0000793306 BLUE DOLPHIN ENERGY CO false --12-31 FY 2025 true true false false The Board oversees our risks, and risk management initiatives, including those related to cybersecurity risk are the responsibility of the entire Board. At the management level, our cybersecurity risk management activities are led by our chief executive officer. Management utilizes certain tools and controls to detect, monitor, prevent, mitigate, and remediate cybersecurity threats to our systems, networks, applications, and data management. Management also recently implemented a program to conduct periodic phishing tests, which provide contemporaneous feedback and instruction to personnel and seeks to strengthen our defenses against cyber threats. The Board oversees our risks, and risk management initiatives, including those related to cybersecurity risk are the responsibility of the entire Board. At the management level, our cybersecurity risk management activities are led by our chief executive officer. Management utilizes certain tools and controls to detect, monitor, prevent, mitigate, and remediate cybersecurity threats to our systems, networks, applications, and data management. Management also recently implemented a program to conduct periodic phishing tests, which provide contemporaneous feedback and instruction to personnel and seeks to strengthen our defenses against cyber threats. The Board oversees our risks, and risk management initiatives, including those related to cybersecurity risk are the responsibility of the entire Board. At the management level, our cybersecurity risk management activities are led by our chief executive officer. Management utilizes certain tools and controls to detect, monitor, prevent, mitigate, and remediate cybersecurity threats to our systems, networks, applications, and data management. Management also recently implemented a program to conduct periodic phishing tests, which provide contemporaneous feedback and instruction to personnel and seeks to strengthen our defenses against cyber threats. The Board oversees our risks, and risk management initiatives, including those related to cybersecurity risk are the responsibility of the entire Board. At the management level, our cybersecurity risk management activities are led by our chief executive officer. Management utilizes certain tools and controls to detect, monitor, prevent, mitigate, and remediate cybersecurity threats to our systems, networks, applications, and data management. Management also recently implemented a program to conduct periodic phishing tests, which provide contemporaneous feedback and instruction to personnel and seeks to strengthen our defenses against cyber threats. The Board oversees our risks, and risk management initiatives, including those related to cybersecurity risk are the responsibility of the entire Board. At the management level, our cybersecurity risk management activities are led by our chief executive officer. Management utilizes certain tools and controls to detect, monitor, prevent, mitigate, and remediate cybersecurity threats to our systems, networks, applications, and data management. Management also recently implemented a program to conduct periodic phishing tests, which provide contemporaneous feedback and instruction to personnel and seeks to strengthen our defenses against cyber threats. true true false 0.01 0.01 20,000,000 20,000,000 14,921,968 14,921,968 14,921,968 14,921,968 2 0 45.4 0 0 0 0 0 0 1 15.0 2.00 http://fasb.org/us-gaap/2025#PrimeRateMember 4.0 April 30, 2027 0.03 2 0 June 30, 2034 2.75 December 31, 2034 2.75 October 30, 2031 June 30, 2051 August 31, 2050 August 31, 2050 March 31, 2031 1.0 0.2 3.0 0.03 0 0 0 0 0 0.9 false false false false true false Original principal amount was $0.5 million; the Blue Dolphin Term Loan Due 2051 was modified to increase the principal amount by $1.5 million. Payments deferred for thirty (30) months; first payment due and paid in November 2023; interest accrues during deferral period; loan not forgivable. Fees associated with an intercompany tolling agreement related to naphtha volumes. In March 2025, LE entered into the Equipment Loan Due 2031 to purchase mobile offices; the mobile offices are used at the Nixon facility. Our secured loan agreements with Huntington are subject to certain financial and non-financial covenants. As of December 31, 2025, LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034, respectively. With respect to non-financial covenants, we are required to have a balance of $1.0 million in a payment reserve account held by Huntington. At December 31, 2025 restricted cash, current and noncurrent totaled $1.0 million and $0.0, respectively. At December 31, 2024, both restricted cash, current and noncurrent totaled $1.0 million. Loan requires monthly interest-only payments for the first thirty-six (36) months. Afterwards, principal and interest payments are due monthly through loan maturity. First payment due in November 2024. As of December 31, 2025 and the filing date of this report, the NPS Term Loan Due 2031 was in technical default for failure to have an active deposit account with the lender and to provide standalone audited financial statements for NPS, a wholly-owned subsidiary. Blue Dolphin has 2,500,000 shares of preferred stock, par value $0.10 per share, authorized. At both December 31, 2025 and 2024, there were no shares of preferred stock issued and outstanding. Includes costs and expenses associated with our pipeline and facilities assets. 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FORM 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☑	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 0-15905

BLUE DOLPHIN ENERGY COMPANY

(Exact name of registrant as specified in its charter)

Delaware		73-1268729
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

801 Travis Street, Suite 2100, Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

	713-568-4725
	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

	Common Stock, par value $0.01 per share
	(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

The aggregate market value of shares of common stock held by non-affiliates of the registrant was $3,124,464 as of June 30, 2025, (the last trading day of the registrant’s most recently completed second fiscal quarter) based on the number of shares of common stock held by non-affiliates and the last reported sale price of the registrant's common stock on June 30, 2025.

Number of shares of common stock, par value $0.01 per share, outstanding at March 31, 2026: 14,921,968

Table of Contents

Table of Contents

PART I		7
ITEM 1.	BUSINESS	7
ITEM 1A.	RISK FACTORS	11
ITEM 1B.	UNRESOLVED STAFF COMMENTS	22
ITEM 1C.	CYBERSECURITY	22
ITEM 2.	PROPERTIES	22
ITEM 3.	LEGAL PROCEEDINGS	23
ITEM 4.	MINE SAFETY DISCLOSURE	24
PART II		25
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	25
ITEM 6.	SELECTED FINANCIAL DATA	25
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	35
	Report of Independent Registered Public Accounting Firm	35
	Consolidated Balance Sheets	36
	Consolidated Statements of Operations	37
	Consolidated Statements of Stockholders’ Equity	38
	Consolidated Statements of Cash Flows	39
	Notes to Consolidated Financial Statements	40
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	58
ITEM 9A.	CONTROLS AND PROCEDURES	58
ITEM 9B.	OTHER INFORMATION	58
ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	58
PART III		59
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	59
ITEM 11.	EXECUTIVE COMPENSATION	60
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	61
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	62
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	63
PART IV		64
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	64
ITEM 16.	FORM 10-K SUMMARY	67
SIGNATURES		68

Blue Dolphin Energy Company

December 31, 2025 | Page 2

Glossary of Terms

Throughout this Annual Report on Form 10-K, we have used the following terms:

Affiliate. Refers, either individually or collectively, to certain related parties including Jonathan Carroll, Chairman and Chief Executive Officer of Blue Dolphin, and his affiliates (including Ingleside and Lazarus Capital) and LEH and its affiliates (including LMT and LTRI). Together, Jonathan Carroll and LEH owned 84.4% of the Common Stock as of the filing date of this report.

AMT. Alternative Minimum Tax.

API Gravity. American Petroleum Institute (API) gravity; measures how heavy or light petroleum liquids are compared to water; standard used in the oil and gas industry to classify crude oil.

ARO. Asset retirement obligations.

ASU. Accounting Standards Update issued by FASB.

AGO. Atmospheric gas oil (also known as atmospheric tower bottoms) is the heaviest product boiled by a crude distillation tower operating at atmospheric pressure. This fraction ordinarily sells as distillate fuel oil, either in pure form or blended with cracked stocks. Certain ethylene plants, called heavy oil crackers, can take AGO as feedstock.

bbl(s). Barrel; a unit of volume equal to 42 U.S. gallons.

BDEX. Blue Dolphin Exploration Company, a wholly owned subsidiary of Blue Dolphin.

BDPC. Blue Dolphin Petroleum Company, a wholly owned subsidiary of Blue Dolphin.

BDPL. Blue Dolphin Pipe Line Company, a wholly owned subsidiary of Blue Dolphin.

BDSC. Blue Dolphin Services Co., a wholly owned subsidiary of Blue Dolphin.

Blue Dolphin. Blue Dolphin Energy Company, one or more of its consolidated subsidiaries, or all of them taken as a whole.

bpd. Barrel per day; a measure of the bbls of daily output produced in a refinery or transported through a pipeline.

Board. Board of Directors of Blue Dolphin.

BOEM. Bureau of Ocean Energy Management; an agency within the U.S. Department of the Interior.

BSEE. Bureau of Safety and Environmental Enforcement; an agency within the U.S. Department of the Interior.

CAA. Clean Air Act.

CERLA. Comprehensive Environmental Response, Compensation, and Liability Act of 1980.

CIP. Construction in progress.

Common Stock. Blue Dolphin common stock, par value $0.01 per share. Blue Dolphin has 20,000,000 shares of Common Stock authorized and 14,921,968 shares of Common Stock issued and outstanding as of the filing date of this report.

Complexity. A numerical score that denotes, for a given refinery, the extent, capability, and capital intensity of the refining processes downstream of the crude distillation tower. Refinery complexities range from the relatively simple crude distillation tower (“topping unit”), which has a complexity of 1.0, to the more complex deep conversion (“coking”) refineries, which have a complexity of 12.0.

Condensate. Liquid hydrocarbons that are produced in conjunction with natural gas. Although condensate is sometimes like crude oil, it is usually lighter.

Consolidated EBITDA. Non U.S. GAAP measure which presents Income (loss) before interest, taxes, and depreciation and amortization on a consolidated basis.

Cost of goods sold. For refinery operations, calculated as crude oil, fuel use, and chemicals plus other conversion costs plus intercompany processing fees plus associated depreciation and amortization. For tolling and terminaling, calculated as tolling and terminaling costs plus associated depreciation and amortization.

Crude distillation tower. A tall column-like vessel in which crude oil and condensate is heated and its vaporized components are distilled by means of distillation trays. This process refines crude oil and other inputs into intermediate and finished petroleum products; commonly referred to as a crude distillation unit or an atmospheric distillation unit.

Crude oil. A mixture of thousands of chemicals and compounds, primarily hydrocarbons. Crude oil quality is measured in terms of density (light to heavy) and sulfur content (sweet to sour). Light crude oil is thinner, has a high API Gravity, and requires less processing; heavy crude oil is thicker, has a low API Gravity, and requires more processing. Sweet crude contains sulfur content of less than 0.5% while sour crude contains sulfur content of greater than 0.5%. Crude oil must be broken down into its various components (distillates) by distillation before use as fuels or conversion to other products.

CWA. Clean Water Act.

Depropanizer unit. A distillation column that isolates propane from a mixture containing butane and other heavy components.

Distillates. The result of crude distillation and therefore any refined oil product. Distillate is more commonly used as an abbreviated form of middle distillate. There are mainly four (4) types of distillates: (i) very light oils or light distillates (such as naphtha), (ii) light oils or middle distillates (such as our jet fuel), (iii) medium oils, and (iv) heavy oils (such as our low-sulfur diesel and HOBM, reduced crude, and AGO).

Distillation. The first step in the refining process whereby crude oil and condensate are heated at atmospheric pressure in the base of a distillation tower. As the temperature increases, the various compounds vaporize in succession at their various boiling points and then rise to prescribed levels within the tower based on their densities (from lightest to heaviest). They then condense in distillation trays and are drawn off individually for further refining. Distillation is also used at other points in the refining process to remove impurities.

DLA. Defense Logistics Agency.

Downtime. Scheduled and unscheduled periods in which the crude distillation tower is not operating. Downtime may occur for a variety of reasons, including severe weather, power failures, and preventive maintenance.

EIA. Energy Information Administration.

EIDL. Economic Injury Disaster Loan; an SBA program that provides economic relief to businesses within a declared disaster area.

EPA. Environmental Protection Agency.

Eagle Ford Shale. A hydrocarbon-producing geological formation extending across South Texas from the Mexican border into East Texas; crude oil is typically characterized as light, sweet crude with a high API Gravity; particularly suitable for refining into gasoline and other light products.

Exchange Act. Securities Exchange Act of 1934, as amended.

FASB. Financial Accounting Standards Board.

FDIC. Federal Deposit Insurance Corporation.

Feedstocks. Crude oil and other hydrocarbons, such as condensate and intermediate products, used as basic input materials in a refining process. Feedstocks are transformed into one or more finished products.

Finished petroleum products. Materials or products which have received the final increments of value through processing operations, and which are being held in inventory for delivery, sale, or use.

Freeport facility. Onshore terminal facility consisting of processing units for: (i) crude oil and natural gas separation and dehydration, (ii) natural gas processing, treating, and redelivery, and (iii) vapor recovery; also includes the onshore portion of a 20-inch, 34 mile gathering pipeline originating at an offshore anchor platform in Galveston Area Block 288, a 16-inch natural gas pipeline connecting the Freeport facility to the Dow Chemical Plant complex, and 162 acres of land; facility is currently inactive.

GNCU. Greater Nevada Credit Union.

Greenhouse gases (GHGs). Molecules in the Earth’s atmosphere, such as carbon dioxide, methane, and chlorofluorocarbons that warm the atmosphere because they absorb some of the thermal radiation emitted from the Earth’s surface. GHG process emissions from the petroleum refining sector include emissions from venting, flares, and fugitive leaks from equipment (e.g., valves, flanges, pumps); GHG emissions also include combustion emissions from stationary combustion units.

Gross profit (deficit). Calculated as total revenue less total cost of goods sold; reflected as a dollar ($) amount.

HOBM. Heavy oil-based mud blendstock; see also “distillates.”

HUBZone. Historically Underutilized Business Zones program established by the SBA to help small businesses in both urban and rural communities.

Huntington. Huntington National Bank.

IBLA. Interior Board of Land Appeals; an appellate review body within the U.S. Department of the Interior.

INC. Incident of Noncompliance issued by BOEM or BSEE.

