ended December 31, 2024 compared to capital expenditures of $0.1 million for the twelve months ended December 31, 2023.2025 compared to capital expenditures of $0.0 million for the twelve months ended December 31, 2024. Due to continued uncertainties surrounding general macroeconomic conditions related to inflation, tariffs, interest rates, capital and credit markets, and geopolitical tensions (including military conflicts in Ukraine and Israel and escalations in the Middle East), we anticipate continuing to limit capital expenditures for the remainder of 2025.2026. However, to the extent we can capitalize on green energy growth opportunities, we may finance capital expenditures through project-based government loans.

Financing Activities. During the twelve months ended December 31, 2024,2025, Blue Dolphin made payments on debt principal totaling $5.2$4.3 million compared to payments on debt principal totaling $1.5$5.2 million for the twelve months ended December 31, 2023.2024. Proceeds from debt totaled $8.7 million for the twelve months ended December 31, 2025 compared to proceeds from debt totaling $3.3 million for the twelve months ended December 31, 2024 compared to proceeds from debt totaling $0.0 for the twelve months ended December 31, 2023.2024. In 2024,2025 and 2024 proceeds from debt related to the Affiliate Revolving Credit Agreement. In 2023, Blue Dolphin paid off amounts owed to LEH totaling $1.2 million related to a June 2017 promissory note, as amended, for Blue Dolphin working capital. See "Part II, Item 8. Financial Statements and Supplementary Data —Notes (3) and (16)" to our consolidated financial statements for additional disclosures related to related-party transactions.

Office Lease. We maintain our corporate headquarters in Houston, Texas. In October 2024, BDSC signed a new 24-month extension, the sixth amendment, to its operating lease. The sixth amendment was deemed to be a separate contract and not a lease modification. The first two months of the lease cover the holdover period of September and October 2024 wherein management negotiated the lease with the landlord; BDSC was not subject to a holdover rate during the holdover period. During months 3 through 12, which began on November 1, 2024, the landlord reduced the annual base rent to $29.00 per square foot. During months 13 through 24 the annual base rent will increase to $30.00 per square foot. As additional rent, BDSC will pay a proportionate share of basic building costs (e.g., utilities) up to a maximum of $1,500 per month. The total rental area under the sixth amendment is 9,961 square feet, an increase of 2,268 square feet to accommodate additional personnel. Under the lease amendment, BDSC will receivereceived an improvement allowance of $1.50 per square foot; the improvement allowance will expireexpired six months from the lease signing date. See "Part II, Item 8. Financial Statements and Supplementary Data—Note (12)" to our consolidated financial statements for additional disclosures related to the BDSC office lease.

An Affiliate, LEH, sub-leases a portion of the Houston office space. BDSC received sub-lease income from LEH totaling $0.03$0.06 million and $0.03 for both twelve months ended December 31, 20242025 and 2023.2024.

Tank Lease. LE leases tanks from Ingleside under the LESecond Amended and Restated Master Services Agreement. Lease expense associated with the LESecond Amended and Restated Master Services Agreement totaled $1.3$1.2 million and $1.0$1.3 million for the twelve months ended December 31, 20242025 and 2023,2024, respectively. See "Part II, Item 8. Financial Statements and Supplementary Data—Note (16)" to our consolidated financial statements for additional disclosures related to the LESecond Amended and Restated Master Services Agreement.

Debt Issue Costs. Unamortized debt issue costs associated with the VeritexHuntington and GNCU loans as of the dates indicated consisted of the following:

Proceeds from Debt. Proceeds from debt totaled $3.3$8.7 million for the twelve months ended December 31, 20242025 compared to proceeds from debt totaling $0.0$3.3 for the twelve months ended December 31, 2023.2024. In 2025 and 2024, proceeds from debt related to the Affiliate Revolving Credit Agreement.

See “Part II, Item 8. Financial Statements and Supplementary Data—Notes (3), (10), and (1610)” for additional disclosures related to disclosures related to third-party and related-party debt.

BOEM. See "Part I, Item 3. Legal Proceedings —Resolved Matters—RLI Corp. Surety Bonds" and "Part I, Item 3. Legal Proceedings —Unresolved Matters—BOEM Supplemental Pipeline Bonds" BSEE. See "Part I, Item 1A. Risk Factors—Risk Factor C5," "Part I., Item 3. Legal Proceedings—Unresolved Matters—BSEE Offshore Platform Inspections, Decommissioning Obligations, and Civil Penalties" and "Part II, Item 8. Financial Statements and Supplementary Data—Notes (11), (15), and (16)."