Ingleside. Ingleside Crude, LLC, an affiliate of Jonathan Carroll.

Intercompany processing fees . Fees associated with an intercompany tolling agreement related to naphtha volumes.

Blue Dolphin Energy Company

December 31, 2025 | Page 3

Glossary of Terms (Continued)

Intermediate petroleum products. A petroleum product that might require further processing before being saleable to the ultimate consumer; further processing might be done by the producer or by another processor. Thus, an intermediate petroleum product might be a final product for one company and an input for another company to process it further.

IRC Section 382. Title 26, Internal Revenue Code, Subtitle A – Income Taxes, Subchapter C – Corporate Distributions and Adjustments, Part V Carryovers, § 382. Limits NOL carryforwards and certain built-in losses following ownership change.

IRS. Internal Revenue Service.

Jet fuel. A high-quality kerosene product primarily used in aviation. Kerosene-type jet fuel (including Jet A and Jet A-1) has a carbon number distribution between 8 and 16 carbon atoms per molecule; wide-cut or naphtha-type jet fuel (including Jet B) has between 5 and 15 carbon atoms per molecule.

Kissick Noteholder. John H. Kissick.

Lazarus Capital. Lazarus Capital, LLC, an affiliate of Jonathan Carroll.

LE. Lazarus Energy, LLC, a wholly owned subsidiary of Blue Dolphin.

LEH. Lazarus Energy Holdings, LLC, an affiliate of Jonathan Carroll and controlling shareholder of Blue Dolphin as of the date of this report.

Leasehold interest. The percent interest of a lessee under an oil and gas lease.

LMT. Lazarus Marine Terminal I, LLC, an affiliate of LEH.

LRM. Lazarus Refining & Marketing, LLC, a wholly owned subsidiary of Blue Dolphin.

LTRI. Lazarus Texas Refinery I, an affiliate of LEH.

Mbbls. One thousand bbls.

Mbbls/d. One thousand barrels of oil per day; a measure of the barrels of daily output produced in a refinery or transported through a pipeline.

MVP. MV Purchasing, LLC.

NAAQS. National Ambient Air Quality Standards.

Naphtha. A refined or partly refined light distillate fraction of crude oil. Blended further or mixed with other materials, it can make high-grade motor gasoline or jet fuel. It is also a generic term for the lightest and most volatile petroleum fractions.

Natural gas. A naturally occurring hydrocarbon gas mixture consisting primarily of methane but commonly including varying amounts of other higher alkanes and sometimes a small percentage of carbon dioxide, nitrogen, hydrogen sulfide, or helium.

Nixon facility. Encompasses the Nixon refinery, petroleum storage tanks, loading and unloading facilities, and 56 acres of land in Nixon, Texas.

Nixon refinery. The 15,000-bpd crude distillation tower and associated processing units in Nixon, Texas.

NOL. Net operating losses.

NPS. Nixon Product Storage, LLC, a wholly owned subsidiary of Blue Dolphin.

NSR/PSD. New Source Review/Prevention of Significant Deterioration.

OPA 90. Oil Pollution Act of 1990.

OPEC. Organization of Petroleum Exporting Countries; Membership group comprised of leading oil-producing and oil-dependent countries.

Operating days. Represents the number of days in a period in which the crude distillation tower operated; operating days are calculated by subtracting downtime in a period from calendar days in the same period.

OSHA. Occupational Safety and Health Administration.

Other conversion costs. Represents the combination of direct labor costs and manufacturing overhead costs. These are the costs that are necessary to convert our raw materials into refined products.

PADD. Petroleum Administration for Defense Districts; PADD regions enable regional analysis of petroleum product supply and movements by the EIA.

Petroleum. A naturally occurring flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds. The name petroleum covers both the naturally occurring unprocessed crude oils and petroleum products that are made up of refined crude oil.

PFAS. Per- and polyfluorinated substances. PFAS has been used in oil and gas-related operations, notably in emergency response activities, including in aqueous film forming foam as a vapor and fire suppressant.

PHMSA. Pipeline and Hazardous Materials Safety Administration of the U.S. Department of Transportation.

Preferred Stock. Blue Dolphin preferred stock, par value $0.10 per share. Blue Dolphin has 2,500,000 shares of Preferred Stock authorized and no shares of Preferred Stock issued and outstanding as of the filing date of this report.

Production. The volume processed as output from the crude distillation tower. Refinery production includes finished petroleum products, such as jet fuel, and intermediate petroleum products, such as naphtha, HOBM and AGO.

Product slate. Represents type and quality of products produced.

Propane. A by-product of natural gas processing and petroleum refining. Propane is one of a group of liquified petroleum gases. Others include butane, propylene, butadiene, butylene, isobutylene, and mixtures thereof.

Refined products. Hydrocarbon compounds, such as jet fuel and residual fuel, produced by a refinery.

Refinery. Within the oil and gas industry, a refinery is an industrial processing plant where crude oil, condensate, and intermediate feeds are separated and transformed into petroleum products.

Refining EBITDA. Income (loss) before interest, taxes, and depreciation and amortization for our refinery operations business segment.

Refining operations EBITDA per bbl. Refining EBITDA divided by sales (Mbbls) for the reporting period.

RCRA. Federal Resource Conservation and Recovery Act.

RFS. First Renewable Fuels Standard.

RFS2. Second Renewable Fuels Standard.

ROU. Right-of-use.

SBA. Small Business Administration.

SEC. Securities and Exchange Commission.

Securities Act. The Securities Act of 1933, as amended.

Blue Dolphin Energy Company

December 31, 2025 | Page 4

Glossary of Terms (Continued)

Significant customer. A customer who represents more than 10% of our total revenue from operations.

Stabilizer unit. A distillation column intended to remove the lighter boiling compounds, such as butane or propane, from a product.

Sulfur. Present at various levels of concentration in many hydrocarbon deposits, such as petroleum, coal, or natural gas. Also, produced as a by-product of removing sulfur-containing contaminants from natural gas and petroleum. Some of the most commonly used hydrocarbon deposits are categorized based on their sulfur content, with lower sulfur fuels (e.g., ultra low sulfur diesel) selling at a higher, premium price and higher sulfur fuels (e.g., HOBM) selling at a lower, discounted price.

TCEQ. Texas Commission on Environmental Quality.

Throughput. The volume processed as input through the crude distillation tower. Refinery throughput includes crude oil or condensate.

Tolling and terminaling EBITDA. Income (loss) before interest, taxes, and depreciation and amortization for our tolling and terminaling business segment.

Topping unit. A type of petroleum refinery that engages in only the first step of the refining process (see crude distillation tower). A topping unit uses atmospheric distillation to separate crude oil and condensate into constituent petroleum products. A topping unit has a refinery complexity range of 1.0 to 2.0.

Turnaround. A planned period of time when an industrial plant shuts down one or more units (and sometimes an entire facility) to perform maintenance, inspections, repairs, or upgrades.

USACOE. U.S. Army Corps of Engineers.

USDA. U.S. Department of Agriculture.

USDOI. U.S. Department of the Interior.

U.S. GAAP. Accounting principles generally accepted in the United States of America.

Veritex. Veritex Community Bank, successor in interest to Sovereign Bank by merger. Huntington is the successor in interest to Veritex by merger. All Veritex accounts transitioned to Huntington on January 20, 2026.

WHO. World Health Organization.

WSJ Prime rate. The base rate on corporate loans posted by at least 70% of the ten largest U.S. as published by the Wall Street Journal. Effective December 11, 2025, the WSJ Prime rate decreased to 6.75%.

XBRL. eXtensible Business Reporting Language.

Yield. The percentage of refined products that is produced from crude oil and other feedstocks.

Blue Dolphin Energy Company

December 31, 2025 | Page 5

Important Information Regarding Forward-Looking Statements

This report (including information incorporated by reference) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act, including, but not limited to, those under “Part I, Item 1. Business” and “Part I, Item 1A. Risk Factors,” as well as “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact, including without limitation statements regarding expectations regarding revenue, cash flows, capital expenditures, and other financial items, our business strategy, goals, and expectations concerning our market position, future operations, and profitability, are forward-looking statements. Forward-looking statements may be identified by use of the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar terms and phrases. Although we believe our assumptions concerning future events are reasonable, several risks, uncertainties, and other factors could cause actual results and trends to differ materially from those projected, including but not limited to:

Business and Industry

● Significant debt in current liabilities, certain of which is in default.

● Inability to meet financial covenants under certain loan agreements.

● Restrictive covenants in our debt instruments that limit our ability to undertake certain types of transactions.

● Increased costs of capital or a reduction in the availability of credit.

● Affiliate Common Stock ownership and transactions that could cause conflicts of interest.

● Operational hazards inherent in transporting, processing, and storing crude oil and condensate and refined products.

● Geographical concentration of our assets and customers in West Texas.

● Competition from companies with more significant financial and other resources.

● Market changes in insurance that impact premium costs and available coverages.

● Industry technological developments that outpace our ability to keep up.

● Use of NOL carryforwards to offset future taxable income for U.S. federal income tax purposes, which is subject to limitation.

● Variable interest rates on certain of our debt.

● Our ability to adopt and deploy AI effectively.

Downstream and Midstream Operations

● Commodity price and refined product demand volatility, which can adversely affect our refining margins.

● Crude oil, other feedstocks, and refined products commodity price volatility.

● Availability and cost of crude oil and other feedstocks to operate the Nixon facility.

● Downtime at the Nixon refinery.

● Reliable supply and price of electricity to operate the Nixon facility.

● Potential impairment in the carrying value of long-lived assets, which could negatively affect our operating results.

● Adverse changes in operational cash flow and working capital, shortfalls for which Affiliates may not fund.

● Critical personnel loss, labor actions, and workplace safety issues.

● Market share loss, an unfavorable financial condition shift, or the bankruptcy or insolvency of a significant customer.

● Increases in the cost or availability of third-party vessels, pipelines, trucks, and other means of delivering and transporting our crude oil and condensate, feedstocks, and refined products.

● Sourcing of a substantial amount, if not all, of our crude oil and condensate from the Eagle Ford Shale.

● Geographical concentration of our refining operations and customers within the Eagle Ford Shale.

● Severe weather or other climate-related events that affect our facilities or those of our vendors, suppliers, or customers.

● Our ability to implement a new business strategy, such as renewable fuels, may be materially and adversely affected by many known and unknown factors.

● Our ability to effect and integrate potential acquisitions.

● Sourcing of a substantial amount, if not all, of our crude oil and condensate from the Eagle Ford Shale.

Legal, Government, and Regulatory

● Environmental laws and regulations that may require us to make substantial capital improvements to remain compliant or remediate current or future contamination that could lead to material liabilities.

● Strict laws and regulations regarding personnel and process safety.

● Uncertainty regarding the impact of current and future sanctions (including tariffs) imposed by governments, including the U.S., and other authorities in response to economic and geopolitical tensions.

● General economic, political, or regulatory developments, including recession, inflation, tariffs, interest rates, or changes in governmental policies relating to refined petroleum products, crude oil, or taxation.

● Assessment of penalties by regulatory agencies, such as BOEM, BSEE, OSHA and the TCEQ for violations.

● Our estimates of future AROs related to our pipeline and facilities assets, which may increase.

● Regulatory changes and other measures related to GHG emissions, climate change, and an ongoing desire to transition to greater renewable energy solutions.

Security

● A terrorist attack or armed conflict.

● Increased activism against oil and gas companies.

● Actual or potential cybersecurity threats or loss of data privacy.

Common Stock

● Fluctuations in our stock price that may result in a substantial investment loss.

● Increasing attention to environmental, social, and governance matters.

● Declines in our stock price due to share sales.

● Dilution of the equity of current stockholders and the potential decline of our stock price due to the issuance of new Common Stock or Preferred Stock from the pool of authorized shares that we have available to issue.

● The potential sale of shares in accordance with Rule 144, which may adversely affect the market.

● The lack of dividend payments.

See also the risk factors described in greater detail under “Part I, Item 1A. Risk Factors” of this report. All forward-looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events, or otherwise.

Unless the context otherwise requires, references in this report to “Blue Dolphin,” “we,” “us,” “our,” or “ours” refer to Blue Dolphin Energy Company, one or more of its consolidated subsidiaries, or all of them taken as a whole.

Part I should be read in conjunction with “Part II, Item 7. Management’s Discussion and Analysis and Results of Operations” and “Part II, Item 8. Financial Statements and Supplementary Data”.

Blue Dolphin Energy Company

December 31, 2025 | Page 6

PART I

ITEM 1. BUSINESS

The following section of this Annual Report on Form 10-K generally refers to business developments during the twelve months ended December 31, 2025. Discussion of, or references to, prior period business developments that are not included in this Form 10-K can be found in “Part I, Item 1. Business” of our Annual Report on Form 10-K for the year ended December 31, 2024.

Company Overview

Blue Dolphin was formed in 1986 as a Delaware corporation. The company is an independent downstream energy company operating in the Gulf Coast region of the U.S. Operations primarily consist of a light sweet-crude, 15,000-bpd crude distillation tower, and approximately 1.25 million bbls of petroleum storage tank capacity in Nixon, Texas. Blue Dolphin trades on the OTCQX under the ticker symbol “BDCO.”

Unless the context otherwise requires, references in this report to “we,” “us,” “our,” or “ours” refer to Blue Dolphin, one or more of its consolidated subsidiaries, or all of them taken as a whole.

Jonathan Carroll, our Chief Executive Officer, and an Affiliate together controlled 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 – Notes (3), (15), and (16)” for additional disclosures related to Affiliate agreements, arrangements, and risks associated with working capital deficits.

Our Operations

Our assets are organized into two business segments:

●	refinery operations (also referred to herein as downstream operations), which is owned by LE; and
●	tolling and terminaling services (also referred to herein as midstream operations), which is owned by LRM and NPS

‘Corporate and other’ includes Blue Dolphin subsidiaries BDPL (inactive pipeline and facilities assets), BDPC (inactive leasehold interests in offshore oil and gas wells), and BDSC (administrative services). For more information related to our business segments, see “—Downstream Operations, —Midstream Operations, and — Inactive Operations” and “Part I. Item 2. Properties” in this report.

Downstream Operations. The refinery operations business segment consists of the following assets and operations:

Property

Key Products Handled

Operating Subsidiary

Location

Nixon facility

● Crude distillation tower (15,000 bpd)

● Petroleum storage tanks

● Loading and unloading facilities

● Land (56 acres)

Crude Oil

Refined Products

Nixon, Texas

Crude Oil and Condensate Supply.

We source light-sweet Eagle Ford crude oil for the Nixon facility pursuant to a crude supply agreement with MVP effective January 1, 2024. 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. 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. See “Part I, Item 1A. Risk Factors” and “Part II, Item 8. Financial Statements and Supplementary Data – Notes (3), (15), and (16)” for additional disclosures related to Affiliate agreements.

Customers. 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 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.

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Competition. Most of our competitors are larger than us and 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. We 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.

Safety and Downtime. We operate the refinery in a manner that is materially consistent with industry safety practices and standards. EPA, OSHA, and comparable state and local regulatory agencies provide oversight for personnel safety, process safety management, and risk management to prevent or minimize the accidental release of toxic, reactive, flammable, or explosive chemicals. Our storage tanks are equipped with leak detection devices. We also have response and control plans in place for spill prevention and emergencies.

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, such as repair/replacement of disabled equipment, extreme temperatures (high or low), and power outages.

We are particularly vulnerable to operational disruptions because all our refining operations occur at a single facility. Shutdowns for maintenance may result in lost margin opportunity, potential increased maintenance expense, and reduced refined products inventory, which could adversely impact our ability to meet our payment obligations.

Midstream Operations. Our tolling and terminaling segment consists of the following assets and operations:

Property

Key Products Handled

Operating Subsidiary

Location

Nixon facility

● Petroleum storage tanks (third-party leasing)

● Loading and unloading facilities

Crude Oil

Refined Products

LRM, NPS

Nixon, Texas

Products and Customers. The Nixon facility’s petroleum storage tanks and infrastructure are primarily suited for crude oil and condensate and refined products, such as naphtha, jet fuel, diesel, and fuel oil. Our storage customers are typically from the lower portion of the Texas Triangle (the Houston – San Antonio – Dallas/Fort Worth area). Shipments are received and redelivered from the Nixon facility via third party trucks.

Operations Safety. Our midstream operations are operated in a manner materially consistent with industry safe practices and standards. These operations are subject to OSHA regulations and comparable state and local regulators. Storage tanks used for terminal operations are designed for crude oil and condensate and refined products, and most are equipped with appropriate controls that minimize emissions and promote safety. Our terminal operations have response and control plans, spill prevention and other programs to respond to emergencies.

Inactive Operations. We own pipeline and facilities assets and have leasehold interests in offshore oil and gas properties. These assets are inactive. Our pipeline assets were fully impaired in 2016 and our leasehold interests in offshore oil and gas wells were fully impaired in 2011. Our pipeline assets and oil and gas leasehold interests had no revenue during the years ended December 31, 2025 and 2024.

Property	Operating Subsidiary	Location

Freeport facility ● Crude oil and natural gas separation and dehydration ● Natural gas processing, treating, and redelivery ● Vapor recovery unit ● Two onshore pipelines (the onshore portion of the 20-inch offshore pipeline and a 16-inch natural gas pipeline connecting the Freeport facility to the Dow Chemical Plant complex) ● Land (162 acres)	BDPL	Freeport, Texas
Offshore Pipelines ● 20-inch, 34 mile gathering pipeline with lateral lines originating at an offshore anchor platform in Galveston Area Block 288 ● 8-inch, 13-mile offshore pipeline extending from Galveston Area Block 350 to an interconnect at a transmission pipeline in Galveston Area Block 391	BDPL	U.S. Gulf of America
Leasehold Interests in Offshore Oil and Gas Wells	BDPC	U.S. Gulf of America

Pipeline and Facilities Safety. Although our pipeline and facility assets are inactive, they require upkeep and maintenance and are subject to safety regulations under OSHA, PHMSA, BOEM, BSEE, and comparable state and local regulators. We have response and control plans, spill prevention and other programs to respond to emergencies related to these assets.

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Operating Risks

Successful execution of our business strategy depends on several critical factors, including having adequate working capital, favorable refining margins, and maintaining operation of the Nixon refinery.

Working Capital. Having sufficient working capital is necessary to meet contractual, operational, regulatory, and safety 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 Fourth 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. To avoid business disruptions and manage cash flow, we optimize receivables and payables by prioritizing payments, optimize inventory levels based on demand, monitor discretionary spending, and carefully managing capital expenditures.

As of December 31, 2025 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, representing a $5.3 million increase. Our significant debt in current liabilities at December 31, 2025 consisted of bank debt to Huntington and GNCU and related-party debt. Excluding accrued interest, we had current related-party and third-party debt of $44.4 million and $40.6 million as of December 31, 2025 and 2024, respectively. The $3.8 million increase in current debt between the periods primarily related to a $8.7 million draw under the Second Amended and Restated 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.

Refining Margins. Refining margins, which are affected by commodity prices and refined product demand, are volatile, and a reduction in refining margins will adversely affect the amount of cash we will have available for working capital. 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. 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. To remain competitive in a volatile commodity price environment, we adjust throughput and production and our product slate based on market conditions, including commodity price and refined product demand.

Nixon Refinery Operations. We maintain relationships with suppliers that source and repair key components of the Nixon refinery. We expect our suppliers to maintain an adequate supply of component products and, when components are sent out for repair, to timely deliver components. However, in some cases, increases in demand or supply chain disruptions have led to part and component constraints. We use several suppliers and monitor supplier financial viability to mitigate supply-based risks that could cause a business disruption.

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), and the extent to which these factors may impact working capital, commodity prices, refined product demand, our 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. We can provide no guarantees that: 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 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 third parties 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.

Insurance and Risk Management

Our operations are subject to significant hazards and risks inherent in crude oil and condensate refining operations, as well as the transportation and storage of crude oil and condensate and refined products. We have property damage, business interruption, and pollution liability coverages at the Nixon facility, Freeport facility and for offshore U.S Gulf of America. Business interruption coverage is for 24 months from the date of the loss, subject to a deductible with a 45-day waiting period. Pollution liability provides coverage due to named perils for claims involving pollutants where the discharge is sudden, accidental, and first commences at a specific day and time during the policy period. The pollution policy is subject to a retention and deductible and contains discovery requirements, reporting requirements, exclusions, definitions, conditions, and limitations that could apply to a particular pollution claim. As a result, there can be no assurance that any claim will be adequately insured for all potential damages.

Additional coverage includes umbrella, excess liability, workers’ compensation, directors’ and officers’ liability, environmental liability, and other business risks. These coverages are supported by safety and other risk management programs. Our insurance program may not cover all operational risks and costs and may not provide sufficient coverage in the event of a claim. We do not maintain insurance coverage against all potential losses and could suffer losses for uninsurable or uninsured risks or for losses in excess of existing insurance coverage. Losses in excess of our insurance coverage or cancellation of policies could have a material adverse effect on our business, financial condition, and results of operations.

Intellectual Property

We rely on intellectual property laws to protect our brand, as well as those of our subsidiaries. “Blue Dolphin Energy Company” is a registered trademark in the U.S. in name and logo form. “Petroport, Inc.,” an inactive wholly owned subsidiary, is a registered trademark in the U.S. in name form. In addition, “www.blue-dolphin-energy.com” is a registered domain name.

Human Capital Management

General. Our operations and activities are managed by an Affiliate, LEH, under the Fourth Amended and Restated Operating Agreement. Blue Dolphin and its subsidiaries do not have any employees. As of December 31, 2025, there were 112 employees of the Affiliate who provided support for our operations. None of these employees were covered by collective bargaining agreements. We believe that our personnel provide a competitive advantage for our success. We strive to attract and retain highly qualified and motivated individuals, foster a culture that supports diversity and inclusion, and provide a safe, healthy, and rewarding work environment for our personnel.

Safety, Health, and Wellness. We must comply with a number of federal and state laws and regulations related to safety that protect the health and safety of our workforce. We operate a safety and health program with participation by personnel at all levels of the organization. We strive to imporove safety and reliability performance through year-round safety training that complies with regulatory requirements and protects our assets and personnel. Although we strive to achieve excellence in our safety and health performance, there can be no assurances that there will not be accidents resulting in injuries or even fatalities.

Government Regulations

General. Our operations are subject to extensive and frequently changing federal, state, and local laws, regulations, permits, and ordinances relating to the protection of the environment. Among other things, these laws and regulations govern obtaining and maintaining construction and operating permits, the emission and discharge of pollutants into or onto the land, air, and water, the handling and disposal of solid, liquid, and hazardous wastes and the remediation of contamination. Compliance with existing and anticipated environmental laws and regulations increases our overall cost of business, including our capital costs to construct, maintain, operate, and upgrade equipment and facilities. Failing to comply with these laws and regulations may trigger a variety of administrative, civil, and criminal enforcement measures, including the assessment of monetary penalties. Certain environmental statutes impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances, hydrocarbons, or wastes have been disposed of or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances, hydrocarbons, or other waste products into the environment. These requirements may also significantly affect our customers’ operations and may have an indirect effect on our business, financial condition, and results of operations. However, we do not expect such effects will have a material impact on our financial position, results of operations, or liquidity.

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Air Emissions and Climate Change Regulations. Our operations are subject to the CAA and comparable state and local statutes. Under these laws, we are required to obtain permits, as well as test, monitor, report, and implement control requirements. If regulations become more stringent, additional emission control technologies may be required to be installed at the Nixon facility, Freeport facility, and certain emission sources located offshore, and our ability to secure future permits may become less certain. Any such future obligations could require us to incur significant additional capital or operating costs.

The EPA has undertaken significant regulatory initiatives, including the Petroleum Refinery National Initiative, under authority of the CAA’s NSR/PSD program to further reduce emissions of volatile organic compounds, nitrogen oxides, sulfur dioxide, and particulate matter. These regulatory initiatives have targeted industries with large manufacturing facilities that are significant sources of emissions, such as refining, paper and pulp, and electric power generating industries. The basic premise of these initiatives is the EPA’s assertion that many of these industrial establishments have modified or expanded their operations over time without complying with NSR/PSD regulations, which result in emission increases above threshold limits. As part of these regulatory initiatives, the EPA obtained consent decrees with several refiners that require refiners to make significant capital expenditures to install emissions control equipment at selected facilities. We are not under a consent decree, and as a small refiner, we do not expect any additional requirements under the Petroleum Refinery National Initiative to have a material impact on our financial position, results of operations, or liquidity.

In February 2024, the EPA released a final rule to lower the annual health-based NAAQS for fine particulate matter to 9 micrograms per cubic liter from the current level of 12 micrograms per cubic liter. After publication, the EPA became aware of an error in the preamble text regarding the due date for the state implementaion Plan. The EPA clarified the due date, and the correction was effective in December 2024. To implement the revised fine particulate matter NAAQS, all states were to review their existing air quality management infrastructure State Implementation Plan for fine particulate matter and ensure it is appropriate and adequate. Where areas remain in non-attainment or come into non-attainment as a result of the revised NAAQS, additional planning and emissions control obligations may be required. The ongoing and potential future requirements imposed by states to meet the fine particulate matter NAAQS could have direct impacts on terminaling facilities through additional requirements and increased permitting costs and could have indirect impacts through changing or decreasing fuel demand. Final implementation is pending a November 2025 request by the EPA to vacate the 2024 rule entirely.

Pursuant to the Energy Policy Act of 2005 and Energy Independence and Security Act of 2007, the EPA promulgated RFS and RFS2, respectively, which requires obligated parties, defined by the EPA as refiners or importers of transportation fuels, to either blend “renewable fuels,” such as ethanol and biofuels, into their transportation fuels or purchase renewable fuel credits, known as renewable identification numbers, in lieu of blending. The EPA granted the Nixon refinery a small refinery exemption from RFS2 requirements for 2013 and 2014. In 2014, the Nixon refinery began producing HOBM, a non-transportation lubricant blend product. As a result of our 2014 product slate change, our refined products no longer fall under RFS or RFS2 requirements.

Currently, multiple legislative and regulatory measures to address GHG emissions are in various phases of discussion or implementation. These include actions to develop national, state, or regional programs, each of which would require reductions in our GHG emissions or those of our customers. In 2015, the EPA amended the Petroleum and Natural Gas Systems source category (Subpart W) of the Greenhouse Gas Reporting Program, to include among other things, a new Onshore Petroleum and Natural Gas Gathering and Boosting segment that encompasses GHG emissions from equipment and sources within the petroleum and natural gas gathering boosting systems. In 2016, the EPA promulgated regulations regarding performance standards for methane emissions from new and modified oil and gas production and natural gas processing and transmission facilities, and in September 2018, proposed targeted improvements to these standards to streamline implementation of the rules. In August 2022, Congress passed and President Biden signed into law the Inflation Reduction Act of 2022, which included 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. The Inflation Reduction Act of 2022 also imposes a tax, or "methane fee," on energy producers that exceed a certain level of methane emissions. On January 26, 2024, the EPA published a proposed rule to implement the methane fee. These and other legislative regulatory measures will impose additional burdens on our business and those of our customers, and the impact of future GHG regulations on our operations and financial condition is unknown. In January 2025, President Trump signed an executive order directing the U.S. to withdraw from the Paris Agreement, President Trump and the Republican-led Congress have continued to diverge from the previous administration’s positions and GHG commitments. However, future emission reduction targets and other provisions of legislative or regulatory initiatives and policies enacted in the future by the U.S. could be brought by future administrations or, in the absence of federal action, states may become more active and focused on taking legislative or regulatory actions aimed at climate change and minimizing GHG emissions.