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During the firstsecond quarter of 2026, gross profits were $14.4$25.1 million, or $24.5 million more favorable as compared to to the firstsecond quarter of 2025. For the six months ended June 30, 2026, gross profits were $45.7 million, or $39.0 million more favorable as compared to the six months ended June 30, 2025. Blue Dolphin's net income increased to $14.7$17.7 million, or $0.99$1.19 per share, for the three months ended MarchJune 31,30, 2026 compared to net income of $2.2($1.7) million, or $0.15($0.12) per share, for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, net income was $32.5 million, or $2.18 per share, compared to net income of $0.5 million, or $0.03 per share, for the six months ended June 30, 2025.

Our full operating results for the three and six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, including results by segment, can be found within ‘Results of Operations.’

UncertaintiesWhile we operate in the Gulf Coast region of the U.S., uncertainties that impact our business and industry remain surrounding general macroeconomic conditions related to inflation, tariffs, interest rates, capital and credit markets, and geopolitical tensions (including militarycontinued conflicts in Ukraineescalations and continued escalationsengagement in the Middle East). In addition, global crude oil and refined product markets have experienced significant volatility in 2026 due to the geopolitical instability in the Middle East, including the ongoing conflict involving Iran and resulting disruptions to maritime transit through the Strait of Hormuz. We do not operate or own assets in Russia, Ukraine, or the Middle East. However, theThe extent to which these factors impact our working capital, commodity prices, refined product demand, supply chain, financial condition, liquidity, results of operations, and future prospects will depend on future developments, which cannot be predicted with any degree of confidence. While it is difficult to predict the ultimate economic impacts of these factors on our operations, belowfeedstock areand keypetroleum factorsproducts' thatcommodity pricing and demand impacted our results of operations so far in 2026 and will likely impact our results of operations for the rest of 2026:2026.

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We can provide no guarantees thatof the following: our business strategy will be successful, Affiliates will continue to fund our working capital needs when we experience working capital deficits, we will meet regulatory requirements to provide additional financial assurance (supplemental pipeline surety bonds) and decommission offshore pipelines and platform assets, we can obtain additional financing on commercially reasonable terms or at all, or margins on our refined products will be favorable. Further, if lenders exercise their rights and remedies under secured loan agreements that are in default, our business, financial condition, and results of operations will be materially adversely affected.

We continue efforts to improve our balance sheet and continue to engage with potential lenders to obtain additional funding to refinance and restructure our debt. There can be no assurance that we will be able to raise additional capital on acceptable terms, if at all, or refinance existing debt. If we are unable to refinance or restructure our debt, certain of which is currently in default or waive defaults and lenders exercise their rights with respect to the debt, we may not, in the short term, be able to purchase crude oil and condensate or meet debt payment obligations. In the long term, we may not be able to manage business disruptions or execute our business strategy. We may have to consider other options, such as selling assets, raising additional debt or equity capital, filing bankruptcy, or ceasing operations.

We have outlined the below strategic business objectives to improve our financial profile.profile and unlock future value. These objectives are modified, as necessary, to reflect changing economic conditions and other circumstances.

Successful execution of our business strategy depends on multiple factors. These factors include (i) having adequate working capital to meet operational needs and regulatory requirements, (ii) maintaining safe and reliable operations at the Nixon facility, (iii) meeting contractual obligations,obligations and, (iv) having favorable margins on refined products, and (v) collaborating with new partners to develop and finance clean energy projects.products. Our business strategy involves risks. Accordingly, we cannot assure investors that our plans will be successful. If we are unsuccessful, we would likely have to consider other options, such as selling assets, raising additional debt or equity capital, cutting costs, or otherwise reducing our cash requirements, or negotiating with our creditors to restructure our applicable obligations, filing bankruptcy, or ceasing operating.obligations. In such a case, the trading price of our common stock and the value of an investment in our common stock could significantly decrease, which could lead to holders of our common stock losing their investment in our common stock in its entirety.

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Optimize Existing Asset Base. During the threesix months ended MarchJune 31,30, 2026, the Nixon facility experienced 67 days of downtime, which relates to 4maintenance and repairs (5 days), utility failure (1 day), and inventory management (1 day). Comparatively, the Nixon facility experienced 15 days of downtime for the six months ended June 30, 2025, which related to 3 days of maintenance and repairs 1and a 12 day ofpre-planned inventory management and 1 day of utility failure. Comparatively, the Nixon facility experienced 1 day of downtime for the three months ended March 31, 2025, which related to maintenance and repairs.turnaround.