Hazardous Substances and Waste Regulations. CERCLA imposes strict, joint and several liability on a broad group of potentially responsible parties for response actions necessary to address a release of hazardous substances into the environment. The law authorizes two kinds of response actions: (i) short-term removals, where actions may be taken to address releases or threatened releases requiring prompt response, and (ii) long-term remedial response actions, that permanently and significantly reduce the dangers associated with releases or threats of releases of hazardous substances that are serious, but not immediately life threatening. Neither we nor any of our predecessors have been designated as a potentially responsible party under CERCLA or a similar state statute.

We are subject to RCRA requirements for the generation, transportation, treatment, storage, and disposal of solid and hazardous wastes. When feasible, RCRA-regulated materials are recycled instead of being disposed of on-site or off-site. RCRA establishes standards for the management of solid and hazardous wastes. We generate petroleum product wastes, solid wastes, and ordinary industrial wastes, such as from paints and solvents, that are regulated under RCRA and comparable state statues.

Besides governing current waste disposal practices, RCRA also addresses the environmental effects of certain past waste disposal practices. We currently own properties where crude oil, refined petroleum hydrocarbons, and fuel additives were handled for many years by previous owners. At some sites, hydrocarbons or other waste may have been disposed of or released on or under the properties owned by us or on or under other locations where these wastes have been taken for disposal. Although prior owners and operators may have used operating and waste disposal practices that were standard in the industry at the time, these properties and wastes disposed thereon are now subject to CERCLA, RCRA, and analogous state laws. Under current laws, we could be required to remove or remediate previously disposed or released wastes (including wastes disposed of or released by prior owners or operators), to clean up contaminated property (including impacted groundwater), or to perform remedial operations to prevent future contamination to the extent we are not indemnified for such matters.

Additionally, regulation of PFAS has significantly increased in recent years, at both the federal and state levels. PFAS has been used in oil and gas-related operations, notably in emergency response activities, including in aqueous film forming foam as a vapor and fire suppressant. In January 2024, the EPA announced two waste-related proposed rulemakings. The first proposed rule would list nine (9) PFAS as "hazardous constituents" under RCRA; listing a substance as a hazardous constituent is a preliminary step toward classifying a substance as hazardous waste. The second proposed rule would amend the definition of "hazardous waste" to clarify that the RCRA corrective action authority may be utilized to address emerging contaminants, including PFAS. These are currently expected to go into effect in 2027. Moreover, an increasing number of states have sought to regulate PFAS, creating a patchwork of PFAS standards throughout the U.S. We cannot currently predict the impact of PFAS-related regulations on our compliance or remediation costs.

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Water Pollution Regulations. Our operations can result in the discharge of pollutants, including chemical components of crude oil and refined products, into federal and state waters. The CWA prohibits the discharge of pollutants into U.S. waters except as authorized by the terms of a permit issued by the EPA or a state agency with delegated authority. The transportation and storage of crude oil and refined products over and adjacent to water involves risks and subjects us to the provisions of the CWA, OPA 90, and related state requirements. Uncertainty has persisted in the federal government's applicable jurisdictional reach under the CWA, and in particular what constitutes a regulated "water of the U.S." ("WOTUS"). The EPA and the USACOE under the Obama, first Trump, and Biden Administrations have pursued multiple rulemakings in an attempt to determine the scope of such reach. Most recently, in response to the U.S. Supreme Court's May 2023 ruling in Sackett v. EPA ("Sackett"), the EPA and the USACOE issued a final WOTUS rule that became effective September 8, 2023. In accordance with the U.S. Supreme Court's directive in Sackett, the final rule significantly narrowed the jurisdictional reach of the CWA, but the U.S. Supreme Court's decision also left unaddressed a number of questions and interpretational uncertainties. Multiple lawsuits challenging the final WOTUS rule remain ongoing, and implementation of the rule is enjoined in about half the states and for certain parties. Continued challenges over the jurisdictional reach of the CWA could result in permitting delays and uncertainty as to compliance requirements.

Spill prevention, control, and countermeasure requirements mandate the use of structures, such as berms and other secondary containment, to prevent hydrocarbons or other pollutants from reaching a jurisdictional body of water in the event of a spill or leak. These requirements prevent pollutant releases and minimize potential impacts should a release occur. We have federally certified oil spill response organizations available to respond to an oil spill and, in the case of our offshore pipelines, we maintain the required statutory coverage of financial responsibility at $35.0 million. In the event of an oil spill into navigable waters, we could be subject to strict, joint, and potentially unlimited liability for removal costs and other consequences.

Wastewater is subject to restrictions and strict controls under the CWA. Federal and state regulatory agencies can impose administrative, civil, and criminal penalties for non-compliance with discharge permits. Process wastewater from the Nixon refinery is tested and discharged to a nearby municipal treatment facility pursuant to applicable process wastewater permits. Wastewater from our offshore facilities, including our oil and natural gas pipelines and anchor platform, is tested and discharged pursuant to applicable produced water permits. Stormwater at the Nixon facility is tested and discharged pursuant to applicable stormwater permits.

The EPA established an Action Plan for PFAS in 2021. In furtherance of this plan, the EPA proposed national drinking water standards for six (6) PFAS' in March 2023. The EPA requested public comment on the proposed regulation, and the public comment period ended in May 2023. In April 2024, the EPA announced the final PFAS National Primary Drinking Water Regulation for six (6) PFAS in public water systems. These are currently expected to go into effect in 2027. A number of states have also issued their own drinking water, surface water, and groundwater limits for various PFAS. We cannot currently predict the impact of PFAS-related regulations will have on our compliance or remediation costs.

Offshore Decommissioning Requirement. BSEE decommissioning regulations require lessees and rights-of-way holders to fully decommission all wells, pipelines, platforms, and other structures located on U.S. Gulf of America federal offshore leases, rights-of-ways, and rights-of-use and easements within one year of expiration of a lease, right-of-way grant, right-of-use and easement grant, or when no longer useful for operations. Decommissioning involves platforms and other structures being removed, pipelines being removed, or, if approved by BSEE, abandoned in place, and a site clearance being performed, as applicable. To cover the obligations of such lessees and grant holders, BOEM evaluates an operator's or grant holder's financial ability to carry out present and future work obligations to determine whether the operator must provide additional security beyond minimum bonding requirements. Such obligations include the cost decommissioning platforms and pipelines at the end of production or service activities. Once decommissioning work has been completed, the collateral backing the financial assurance is released by BOEM.

We are required by BOEM to: (i) maintain acceptable financial assurance (pipeline bonds) for the decommissioning of our assets located on federal offshore rights-of-way and (ii) decommission these assets following relinquishment or expiration of a right-of-way or after a certain period of inactivity. As of both December 31, 2025 and 2024, BDPL maintained $0.9 million in cash-backed pipeline bonds issued to the BOEM through RLI Corp. BDPL maintained $6.0 million and $3.0 million in AROs related to decommissioning its pipeline and facilities assets at December 31, 2025 and 2024, respectively. See “Part I, Item 1A. Risk Factors—Legal, Government, and Regulatory (Section C)" and "Part II, Item 8. Financial Statements and Supplementary Data—Notes (11), (15) and (16)" for additional disclosures related to decommissioning obligations for our pipelines and facilities assets and related risks.

OSHA. We are subject to the requirements of OSHA and comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities, and the public.

Website Access to Reports and Other Information

We make certain filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments and exhibits to those reports, which are available free of charge through the SEC’s website (http://www.sec.gov) or through our website (http://www.blue-dolphin-energy.com), as soon as reasonably practicable after they are filed with the SEC. We have also posted our Code of Business Ethics, board committee charters and other corporate governance documents on our website. Our website and the information contained on that site, or connected to that site, are not incorporated by reference into this report.

ITEM 1A. RISK FACTORS

You should carefully consider the risks described below, in addition to the other information contained in this document. Realization of any of the following risks could have a material adverse effect on our business, financial condition, cash flows and results of operations. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we do not currently consider to present significant risks to our operations.

A.	Risks Related to Our Business and Industry

A1.

Our significant debt in current liabilities, certain of which is in default, could adversely affect our financial health and make us more vulnerable to adverse economic conditions.

Excluding accrued interest, we had current related-party and third-party debt of $44.4 million and $40.6 million as of December 31, 2025 and 2024, respectively. Our significant debt in current liabilities, certain of which was in default at December 31, 2025, consisted of bank debt to Huntington (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, 2025 and 2024 due to being in default.

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Risk Factors (Continued)

Blue Dolphin, as parent company, has guaranteed the indebtedness of certain subsidiaries. In addition, Affiliates have guaranteed the indebtedness of Blue Dolphin and certain of its subsidiaries. This level of debt in current liabilities and the cross guarantee agreements could have important consequences, such as: (i) limiting our ability to obtain additional financing to fund our working capital, capital expenditures, debt service requirements, potential growth, or for other purposes; (ii) increasing the cost of future borrowings; (iii) limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to make payments on our debt; (iv) placing us at a competitive disadvantage compared to competitors with less debt; and (v) increasing our vulnerability to adverse economic and industry conditions.

Our ability to service our debt is dependent upon, among other things, business conditions, our financial and operating performance, our ability to raise capital, and regulatory and other factors, many of which are beyond our control. If our working capital is not sufficient to service our debt, and any future indebtedness that we incur, our business, financial condition, and results of operations will be materially adversely affected. In such a case, we may consider other options, including selling assets, raising additional debt or equity capital, cutting costs, reducing cash requirements, restructuring debt obligations, filing for bankruptcy, or ceasing operating.

A2.

Our continued inability to meet covenants under certain of our secured loan agreements could adversely impact our ability to obtain new debt, refinance, or restructure existing debt.

At December 31, 2025 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.

Our ability to meet financial and non-financial covenants depends on numerous factors, including sustained positive operating margins and adequate working capital for, amongst other requirements, purchasing crude oil and condensate and making payments on our long-term debt. Our ability to generate sustained positive margins depends on, among other things, business conditions and the general condition of the financial markets. 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) may adversely impact our working capital, commodity prices, refined product demand, and our supply chain, which would impact our ability to successfully generate sufficient cash from operations to repay our outstanding debt or otherwise restructure or refinance the debt. We could be forced to undertake alternate financings, including a sale of additional common stock, negotiate for an extension of the maturity, or sell assets and delay capital expenditures in order to generate proceeds that could be used to repay such indebtedness. We can provide no assurance that we will be able to consummate any such transaction on terms that are commercially reasonable, on terms acceptable to us or at all. If new debt or other liabilities are added to our current consolidated debt levels, the related risks that it now faces could intensify. If new debt or other liabilities are added to LE, LRM, or NPS’ current debt levels, their inability to meet financial and non-financial covenants could intensify.

A3.

Restrictive covenants in our debt instruments may limit our ability to undertake certain types of transactions, which could adversely affect our business, financial condition, results of operations, and our ability to service our indebtedness.

Various covenants in our debt instruments restrict our financial flexibility in a number of ways. Our current indebtedness subjects us to significant financial and other restrictive covenants, including restrictions on our ability to incur additional indebtedness, place liens upon assets, pay dividends or make certain other restricted payments and investments, consummate certain asset sales or asset swaps, conduct businesses other than our current businesses, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets. Some of our debt instruments also require us to satisfy or maintain certain financial condition tests in certain circumstances. Our ability to meet these financial condition tests can be affected by events beyond our control and we may not meet such tests. In addition, failing to comply with the provisions of our existing debt could result in a further event of default that could enable our lenders, subject to the terms and conditions of such debt, to declare the outstanding principal, together with accrued interest, to be immediately due and payable. Events beyond our control, including pandemics, volatility in commodity prices, and extreme weather resulting from climate change may affect our ability to comply with our covenants. If we are unable to repay the accelerated amounts, our lenders could proceed against the collateral granted to them to secure such debt. If the payment of our debt is accelerated, defaults under our other debt instruments, if any, may be triggered, and our assets may be insufficient to repay such debt in full. In addition, loans provided or guaranteed by the U.S. government subject us to additional restrictions on our operations, including limitations on personnel headcount and compensation reductions and other cost reduction activities that could adversely affect us.

Blue Dolphin Energy Company

December 31, 2025 | Page 12

Risk Factors (Continued)

A4.

Our business, financial condition, and operating results may be adversely affected by increased costs of capital or a reduction in the availability of credit.

Adverse changes to the availability, terms, cost of capital, interest rates, or our credit ratings (which would have a corresponding impact on the credit ratings of our subsidiaries that are party to any cross-guarantee agreements) could cause our cost of doing business to increase by limiting our access to capital, including our ability to refinance maturing or accelerated existing indebtedness on similar terms. In addition, increased crude acquisition costs could adversely impact our working capital. As a result, we cannot provide any assurance that any financing will be available to us in the future on acceptable terms or at all. Any such financing could be dilutive to our existing stockholders. If we cannot raise required funds on acceptable terms, we may further reduce our expenses and we may not be able to, among other things, (i) maintain our general and administrative expenses at current levels; (ii) successfully implement our business strategy; (iii) fund certain obligations as they become due; (iv) respond to competitive pressures or unanticipated capital requirements; (v) repay our indebtedness, or (vi) purchase crude oil to operate the Nixon facility.

A5.

Affiliates hold a significant ownership interest in us and exert considerable influence over us, and their interests may conflict with the interests of our other stockholders; and affiliate transactions may cause conflicts of interest that may adversely affect us.

Jonathan Carroll, our Chief Executive Officer, and an Affiliate, together controlled 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:

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Election and appointment of directors.

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Business strategy and policies.

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Mergers and other business combinations.

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Acquisition or disposition of assets.

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Future issuances of Common Stock or other securities.

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Incurrence of debt or obtaining other sources of financing.

The existence of a controlling stockholder may have the effect of making it difficult for, or may discourage or delay, a third party from seeking to acquire a majority of our outstanding Common Stock, which may adversely affect the market price of our Common Stock.

Affiliate interest may not always be consistent with our interests or with the interests of our other stockholders. Affiliates may also pursue acquisitions or business opportunities in industries in which we compete, and there is no requirement that any additional business opportunities be presented to us. We also have and may in the future enter transactions to purchase goods or services from and sell products to Affiliates. To the extent that conflicts of interest may arise between us and Affiliates, those conflicts may be resolved in a manner adverse to us or its other stockholders.

These relationships could create, or appear to create, potential conflicts of interest when our Board is faced with decisions that could have different implications for us and Affiliates. The appearance of conflicts, even if such conflicts do not materialize, might adversely affect the public’s perception of us, as well as our relationship with other companies and our ability to enter new relationships in the future, which may have a material adverse effect on our ability to do business.

A6.

The dangers inherent in oil and gas operations could expose us to potentially significant losses, costs, or liabilities, and reduce our liquidity.

Oil and gas operations are inherently subject to significant hazards and risks. We process, store, and handle crude oil and condensate, which, under certain circumstances, can be extremely dangerous. Hazards and risks related to the Nixon facility include, but are not limited to, catastrophic events caused by fires, explosions, pressure vessel ruptures, spills, third-party interference, electricity, and mechanical breakdown, any of which could result in interruption or termination of operations, pollution, personal injury and death, or damage to our assets and the property of others.

Offshore operations are also subject to a variety of operating risks peculiar to the marine environment. Although our pipeline assets and leasehold interests in offshore oil and gas wells are inactive, natural disasters and other events, such as hurricanes, can result in blowouts, cratering, explosions, and loss of well control. These hazards can cause injury to persons, loss of life, and damage to property or the environment.

Any of these risks could result in substantial losses to us from a significant decrease in operations, significant additional costs to replace, repair, and insure assets, and from potential civil lawsuits, fines, penalties, and regulatory enforcement proceedings. We may also become subject to more extensive governmental regulation. These regulations may, in certain circumstances, impose strict liability for pollution damage or result in the interruption or termination of operations. These risks could also harm our reputation and business, result in claims against us, and have a material adverse effect on our results of operations and financial condition.

A7.

The geographic concentration of our assets creates a significant exposure to the risks of the regional economy and other regional adverse conditions.

Our primary operating assets are in Nixon, Texas in the Eagle Ford Shale, and we market our refined products in a single, relatively limited geographic area. In addition, we have facilities and related onshore pipeline assets in Freeport, Texas, and offshore pipelines and oil and gas properties in the U.S. Gulf of America. As a result, our operations are more susceptible to regional economic conditions than our more geographically diversified competitors. Any changes in market conditions, unforeseen circumstances, or other events affecting the area in which our assets are located could have a material adverse effect on our business, financial condition, and results of operations. These factors include, among other things, changes in the economy, weather, demographics, and population.

A8.

Competition from companies having greater financial and other resources could materially and adversely affect our business and results of operations.

The refining industry is highly competitive. Our refining operations compete with domestic refiners and marketers in PADD 3 (Gulf Coast), domestic refiners in other PADD regions, and foreign refiners that import products into the U.S. Certain of our competitors have larger, more complex refineries and may be able to realize higher margins per barrel of product produced. Several of our principal competitors are integrated national or international oil companies that are larger and have greater resources than we do and have access to proprietary sources of controlled crude oil production. Unlike these competitors, we obtain all our feedstocks from a single supplier. Because of their integrated operations and larger capitalization, larger, more complex refineries may be more flexible in responding to volatile industry or market conditions, such as crude oil and other feedstocks supply shortages or commodity price fluctuations. If we are unable to compete effectively, we may lose existing customers or fail to acquire new customers.

Blue Dolphin Energy Company

December 31, 2025 | Page 13

Risk Factors (Continued)

A9.

Our insurance policies do not cover all losses, costs, or liabilities that we may experience, and insurance companies that currently insure companies in the energy industry may cease to do so or substantially increase premiums.

Our insurance program may not cover all operational risks and costs and may not provide sufficient coverage in the event of a claim. We do not maintain insurance coverage against all potential losses and could suffer losses for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. The occurrence of an event that is not fully covered by insurance, failure by one or more of our insurers to honor its coverage commitments for an insured event, or losses in excess of our insurance coverage could have a material adverse effect on our business, financial condition, and results of operations.

There is finite capacity in the commercial insurance industry engaged in underwriting energy industry risk, and factors impacting cost and availability include: (i) losses within the 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.

A10.

Our ability to use NOL carryforwards to offset future taxable income for U.S. federal income tax purposes is subject to limitation.

Under IRC Section 382, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOL carryforwards to offset future taxable income. Within the meaning of IRC Section 382, an “ownership change” occurs when the aggregate stock ownership of certain stockholders (generally 5% stockholders, applying certain look-through rules) increases by more than 50 percentage points over such stockholders' lowest percentage ownership during the testing period (generally three years).

Blue Dolphin experienced ownership changes in 2005 because of a series of private placements, and in 2012 because of a reverse acquisition. The 2012 ownership change limits our ability to utilize NOLs following the 2005 ownership change that were not previously subject to limitation. Limitations imposed on our ability to use NOLs to offset future taxable income could cause U.S. federal income taxes to be paid earlier than otherwise would be paid if such limitations were not in effect, and could cause such NOLs to expire unused, in each case reducing or eliminating the benefit of such NOLs. Similar rules and limitations may apply for state income tax purposes. NOLs generated after the 2012 ownership change are not subject to limitation. If the IRS were to challenge our NOLs in an audit, we cannot assure that we would prevail against such challenge. If the IRS were successful in challenging our NOLs, all or some portion of our NOLs would not be available to offset any future consolidated income, which would negatively impact our results of operations and cash flows. Certain provisions of the Tax Cuts and Jobs Act, enacted in 2017, may also limit our ability to utilize our net operating tax loss carryforwards.

At December 31, 2025, management determined that realization of the deferred tax assets from NOLs is more likely than not based on positive evidence that was evaluated, including recent earnings history and expectations for future taxable income. Based on management’s evaluation, we recorded no valuation allowances against our deferred tax assets as of December 31, 2025.

A11.

We may not be able to keep pace with technological developments in our industry.

The development, adoption and use of artificial intelligence (“AI”) technologies are rapidly transforming our industry, enabling faster data analysis and automation through machine learning and predictive modeling. Many of our competitors are investing heavily in AI-driven capabilities to enhance customer acquisition, personalization, pricing optimization, supply chain efficiency, product development, and marketing effectiveness. If we are unable to adopt and deploy AI effectively as quickly as our competitors, it may cause us to be relatively less productive or innovative, adversely impacting our competitiveness, our ability to effectively execute our strategic transformation and requiring additional investments that increase our costs. Laws and regulations regarding AI are rapidly evolving as well, including in the areas of data privacy, cybersecurity, intellectual property, and data protections. Compliance with new or changing laws, regulations, or industry standards relating to AI may impose significant operational and financial burdens and may limit our ability to develop, deploy, or use AI in our business.

A12.

Our variable rate indebtedness under certain of our secured loan agreements subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under certain of our secured loan agreements with third parties are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. As of December 31, 2025, approximately $36.8 million of our debt was variable rate debt. Our anticipated annual interest expense on $36.8 million of variable rate debt at the current rate of 11.25% would be $4.1 million.

B.	Downstream and Midstream Operations

B1.

Our financial results are affected by the relationship, or margin, between our refined product prices and the price for crude oil, which can vary based on global, regional, and local market conditions. Historically, refining margins have been volatile, and we believe they will continue to be volatile in the future. Our cost to acquire feedstocks and the price at which we can ultimately sell products depend upon several factors beyond our control, including regional and global supplies of and demand for feedstocks (such as crude oil), liquid transportation fuels, and other products. These in turn depend on, among other things, the availability and quantity of feedstocks and liquid transportation fuels imported into the U.S., the production levels of suppliers, levels of product inventories, productivity and growth (or the lack thereof) of the U.S. and global economies, the U.S. government’s relationships with foreign governments, political affairs, the extent of government regulation, including tariffs, and the events described in many of the other risk factors below. The ability of the members of the OPEC to agree on and to maintain crude oil price and production controls has also had, and is likely to continue to have, a significant impact on the market prices of crude oil and certain of our products.

Blue Dolphin Energy Company

December 31, 2025 | Page 14

Risk Factors (Continued)

Some of these factors can vary by region and may change quickly, adding to market volatility, while others may have longer-term effects. The longer-term effects of these and other factors on refining margins are uncertain. We do not produce crude oil, and we must purchase nearly all of the feedstock we process. Price level changes during the period between purchasing crude oil and selling the resulting refined products has had, and could continue to have, a significant effect on our financial results. A decline in market prices for our refined products and crude oil has had, and could again have, a negative impact to the carrying value of our inventories. Factors outside of our control, such as economic uncertainty, inflation (and the potential for increased prices to create demand destruction), tariffs, persistently high interest rates, public health crises, and political unrest or hostilities, have affected, and could continue to affect, economic activity and growth levels of the U.S. and other countries. A decrease in the demand for and consumption of our products due to lower economic activity and growth levels has caused, and could again cause, declines in our revenues and refining margins and could negatively impact our growth prospects and capital allocation decisions.

B2.

The volatility of commodity prices for crude oil, other feedstocks, and refined products may have a material adverse effect on our earnings, cash flows, and liquidity.

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 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.

The markets and commodity prices for crude oil and condensate and our finished products have historically been volatile, are likely to continue to be volatile, and depend on factors beyond our control. These factors include:

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The level of domestic and offshore production.

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The availability of crude oil and U.S. and global demand for this commodity.

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A general downturn in economic conditions.

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The impact of weather, including abnormally mild or extreme winter or summer weather that causes lower or higher energy usage for heating or cooling purposes, respectively, or extreme weather that may disrupt our operations or related upstream or downstream operations.

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Actions taken by foreign oil and gas producing and importing nations, including the ability or willingness of OPEC and OPEC+ to set and maintain pricing and production levels for oil.

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The availability of local, intrastate, and interstate transportation systems.

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U.S. and global economic conditions, including inflationary pressures, tariffs, further increases in interest rates, and a general economic slowdown or recession.

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Geopolitical tensions, including conflicts and war (such as the ongoing military conflicts in Ukraine and Israel and escalations in the Middle East).

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The availability and marketing of competitive fuels.

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The extent of governmental regulation and taxation.

B3.

Our ability to acquire sufficient levels of crude oil on favorable terms impacts our ability to operate the Nixon refinery.

Pursuant to a crude supply agreement with MVP effective January 1, 2024, we source light-sweet Eagle Ford crude oil for the Nixon facility. 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. 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.

Given the large dollar amount required to make crude oil purchases, liquidity constraints could cause us to delay purchases of crude oil or otherwise acquire less than the desired amounts. This, in turn, could cause us to operate the Nixon facility at a lower rate on a bpd basis to meet customer demand. During the twelve-month periods ended December 31, 2025 and 2024, the refinery experienced no days of downtime due to lack of crude associated with cash constraints. Failing to operate the Nixon facility at the desired run rate, or at all, could adversely affect our profitability and cash flows.

B4.

Downtime at the Nixon refinery could result in lost margin opportunity, increased maintenance expense, increased inventory, and a reduction in cash available for payment of our obligations.

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 including repair/replacement of disabled equipment, 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.

Blue Dolphin Energy Company

December 31, 2025 | Page 15

Risk Factors (Continued)

B5.

Our operations depend on the reliable supply of electricity, which exposes us to various risks.

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, 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.

B6.

Potential impairment in the carrying value of long-lived assets could negatively affect our operating results.

We have a significant amount of long-lived assets on our consolidated balance sheet. Under U.S. 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.

Significant management judgment is required in the forecasting of future operating results that are used in the preparation of projected cash flows. As a result, there can be no assurance that the estimates and assumptions made for purposes of our impairment analysis will prove to be an accurate prediction of the future. Should our assumptions significantly change in future periods, it is possible we may later determine the carrying values of our refinery and facilities assets exceed the undiscounted estimated pretax cash flows, which would result in a future impairment charge.

B7.

We may have capital needs for which internally generated cash flows and external financing are inadequate. Affiliates may, but are not required to, fund our working capital requirements in such instances.

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.

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 Fourth 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.

Blue Dolphin Energy Company

December 31, 2025 | Page 16

Risk Factors (Continued)

B8.

Our business may suffer if any of the executive officers or other key personnel discontinue employment with us. Furthermore, a shortage of skilled labor or disruptions in our labor force may make it difficult for us to maintain productivity.

Our future success depends on the services of the executive officers and other key personnel and on our continuing ability to recruit, train and retain highly qualified personnel in all areas of our operations. In particular, Jonathan Carroll currently serves as our principal executive officer; Bryce Klug currently serves as our principal financial and accounting officer; and William Christopher McDougall currently serves as our Corporate Development Officer. We are highly dependent on their continued services to execute our business plan and strategy. Furthermore, our operations require skilled and experienced personnel with proficiency in multiple tasks. Competition for skilled personnel with industry-specific experience is intense, and the loss of these executives or personnel could harm our business. If any of these executives or other key personnel resign or become unable to continue in their present roles and are not adequately replaced, our business could be materially adversely affected.

B9.