Seize Market Opportunities. Management continueswill continue to seek ways to leverage our existing assets through strategic investments in new technologies where economically feasible, and review renewable energy growth opportunities with potential commercial partners. Although the One Big Beautiful Bill Act (OBBBA) under the Trump Administration dismantled Biden-era renewable energy incentives, cancelled loan guarantees, froze grants, and repealed tax credits, the evolving policy environment ishas creatingenhanced newrenewable opportunities.energy Management will continue to seek ways to leverage our existing assets through strategic investmentsopportunities in newgeothermal technologiesenergy, whereBattery economicallyEnergy feasible.Storage Systems (BESS), Advanced and Small Modular Nuclear (SMR), and solar and wind generation.

Crude Oil and Condensate Supply. OnIn December 29, 2023, we entered a crude supply agreement with MVP, effective January 1, 2024.MVP. This agreement provides a firm source of light-sweet Eagle Ford crude oil to the Nixon facility under improved credit terms, and the crude supply agreement renews on a quarterly evergreen basis. Related to the crude supply agreement, MVP stores crude oil at the Nixon facility under a terminal services agreement. Management believes that MVP can provide us with adequate amounts of crude oil and condensate for the foreseeable future. Because we obtain our crude oil and condensate without the benefit of a long-term crude supply agreement, our exposure to the risks associated with volatile crude oil prices may increase, crude oil transportation costs could increase, and our liquidity may be reduced. Similarly, if producers experience crude supply constraints and increased transportation costs, our crude acquisition costs may rise, or we may not receive sufficient amounts to meet our needs, which could result in refinery downtime and could materially affect our business, financial condition, and results of operations. If we are unable to manage this, we may have to consider other options, such as selling assets, raising additional debt or equity capital, filing bankruptcy, or ceasing operations.

Products and Markets. Our market is the Gulf Coast region of the U.S., which is represented by the EIA as PADD 3. We sell our products primarily in the U.S. within PADD 3. Occasionally, we sell refined products to customers that export to other countries, such as naphtha and HOBM to Mexico.countries. The Nixon refinery’s product slate is adjusted based on market demand. We currently produce a single finished product – jet fuel – and several intermediate products, including naphtha, HOBM, and AGO. An Affiliate, LEH, purchases most of our jet fuel under the Amended and Restated Jet Fuel Sales Agreement; LEH then sells the jet fuel to the DLA under preferential pricing terms due to the Affiliate's HUBZone certification. The agreement with LEH has a one-year term with automatic renewals. Our intermediate products are primarily sold in nearby markets to wholesalers and refiners as a feedstock for further blending and processing.

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Customer s. Customers for our refined products include distributors, wholesalers, and refineries primarily in the lower portion of the Texas Triangle (the Houston – San Antonio – Dallas/Fort Worth area). An Affiliate, LEH, is a significant customer. Most of our contracts require our customers to prepay, with us selling them fixed quantities or minimum quantities of finished and intermediate petroleum products. Many of these prepay arrangements are subject to periodic renegotiation on a forward-looking basis, which could result in higher or lower relative prices on future sales of our refined products. From time to time, we sell bulk product from a Gulf Coast point of shipment. We extend credit terms to allow the time required for transport from shipment point to destination and for the destination-date pricing to finalize.

Competition. Most of our competitors are larger than usus, andhowever are engaged on a national or international level in many segments of the oil and gas industry, including exploration and production, gathering and transportation, and marketing. These competitors may have greater flexibility in responding to or absorbing market changes occurring in one or more of these business segments. Wewe compete primarily based on cost. Due to the low complexity of our simple “topping unit” refinery, we can be relatively nimble in adjusting our refined products slate because of changing commodity prices, market demand, and refinery operating costs.

The Nixon refinery periodically undergoes planned and unplanned temporary shutdowns. We periodically complete a planned turnaround to repair, restore, refurbish, or replace refinery equipment. The timing of planned turnarounds is adjusted to capitalize on favorable market conditions. Occasionally, unplanned shutdowns occur. Unplanned downtime can occur for a variety of reasons. Common reasons for unplanned downtime include repair/replacement of disabled equipment, crude deficiencies associated with cash constraints, extreme temperatures (high or low), and power outages.

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Inactive Operations. We own pipeline and facilities assets and have working interests in offshore oil and gas assets. These assets are inactive. Our pipeline assets were fully impaired in 2016 and our working interests in offshore oil and gas wells were fully impaired in 2011. Our pipeline assets and oil and gas working interests had no revenue during each of the threesix months ended MarchJune 31,30, 2026 and 2025.