Loss of business from, or the bankruptcy or insolvency of, one or more of our significant customers, one of which is an Affiliate, could have a material adverse effect on our financial condition, results of operations, liquidity, and cash flows.

Most of our contracts require our customers to prepay and for us to sell to our customers fixed quantities or minimum quantities of finished and intermediate petroleum products. Many of these arrangements are subject to periodic renegotiation on a forward-looking basis, which could result in higher or lower relative commodity prices on future sales of our refined products.

Our customers have a variety of suppliers to choose from. As a result, they can make substantial demands on us, including demands for more favorable product pricing or contractual terms. Our ability to maintain strong relationships with our principal customers is essential to our future performance. Our operating results could be harmed if we lose a key customer, a key customer reduces their order quantity, or a key customer requires us to reduce our commodity prices. We may further be harmed if a key customer is acquired by a competitor or suffers financial hardship. Additionally, our profitability could be adversely affected if there is consolidation among our customer base and our customers command increased leverage in negotiating commodity prices and other terms of sale. We could decide not to sell our refined products to a certain customer if, because of increased leverage, the customer pressures us to reduce our pricing such that our gross profits are diminished, which could result in a decrease in our revenue. Consolidation may also lead to reduced demand for our products, replacement of our products by the combined entity with those of our competitors, and cancellations of orders, each of which could harm our operating results. Loss of business from, or the bankruptcy or insolvency of, one or more of our major customers could similarly affect our financial condition, results of operations, liquidity, and cash flows.

B10.

We are dependent on third parties for the transportation of crude oil and condensate into and refined products out of our Nixon facility. If these third parties become unavailable to us, our ability to process crude oil and condensate and sell refined products to wholesale markets could be materially and adversely affected.

We rely on trucks for the receipt of crude oil and condensate into and the sale of refined products out of our Nixon facility. Since we do not own or operate any of these trucks, their continuing operation is not within our control. If any of the third-party trucking companies that we use, or the trucking industry in general, become unavailable to transport crude oil, condensate, or our refined products or experience interruptions in transportation because of acts of God, accidents, government regulation, terrorism or other events, our revenue and net income would be materially and adversely affected.

B11.

Our suppliers source a substantial amount, if not all, of our crude oil and condensate from the Eagle Ford Shale and may experience interruptions of supply from that region.

Our suppliers source a substantial amount, if not all, of our crude oil and condensate from the Eagle Ford Shale. Consequently, we may be disproportionately exposed to the impact of delays or interruptions of supply from that region caused by transportation capacity constraints, curtailment of production, unavailability of equipment, facilities, personnel or services, significant governmental regulation, severe weather, plant closures for scheduled maintenance, or the interruption of oil or natural gas being transported from wells in that area.

B12.

Our refining operations and customers are primarily located within the Eagle Ford Shale and changes in the supply/demand balance in this region could result in lower refining margins.

Our primary operating assets are in Nixon, Texas in the Eagle Ford Shale, and we market our refined products in a single, limited geographic area. Therefore, we are more susceptible to regional economic conditions than our more geographically diversified competitors. Should the supply/demand balance shift in our region due to changes in the local economy, an increase in refining capacity or other reasons, resulting in supply in the PADD 3 (Gulf Coast) region to exceed demand, we would have to deliver refined products to customers outside of our current operating region and thus incur considerably higher transportation costs, resulting in lower refining margins.

Blue Dolphin Energy Company

December 31, 2025 | Page 17

Risk Factors (Continued)

B13.

Severe weather or other events affecting our facilities, or those of our vendors, suppliers, or customers could have a material adverse effect on our liquidity, business, financial condition, and results of operations.

Our operations are subject to all the risks and operational hazards inherent in receiving, handling, storing, and transferring crude oil and petroleum products. These risks include damages to facilities, related equipment and surrounding properties caused by severe weather (such as extreme cold or hot temperatures, hurricanes, floods, and other natural disasters) or other events (such as equipment malfunctions, mechanical or structural failures, explosions, fires, spills, or acts of terrorism) and can occur at our facilities or at third-party facilities on which our operations are dependent. Severe weather or other events could cause severe damage or destruction to our assets or the temporary or permanent shut-down of our operations. If we are unable to operate, our liquidity, business, financial condition, and results of operations could be materially affected.

B14.

Our renewable energy strategy may not materialize or underperform expectations.

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 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 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.

C.	Legal, Government, and Regulatory

C1.

Environmental laws and regulations could require us to make substantial capital expenditures to remain in compliance or to remediate current or future contamination that could give rise to material liabilities.

Our operations are subject to a variety of federal, state, and local environmental laws and regulations relating to the protection of the environment and natural resources, including those governing the emission or discharge of pollutants into the environment, product specifications and the generation, treatment, storage, transportation, disposal, and remediation of solid and hazardous wastes. Violations of these laws and regulations or permit conditions can result in substantial penalties, injunctive orders compelling installation of additional controls, civil and criminal sanctions, permit revocations, or facility shutdowns. These and further actions could restrict or limit operations as currently conducted at the Nixon Facility. In addition, new environmental laws and regulations, new interpretations of existing laws and regulations, increased governmental enforcement of laws and regulations, or other developments could require us to make additional unforeseen expenditures. Many of these laws and regulations are becoming increasingly stringent, and the cost of compliance with these requirements can be expected to increase over time. The requirements to be met, as well as the technology and length of time available to meet those requirements, continue to develop and change. Expenditures or costs for environmental compliance could have a material adverse effect on our results of operations, financial condition, and profitability.

The Nixon facility operates under several federal and state permits, licenses, and approvals with terms and conditions that contain a substantial number of prescriptive limits and performance standards. These permits, licenses, approvals, limits, and standards require a significant amount of monitoring, record keeping and reporting to demonstrate compliance with the underlying permit, license, approval, limit or standard. Non-compliance or incomplete documentation of our compliance status may result in the imposition of fines, penalties, and injunctive relief. Additionally, there may be times when we are unable to meet the standards and terms and conditions of our permits, licenses, and approvals due to operational upsets or malfunctions, which may lead to the imposition of fines and penalties or operating restrictions that may have a material adverse effect on our ability to operate our facilities, and accordingly our financial performance.

C2.

We are subject to strict laws and regulations regarding personnel and process safety, and failing to comply with these laws and regulations could have a material adverse effect on our results of operations, financial condition, and profitability.

We are subject to the requirements of OSHA, and comparable state statutes that regulate the protection, health, and safety of workers, and the proper design, operation, and maintenance of our equipment. In addition, OSHA and certain other environmental regulations require that we maintain information about hazardous materials used or produced in our operations and that we provide this information to personnel and state and local governmental authorities. Failing to comply with these requirements, including general industry standards, record keeping requirements and monitoring and control of occupational exposure to regulated substances, may result in significant fines or compliance costs, which could have a material adverse effect on our results of operations, financial condition, and cash flows.

C3.

The impact of current and future sanctions (including tariffs) imposed by governments, including the U.S., and other authorities in response to economic and geopolitical tensions, may impact our business, financial condition, and results of operations.

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.

Blue Dolphin Energy Company

December 31, 2025 | Page 18

Risk Factors (Continued)

In February 2022, Russia initiated significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export controls against Russia. In October 2023, Hamas launched a surprise attack on Israel. In response, the U.S. and certain other countries imposed sanctions against Hamas and key Hamas terrorist group members. The U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should these conflicts continue or worsen. It is not possible to predict the broader consequences of these conflicts, including related geopolitical tensions, the measures and retaliatory actions taken by the U.S. and other countries, counter measures or retaliatory actions by Russia or Hamas in response (e.g., potential cyberattacks or the disruption of energy exports). Such consequences are likely to cause regional instability, geopolitical shifts, and could materially adversely affect global trade, currency exchange rates, regional economies, and the global economy. While it is difficult to predict the impact of any of the foregoing, these conflicts and actions taken in response could increase our costs for crude oil, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.

The ongoing Iran conflict, which began in 2026, and remains unresolved as of the date of this report, together with related geopolitical tensions in the Middle East, could have a material adverse effect on our business, results of operations, financial condition and cash flows. The conflict has already resulted in significant volatility in the global energy and commodity markets, disruptions to international shipping lanes (including the Strait of Hormuz), imposition of new or expanded economic sanctions by the United States and other governments, and heightened risks of cyber-attacks, terrorism, and supply-chain interruptions. Any escalation of the Iran conflict, including broader involvement of regional or global powers, direct attacks on oil infrastructure, or additional sanctions targeting energy exports, could lead to sharp increases in crude oil and natural gas prices, higher insurance and transportation costs, delays or cancellations of customer demand, and reduced availability of critical raw materials and components.

C4.

General U.S. economic, political, or regulatory developments, including those related to recession, inflation, tariffs, interest rates, or governmental policies relating to refined petroleum products, crude oil, or taxation could adversely affect our business, operating results, and financial condition.

U.S. economic slowdowns may have serious negative consequences for our business and operating results because our performance is subject to domestic economic conditions and their impact on levels of consumer spending (e.g., consumer airline travel relating to jet fuel). Some of the factors affecting consumer spending include unemployment rates, consumer debt levels, recession, inflation rates, the impact of tariffs on goods and services, net worth reductions based on declines in equity markets and residential real estate values, interest rates for mortgages and other loans, taxation, energy prices, consumer confidence, and other macroeconomic factors. Political instability and health crises, among many other factors, can also impact the global economy and decrease worldwide demand for oil and refined products. During periods of economic weakness or uncertainty, current or potential customers may travel less, reduce, or defer purchases, go out of business, or have insufficient funds to buy or pay for our products and services. Moreover, a financial market crisis may have a material adverse impact on financial institutions and limit access to capital and credit. This could, among other things, make it more difficult for us to obtain (or increase our cost of obtaining) capital and financing for our operations. Our access to additional capital may not be available on terms acceptable to us or at all.

Because our refinery is located in the Gulf Coast Region, we primarily market our refined products in a relatively limited geographic area. As a result, we are more susceptible to regional economic conditions compared to our more geographically diversified competitors, and any unforeseen events or circumstances that affect the Gulf Coast Region could also materially and adversely affect our revenues and cash flows. Primary factors include, among other things, changes in the economy, weather conditions, demographics and population, increased supply of refined products from competitors and reductions in the supply of crude oil or other feedstocks. In the event of a shift in the supply/demand balance in the Gulf Coast Region due to changes in the local economy, an increase in aggregate refining capacity or other reasons, resulting in supply exceeding the demand in the region, our refinery may have to deliver refined products to more customers outside of the Gulf Coast Region and thus incur considerably higher transportation costs, resulting in lower refining margins, if any.

C5.

Penalty assessments by regulatory agencies, such as BOEM, BSEE, OSHA, and TCEQ for failing to meet regulatory requirements could adversely affect our business, operating results, and financial condition.

We are subject to a variety of regulatory requirements, including through BOEM, BSEE, OSHA and TCEQ. From time to time, we have received penalties from these organizations or been required to have periodic inspections. For example, in July 2025, BSEE imposed over $2 million in penalties against BDPL. In some cases, the groups can exercise even more substantial rights against us for failure to comply with applicable regulations. Failure to satisfy our obligations or pay the penalties when do could have a material adverse effect on our business and results of operation.

Blue Dolphin Energy Company

December 31, 2025 | Page 19

Risk Factors (Continued)

C6.

Our estimates of future AROs related to our pipeline and facilities assets may increase.

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, 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.

C7.

We may incur significant costs and liabilities resulting from performance of pipeline integrity programs and related repairs.

PHMSA has established a series of rules requiring pipeline operators to develop and implement integrity management programs for hazardous liquid pipelines that, in the event of a pipeline leak or rupture, could affect high consequence areas ("HCAs"), which are areas where a release could have the most significant adverse consequences, including high-population areas, certain drinking water sources, and unusually sensitive ecological areas. Although our pipelines are inactive, PHMSA regulations require pipelines to be maintained and monitored to ensure safety standards are met until the subject pipeline is officially taken out of service and properly abandoned. The rules require pipeline operators to:

●

Perform ongoing assessments of pipeline integrity.

●

Identify and characterize applicable threats to pipeline segments that could impact an HCA.

●

Improve data collection, integration, and analysis.

●

Repair and remediate the pipeline as necessary.

●

Implement preventative and mitigating actions.

In addition, certain states have also adopted regulations similar to existing PHMSA regulations for intrastate gathering and transmission lines. These requirements could require us to install new or modified safety controls, pursue additional capital projects, or conduct maintenance programs on an accelerated basis, any or all of which tasks could result in us incurring increased operating costs that could be significant and have a material adverse effect on our financial position or results of operations. Additionally, we are subject to periodic inspections and audits regarding these requirements. Moreover, changes to pipeline safety laws by Congress and regulations by PHMSA that result in more stringent or costly safety standards could result in our incurring increased operating costs that could have a material adverse effect on our financial position or results of operations.

C8.

Regulatory changes, as well as proposed measures that are reasonably likely to be enacted, related to GHG emissions, climate change, and an ongoing desire to transition to greater renewable energy solutions could require us to incur significant costs or could result in a decrease in demand for our refined products, which could adversely affect our business.

Scientific studies conclusively show that, in the absence of human intervention, the rate of increase of carbon dioxide in the atmosphere will significantly increase in the next 100 years. This increase in carbon dioxide has enhanced the Earth’s natural greenhouse effect, resulting in global warming. Higher concentrations of GHGs (including carbon dioxide, methane, and nitrous oxides) in the atmosphere can produce changes in climate with significant physical effects, including increased frequency and severity of storms, floods, and other extreme weather events that could affect our operations. Increased concern over the effects of climate change have begun to affect our competition and customers’ energy strategies, consumer consumption patterns, and government and private sector alternative energy initiatives. In recent years, more aggressive efforts by governments and non-governmental organizations to put in place laws requiring or otherwise driving reductions in GHG emissions were gaining approval. Any such future laws and regulations could result in increased compliance costs or additional operating restrictions to us and our customers, and any increase in the prices of refined products resulting from such increased costs, GHG cap-and-trade programs or taxes on GHGs, could result in reduced demand for our refined petroleum products. Additionally, changing customer sentiment towards renewable and sustainable energy products may reduce demand for our products, and an excess of supply over demand could reduce fossil fuel prices. If we fail to stay in step with the pace and extent of the market shift, we could impact future earnings; if we move too fast, we risk investing in technologies, markets, and low-carbon products that will be unsuccessful. These factors could also have a material adverse effect on our business, financial condition, and results of operations.

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 the Trump Administration and the Republican-led Congress have taken steps to rescind previous administration’s positions and GHG commitments.

The Inflation Reduction Act of 2022 imposes a tax, or "methane fee," on energy producers that exceed a certain level of methane emissions. In January 2024, the EPA published a proposed rule to implement the methane fee. These and similar regulations could require us to incur costs to monitor, report, and reduce GHG emissions associated with our operations. However, future emission reduction targets and other provisions of legislative or regulatory initiatives and policies enacted in the future by the U.S. could be brought by future administrations or, in the absence of federal action, states may become more active and focused on taking legislative or regulatory actions aimed at climate change and minimizing GHG emissions.

Federal and state requirements to reduce GHG emissions could result in increased costs to operate and maintain the Nixon facility as well as implement and manage new emission controls and programs. Cap-and-trade places a cap on GHGs and refiners are required to acquire a sufficient number of credits to cover emissions from their refinery and in-state sales of gasoline and diesel. Similarly, low carbon fuel standards require an established percentage reduction in the carbon intensity of gasoline and diesel by a specified time period. Compliance with the low carbon fuel standard is achieved through blending lower carbon intensity biofuels into gasoline and diesel or by purchasing credits. Compliance with each of these programs is facilitated through a market-based credit system. If sufficient credits are unavailable for purchase or refiners are unable to pass through costs to their customers, they must pay a higher price for credits. The Nixon refinery does not produce gasoline or diesel. In the event we do incur increased costs as a result of increased efforts to control GHG emissions, we may not be able to pass on any of these costs to our customers. Regulatory requirements also could adversely affect demand for the refined petroleum products that we produce. Any increased costs or reduced demand could materially and adversely affect our business and results of operations.

Blue Dolphin Energy Company

December 31, 2025 | Page 20

Risk Factors (Continued)

D.	Security

D1.

A terrorist attack or armed conflict could harm our business.

Terrorist activities, anti-terrorist efforts, and other armed conflicts involving the U.S. or other countries may adversely affect national and global economies and could prevent us from meeting our financial and other obligations. For example, Russia’s February 2022 invasion of Ukraine and Hamas' October 2023 surprise attack on Israel and resulting sanctions and export controls by the U.S. and other countries could have wide-ranging impacts that have yet to be identified. Given the evolving geopolitical situation, there are many unknown factors and events that could materially impact our operations, which may be temporary or permanent in nature. These tensions also create heightened risk of a terrorist attack or armed conflict involving the U.S. If any of these events occur, the resulting political instability and societal disruption could reduce overall demand for oil and natural gas, potentially putting downward pressure on demand for our production and causing a reduction in our revenues. Oil and natural gas related facilities could be direct targets of terrorist attacks, and our operations could be adversely impacted if infrastructure integral to our operations or the operations of our customers’ is destroyed or damaged. Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all.

D2.

We face various risks associated with increased activism against oil and natural gas companies.

Opposition toward oil and natural gas companies has been growing globally and is particularly pronounced in the U.S. Companies in the oil and natural gas industry are often the target of activist efforts from both individuals and non-governmental organizations regarding safety, human rights, environmental matters, such as climate change, sustainability efforts, including environmental justice, and business practices. Anti-development activists are working to, among other things, reduce access to federal and state government lands, delay or cancel certain operations, stop or rescind operating permits, or curtail emissions. Any restrictions or limitations on our business or operations resulting from such opposition could have a material adverse effect on our financial condition and results of operations.

D3.

Our business could be negatively affected by cybersecurity threats.

A cyberattack or similar incident could occur and result in information theft, data corruption, loss of data privacy, operational disruption, damage to our reputation, or economic loss. Our industry has become increasingly dependent on digital technologies to conduct certain exploration, development, production, processing, and financial activities. Our technologies, systems, networks, or other proprietary information, and those of our vendors, suppliers, and other business partners, may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, or destruction of proprietary and other information, or could otherwise lead to the disruption of our business operations. Cyberattacks are becoming more sophisticated and certain cyber incidents, such as surveillance, may remain undetected for an extended period and could lead to disruptions in critical systems or the unauthorized release of confidential or otherwise protected information. These events could lead to economic loss from remedial actions, loss of business, disruption of operations, damage to our reputation, or potential liability. Also, computers control nearly all the oil and gas distribution systems in the U.S. and abroad, which are necessary for transporting our production to market. A cyberattack directed at oil and gas distribution systems could damage critical distribution and storage assets or the environment, delay or prevent delivery of production to markets, and make it difficult or impossible to accurately account for production and settle transactions. Cyber incidents have increased, and the U.S. government has issued warnings indicating that energy assets may be specific targets of cybersecurity threats. Our systems and insurance coverage for protecting against cybersecurity risks may not be sufficient. Further, as cyberattacks continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyberattacks.

E.	Common Stock

E1.

Our stock price has experienced fluctuations and may continue to do so, resulting in a substantial loss in your investment.

The market for our Common Stock has been characterized by volatile prices. As a result, investors in our Common Stock may experience a decrease in the value of their securities, including decreases unrelated to our operating performance or prospects. The market price of our Common Stock is likely to be highly unpredictable and subject to wide fluctuations in response to numerous factors, many of which are beyond our control. These factors include:

●

Quarterly variations in our operating results and achievement of key business metrics.

●

Changes in the global economy and the local economies in which we operate.

●

Our ability to obtain working capital financing.

●

Changes in the federal, state, and local laws and regulations to which we are subject.

●

Market reaction to any acquisitions, joint ventures or strategic investments announced by us or our competitors.

●

The departure of any of our key executive officers and directors.

●

Future sales of our securities.

E2.

Increasing attention to environmental, social, and governance matters may impact our business.

In recent years, increasing attention to environmental, social, and governance matters, including those related to climate change and sustainability, increasing societal, investor and legislative pressure on companies to address environmental, social, and governance matters, may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation or threats thereof, negative impacts on our stock price and access to capital markets, and damage to our reputation. Some investors have been divesting and promoting divestment of or screening out of fossil fuel equities and urging lenders to limit funding to companies engaged in the extraction of fossil fuel reserves. Further, voluntary carbon-related and target-setting frameworks have developed, and continue to develop, that limit the ability of certain sectors, including the oil and gas sector, from participating, and may result in exclusion of our equity from being included as an investment option in portfolios. In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to environmental, social, and governance matters, including climate change and climate-related risks (including entities commonly referred to as “raters and rankers”). Such ratings are used by some investors to inform their investment and voting decisions. Unfavorable environmental, social, and governance ratings and investment community divestment initiatives, among other actions, may lead to negative investor sentiment toward us and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital. Additionally, evolving expectations on various environmental, social, and governance matters, including biodiversity, waste, and water, may increase costs, require changes in how we operate and lead to negative shareholder sentiment.

Blue Dolphin Energy Company

December 31, 2025 | Page 21

Risk Factors (Continued)

Conversely, environmental, social, and governance has become a politically charged issue, and “anti-environmental, social, and governance” sentiment and increased scrutiny and skepticism of environmental, social, and governance policies and practices have resulted in, and could continue to result in, additional demands and strains on companies. Responding to such environmental, social, and governance focused activism has been, and will likely continue to be, costly and time-consuming. Such response efforts have resulted in, and could continue to result in, the implementation of certain practices and disclosures that may present a heightened level of legal and regulatory risk, or that threaten our credibility with other investors and stakeholders. The methodologies and standards for tracking and reporting on environmental, social, and governance matters are relatively new, have not been standardized, and continue to evolve. As a result, our environmental, social, and governance related metrics, targets, ambitions, and other disclosures, may not necessarily be calculated or presented in the same manner or be comparable to similarly titled measures presented by us in other contexts, or by other companies or third-party estimates or disclosures, and our interpretation of reporting standards may differ from those of others. While we believe that our environmental, social, and governance disclosures and methodologies reflect our business strategy and are reasonable at the time made or used, as our business or applicable methodologies, standards, or regulations develop and evolve, we may revise or cease reporting or using certain disclosures and methodologies if we determine that they are no longer advisable or appropriate, or are otherwise required to do so.

E3.

Our stock price may decline due to sales of shares.

Affiliates sales of substantial amounts of our Common Stock, or the perception that these sales may occur, may adversely affect the price of our Common Stock and impede our ability to raise capital through the issuance of equity securities in the future. Affiliates could elect in the future to request that we file a registration statement to them to sell shares of our Common Stock. If Affiliates were to sell a large number of shares into the public markets, Affiliates could cause the price of our Common Stock to decline.

E4.

We are authorized to issue up to a total of 20 million shares of our Common Stock and 2.5 million shares of preferred stock; issuance of additional shares would further dilute the equity ownership of current holders and potentially dilute the share price of our Common Stock.

We periodically issue Common Stock to non-employee directors for services rendered to the Board and to Jonathan Carroll pursuant to the Guaranty Fee Agreements. In the past, we have also issued Common Stock, Preferred Stock, convertible securities (such as convertible notes), and warrants in order to raise capital. We believe that it is necessary to maintain a sufficient number of available authorized shares of our Common Stock and Preferred Stock to provide us with the flexibility to issue Common Stock or Preferred Stock for business purposes that may arise as deemed advisable by our Board. These purposes could include, among other things: (i) future stock splits, which may increase the liquidity of our shares; (ii) the sale of stock to obtain additional capital or to acquire other companies or businesses, which could enhance our growth strategy or allow us to reduce debt if needed; and (iii) for other bona fide purposes. Our Board may authorize us to issue the available authorized shares of Common Stock or Preferred Stock without notice to, or further action by, our stockholders, unless stockholder approval is required by law or the rules of the OTCQX. The issuance of additional shares of Common Stock or new shares of Preferred Stock, convertible securities, or warrants may significantly dilute the equity ownership of the current holders of our Common Stock, affect the rights of our stockholders, or could reduce the market price of our Common Stock. In addition, the issuance or sale of enormous amounts of our Common Stock, or the potential for issuance or sale even if they do not actually occur, may have the effect of depressing the market price of our Common Stock.

E5.

Shares eligible for future sale pursuant to Rule 144 may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of Common Stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, stockholders who have been non-affiliates for the preceding three months may sell shares of our Common Stock freely after six months subject only to the current public information requirement. Affiliates may sell shares of our Common Stock after six months subject to the Rule 144 volume, manner of sale, current public information, and notice requirements. Any substantial sales of our Common Stock pursuant to Rule 144 may have a material adverse effect on the market price of our Common Stock.

E6.

We do not expect to pay cash dividends in the foreseeable future and therefore investors should not anticipate cash dividends on their investment.

Under certain of our secured loan agreements, we are restricted from declaring or paying any dividend on our Common Stock without the prior written consent of the lender. We have historically not declared any dividends on our Common Stock and there can be no assurance that cash dividends will ever be paid on our Common Stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

We depend on information technology and systems for various operations (including refinery processes and refined product loading) and for capturing accounting, technical, and regulatory data for reporting, analysis, and archiving. These systems mostly consist of purchased and licensed software programs that integrate with our internal solutions. We completed an initial inventory of our critical assets, information assets, and data repositories to identify potential areas of exposure to cybersecurity threats, and we are developing a periodic assessment program. Until such a plan is implemented, we rely on ad-hoc assessments and monitoring of our information technology infrastructure. There can be no assurance that our current, ad-hoc assessments will detect all potential vulnerabilities in a timely manner, which could expose us to material risk.

The Board oversees our risks, and risk management initiatives, including those related to cybersecurity risk are the responsibility of the entire Board. At the management level, our cybersecurity risk management activities are led by our chief executive officer. Management utilizes certain tools and controls to detect, monitor, prevent, mitigate, and remediate cybersecurity threats to our systems, networks, applications, and data management. Management also recently implemented a program to conduct periodic phishing tests, which provide contemporaneous feedback and instruction to personnel and seeks to strengthen our defenses against cyber threats.

We did not experience a significant cybersecurity breach or associated expenses, penalties, or settlements for the twelve months ended December 31, 2025 and 2024.

ITEM 2. PROPERTIES

An Affiliate operates and manages all our properties under the Fourth Amended and Restated Operating Agreement. Our owned facilities have been constructed or acquired over a period of years and vary in age and operating efficiency. We believe that all our properties and facilities are adequate for our operations and that our facilities are adequately maintained. At our corporate headquarters, BDSC leases 9,961 square feet of office space in Houston, Texas. The location and general description of our other properties are described within “Part I. Item 1. Business—Downstream Operations, —Midstream Operations, and — Inactive Operations”.

Blue Dolphin Energy Company

December 31, 2025 | Page 22

ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of business, we are involved in legal matters incidental to the routine operation of our business, such as mechanic’s liens and contract-related disputes. We may also become party to lawsuits, administrative proceedings, and governmental investigations, including environmental, regulatory, and other matters. Large, sometimes unspecified, damages or penalties may be sought from us in some matters, which may require years to resolve. Although we cannot provide assurance, we believe that an adverse resolution of the matters described below would not have a material impact on our liquidity, consolidated financial position, or consolidated results of operations.