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Overview. Net income (loss) for Q2 2026 was $14.7$17.7 million or $ 0.991.19 per share, compared to net income (loss) of $2.2($1.7) million, or $ 0.15(0.12) per share, in 2025. The $12.5$19.4 million, or $0.84$1.31 per share, increase in net income between the periods was the result of more favorable gross margins.

Total Revenue from Operations. Total revenue from operations was $81.5$144.3 million for Q2 2026 compared to total revenue from operations of $83.7$56.6 million for Q2 2025, representing a decreaseincrease of $2.2$87.7 million. The decreaseincrease in Q2 2026 related to declinesincreases in both refinery operations and tolling and terminaling revenue.operations. Refinery operations revenue in Q2 2026 decreasedincreased primarily due to ana 18.0%56.3% decreaseincrease in sales volume partially offset byand higher market pricing. Tolling and terminaling revenue in Q2 2026 declined primarily due to lower tank rental fees.

Total Cost of Goods Sold. Total cost of goods sold was $60.9$119.2 million for Q2 2026 compared to total cost of goods sold of $77.6$56.0 million for Q2 2025, representing aan decreaseincrease of 21.5%.112.9%. The decreaseincrease in Q2 2026 related to product sales mixmix, market pricing, and an 18.0%56.3% decreaseincrease in sales volumes.

Gross Profit. Gross profit totaled $20.6$25.1 million for Q2 2026 compared to gross profit of $6.1$0.6 million for Q2 2025. More favorable gross margins offsetand byan a decreaseincrease in sales volume positively impacted refinery operations gross profit in Q2 2026 compared to Q2 2025.

LEH Operating Fee, Related Party. For Q2 2026 the LEH operating fee, related party totaled $0.2$0.3 million compared to $0.2$0.3 million for Q2 2025.

General and Administrative Expenses. General and administrative expenses totaled $1.2$0.9 million in Q2 2026 compared to general and administrative expenses of $1.4$0.7 million in Q2 2025. The $0.2 million, or 14.3%,28.6%, decreaseincrease in Q2 2026 primarily related to aincreased reductioncorporate in regulatory penalties.expenses.

Interest and Other Non-Operating Expenses, Net. Total other expense in Q2 2026 was $1.4$1.1 million compared to $1.5$1.6 million in 2025.Q2 2025, primarily related to a decrease in note balances.

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Consolidated EBITDA. Consolidated EBITDA in Q2 2026 totaled $20.7$24.4 million compared to $5.1$0.1 million in Q2 2025 representing an increase of $15.6$24.3 million. The increase in Q2 2026 was related to more favorable gross margins partiallyand offset by lowerhigher sales volumes. See Non-GAAP Measures, below, for a reconciliation to GAAP.

Refinery Downtime. Refinery downtime increaseddecreased to 6 days in Q1 2026 from 1 day in Q1Q2 2026 from 14 day in Q2 2025. Refinery downtime in Q1Q2 2026 related to maintenance and repairs (1 day), utility failure (1 day) and inventory management (1 days).repairs. Refinery downtime in Q1Q2 2025 related to maintenance and repairs.repairs and a planned turnaround of 12 days.

Refinery Operations Revenue. Refinery operations revenue was $80.7$143.5 million for Q1Q2 2026 compared to $83.0$55.8 million for Q1Q2 2025, representing aan decreaseincrease of 2.7%.157.2%. The decreaseincrease in Q1Q2 2026 related to lowerhigher sales volume partially offset byand more favorable market pricing.

Cost of Goods Sold. Cost of goods sold for refinery operations was $61.2$119.3 million for Q1Q2 2026 compared to $77.7$56.1 million for Q1Q2 2025, representing a decreaseincrease of 21.2%.112.7%. The decreaseincrease in Q1Q2 2026 was related to the product sales mix and lowerhigher crude pricing.

LEH Operating Fee, Related Party. LEH operating fee for Q1both Q2 2026 and Q2 2025 was $0.2$0.3 million compared to $0.2 million for Q1 2025.million.

Refining EBITDA. Refining EBITDA was $18.6$23.8 million in Q1Q2 2026 compared to $4.9($0.9) million in Q1Q2 2025, representing an increase of 277.6%.2795.8%. The significant increase in Q1Q2 2026 was related to more favorable gross margins. See Non-GAAP Measures, below, for a reconciliation to GAAP.

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Refining Operations EBITDA per Bbl. On a per barrel basis, refining EBITDA was $23.24$20.79 for 2026 compared to $5.04($1.21) for 2025, representing an increase of $18.20$22.00 per barrel. The increase in Q2 2026 related to more favorable gross margins.