Resolved Matters

RLI Corp. Surety Bonds. Blue Dolphin currently has surety bonds through RLI Corp. as required by BOEM, including an area-wide general lease surety bond to operate in the Gulf of America and multiple pipeline surety bonds, and the Railroad Commission of Texas for an operator performance bond. The bonds total approximately $1.2 million in the aggregate. In February 2024, RLI Corp. filed suit against Blue Dolphin, BDPL, and BDEX seeking an injunction to fully collateralize the bonds in cash, representing an increase of $1.0 million. In July 2024, RLI Corp. informed the court that the parties reached a settlement in principle, and the parties executed a settlement agreement in September 2024. From September 2024 to March 31, 2025, BDPL made payments to RLI Corp. under the settlement agreement totaling $1.0 million, bringing the total surety bond amount to $1.2 million in cash. Once BDPL’s offshore pipeline and platform assets have been decommissioned, BDPL can request that BOEM cancel the surety bonds. Once approved by BOEM, RLI Corp. would release the cash collateral tied to these surety bonds back to BDPL.

TCEQ Final Agreed Order. In October 2021, LRM received a proposed agreed order from the TCEQ for alleged solid and hazardous waste violations discovered during an investigation from January to March 2020. The proposed agreed order assessed an administrative penalty of $0.4 million and identified actions needed to correct the alleged violations. In September 2023, TCEQ presented its final penalty offer of $0.35 million, which LRM accepted. Although LRM believed the penalty matter was resolved in September 2023, TCEQ referred the matter to the State Office of Administrative Hearings ("SOAH"). A preliminary hearing, the purpose of which was to set a hearing schedule, was held on August 8, 2024; management participated in the hearing. Although a follow-up hearing was scheduled for January 2025, TCEQ presented, and LRM signed, a revised draft Agreed Order in November 2024. Under the terms of the revised draft Agreed Order, TCEQ acknowledged that LRM had ceased unauthorized disposal of industrial solid waste and industrial hazardous waste and LRM accepted a final penalty amount of approximately $0.4 million. The SOAH case was dismissed and the matter was remanded back to the TCEQ in December 2024; TCEQ finalized the Agreed Order in February 2025, and LRM is paying the penalty in monthly installments over a three-year period. LRM submitted a Site Investigation Report, as prepared by a third-party, to the TCEQ in June 2025 as required under the final Agreed Order.

Unresolved Matters

BOEM Supplemental Pipeline Bonds. To cover the obligations of such lessees and grant holders, BOEM evaluates an operator's or grant holder's financial ability to carry out present and future work obligations to determine whether the operator must provide additional security beyond minimum bonding requirements. Such obligations include the cost of decommissioning platforms and pipelines at the end of production or service activities. Once decommissioning work has been completed, the collateral backing the financial assurance is released by BOEM. In March 2018, BOEM ordered BDPL to provide an additional financial assurance totaling approximately $5.7 million for five existing pipeline rights-of-way, an increase of approximately $4.8 million. In June 2018, BOEM issued BDPL INCs for each right of way that failed to comply. BDPL appealed the INCs. On August 27, 2025, the IBLA issued an order dismissing the appeal. In its order, the IBLA clarified that BDPL's appeal was dismissed on the basis that: (i) one of the pipeline rights-of-way (ROW OCS-G 19655, HI A-173) was already decommissioned, and (ii) for the other four rights-of-way, BDPL should have challenged the March 2018 BOEM order, not the INCs issued due to BDPL's non-compliance with the March 2018 BOEM order (i.e., the doctrine of administrative finality). There can be no assurance that we will be able to meet additional supplemental pipeline bond requirements. If BDPL is required by BOEM to provide significant additional supplemental pipeline bonds or is assessed significant penalties under the INCs, we will experience a significant and material adverse effect on our operations, liquidity, and financial condition. We cannot predict the outcome of the supplemental pipeline bond INCs. Accordingly, we did not record a liability on our consolidated balance sheets as of December 31, 2025 and 2024. At both December 31, 2025 and 2024, BDPL maintained $0.9 million in cash-backed pipeline bonds issued to BOEM through RLI Corp.

BSEE Offshore Platform Inspections, Decommissioning Obligations, and Civil Penalties. Until decommissioning, BSEE requires lessees and grant holders to inspect and maintain platforms and other structures in accordance with regulatory requirements.

Platform Inspection Obligation. We are required by BSEE to perform annual structural inspections of our offshore platform, as well as to perform monthly platform checks of navigational aids, fog horns, and lifesaving equipment. On April 9, 2025, BSEE issued BDPL and INC for failing to conduct required pollution inspections at the prescribed or approved intervals during the months of September 2024 and March 2025. BDPL corrected the INC on April 22, 2025, which was reviewed and approved by BSEE on June 3, 2025. On January 7, 2026, BSEE issued BDPL an INC for failing to perform a Level 3 platform inspection for the platform at GA-288C. On January 26, 2026 BDPL requested an extension from BSEE. On February 2, 2026, BSEE granted BDPL's extension request to July 31, 2026.

Blue Dolphin Energy Company

December 31, 2025 | Page 23

Legal Proceedings (Continued)

Decommissioning Obligations.

BSEE mandated that BDPL's pipelines and facilities assets, including its platform, offshore in federal waters, be decommissioned due to their extended period of inactivity. On March 17, 2025, BSEE issued BDPL and INC for failing to decommission Pipeline Segment No. 8437.

Management is currently working with a consultant to fulfill BDPL's decommissioning obligations. In October 2025, the third-party consultant completed the review and analysis of its request for bid process to decommission BDPL's offshore assets. Final project bids were double what management expected. As a result, management increased Blue Dolphin's ARO liability by $3.0 million at September 30, 2025. BDPL's delay in decommissioning its offshore assets does not relieve BDPL of its obligations to comply with BSEE's mandate or of BSEE's authority to impose civil penalties. Further, there can be no assurance that BDPL will be able to complete the anticipated work or predict the outcome of BSEE INCs. If BDPL is unable to perform its decommissioning obligations, BOEM may exercise its rights under supplemental pipeline bonds or exercise any other rights and remedies it has available.

BSEE Civil Penalties. During the twelve months ended December 31, 2025 and 2024 BDPL received the following BSEE civil penalty referral letters:

●

Civil Penalty G-2024-054. In August 2024, BDPL received a civil penalty referral letter from BSEE for failing to timely remove its GA-288C junction platform offshore in federal waters. The civil penalty referral is associated with a G-114 (W) INC issued by BSEE in October 2023. In March 2025, BSEE calculated a proposed civil penalty of $1.0 million against BDPL, and the agency reserved its rights to assess additional civil penalties in the amount of $3,097 per day until the referenced INC is fully remediated. In July 2025, BSEE issued the Reviewing Officer’s Final Decision, in which the agency assessed a civil penalty of $1.3 million against BDPL. In September 2025, BDPL requested an informal resolution of the matter, and in January 2026, BDPL entered into settlement discussions with BSEE. As of the filing date of this report, resolution discussions between BSEE and BDPL were ongoing. As of December 31, 2025, we accrued $1.9 million in fines and penalties related to this matter. See "Part II, Item 8—Financial Statements and Supplementary Data -- Notes (11) and (15)" for additional disclosures related to our pipelines and facilities assets.

●

Civil Penalty G-2024-056. In August 2024, BDPL received a civil penalty referral letter from BSEE for failing to timely flush, fill, and abandon its lateral pipeline from GA-245 to the GA-273 subsea tie-in (Pipeline Segment No. 15635) offshore in federal waters. The civil penalty referral is associated with a G-802 (W) INC issued by BSEE in November 2023. In January 2025, BSEE calculated a proposed civil penalty of $0.4 million against BDPL, and the agency reserved its rights to assess additional civil penalties in the amount of $3,097 per day until the referenced INC is fully remediated. In July 2025, BSEE issued the Reviewing Officer’s Final Decision, in which the agency assessed a civil penalty of $0.9 million against BDPL. In September 2025, BDPL requested an informal resolution of the matter, and in January 2026, BDPL entered into settlement discussions with BSEE. As of the filing date of this report, resolution discussions between BSEE and BDPL were ongoing. As of December 31, 2025, we accrued $1.4 million in fines and penalties related to this matter. See "Part II, Item 8—Financial Statements and Supplementary Data -- Notes (11) and (15)" for additional disclosures related to our pipelines and facilities assets.

●

Civil Penalty G-2024-010. In April 2024, BDPL received a civil penalty referral letter from BSEE for failing to remediate certain BSEE INCs issued in September 2023 associated with its GA-288C junction platform offshore in federal waters. Specifically, remediation was associated with BSEE INC Nos. E120 (physically boarding platform monthly, performing visual inspections for environmental pollution, and maintaining monthly inspection records), G112 (timely removing 55-gallon drum leaking oil on platform deck), L141 (timely flushing and filling Pipeline Segment No. 13101 with inhibited seawater), and L142 (timely decommissioning in place Pipeline Segment No. 13101). In March 2025, BSEE calculated a proposed civil penalty of $1.1 million against BDPL. In April 2025, BDPL exercised its right to request a meeting with the penalty reviewing officer to submit additional information for consideration. BSEE held the meeting in June 2025, and in July 2025 the agency sent BDPL a Notice of Civil Penalty Case Dismissal indicating no penalty would be assessed for the associated INCs. See "Part II, Item 8—Financial Statements and Supplementary Data -- Notes (11) and (15)" for additional disclosures related to our pipelines and facilities assets.

Default under a Secured Loan Agreement. As of December 31, 2025 and the filing date of this report, certain of our bank debt to Huntington was in default related to a financial covenant violation, and bank debt to GNCU was in default related to non-financial covenant violations. See “Note (10)” to our consolidated financial statements for additional disclosures related to third-party debt, default on such debt, and the potential effects of such a default on our business, financial condition, and results of operations. If the lenders exercises their rights and remedies due to the defaults under our secured loan agreement, our business, financial condition, and results of operations will be materially adversely affected.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

Blue Dolphin Energy Company

December 31, 2025 | Page 24

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our Common Stock trades on the OTCQX U.S. tier of the OTC Markets under the ticker symbol “BDCO.” The quotations reflect inter-dealer prices, without adjustment for retail mark-ups, markdowns or commissions and may not represent actual transactions. We had 14,921,968 shares of Common Stock issued and outstanding at both December 31, 2025 and 2024, respectively. Affiliates controlled 84.4% of our Common Stock's voting power as of this report's filing date. See “Part I, Item 1A. Risk Factors—Common Stock (Section E)” for risks associated with investments in our Common Stock.

Stockholders

We had 272 record holders of record at both December 31, 2025 and 2024. This number does not include beneficial owners of our common stock whose stock is held in nominee or "street name" accounts through brokers.

Dividends

Stockholders are entitled to receive such dividends as may be declared by our Board out of funds legally available for such purpose. However, no dividend may be declared or paid unless after-tax profit was made in the preceding fiscal year, we comply with covenants in our secured loan agreements, we are current on all required debt payments, and we have received prior written concurrence from certain lenders. We have not declared any dividends on our Common Stock during the last two fiscal years.

ITEM 6. SELECTED FINANCIAL DATA

[Reserved]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is management’s perspective of our current financial condition and results of operations and should be read in conjunction with “Important Information Regarding Forward-Looking Statements,” “Part I, Item 1A. Risk Factors,” and “Part II, Item 8. Financial Statements and Supplementary Data” included in this report.

This discussion and analysis includes the twelve months ended December 31, 2025 and 2024 and a comparison between such periods. The discussions of the twelve months ended December 31, 2023 and year-to-year comparisons between the twelve months ended December 31, 2024 and 2023 that are not included in this report can be found in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the twelve months ended December 31, 2024, which was filed on April 1, 2025, and such discussions are incorporated by reference into this report.

Company Overview

Our Operations

Our assets are organized into two business segments:

●	refinery operations (also referred to herein as downstream operations), which is owned by LE; and
●	tolling and terminaling services (also referred to herein as midstream operations), which is owned by LRM and NPS

Corporate and other’ includes Blue Dolphin subsidiaries BDPL (inactive pipeline and facilities assets), BDPC (inactive leasehold interests in offshore oil and gas wells), and BDSC (administrative services). For more information related to our business segments, see “Part I., Item 1. Business, —Downstream Operations, —Midstream Operations, and — Inactive Operations” and “Part I. Item 2. Properties” in this report.

Business Operations Update

For the twelve months ended December 31, 2025, refining margins were more favorable compared to the twelve months ended December 31, 2024. More 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”). Our full operating results for 2025 and 2024, including operating results by segment, can be found within ‘Results of Operations.’

General Trends and Outlook

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 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 2025 and will likely impact our results of operations for 2026:

●	Light crude oil commodity pricing and demand.
●	Jet fuel commodity pricing and demand.

●	Naphtha commodity pricing and demand.

We can provide no guarantees that: 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 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.

Liquidity and Access to Capital Markets

We continue efforts to improve our balance sheet. During 2025 and 2024, we entered into payment agreements with the Kissick Noteholder and LEH related to our secured loan agreements, and we 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 forbear 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.

Blue Dolphin Energy Company

December 31, 2025 | Page 25

Management Discussion and Analysis (Continued)

Regulation Changes

Our operations and the operations of our customers have been, and will continue to be, affected by political developments and federal, state, tribal, local, and other laws and regulations that are increasing in number and becoming more stringent and complex. These laws and regulations include, among other things, permitting requirements, environmental protection measures such as limitations on methane and other GHG emissions, and renewable fuels standards. The number and scope of the regulations with which we and our customers must comply has a meaningful impact on our and their businesses, and new or revised regulations, reinterpretations of existing regulations, and permitting delays or denials could adversely affect the profitability of our assets.

2025 Business Strategy and Accomplishments

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

Optimize Existing Asset Base

● Maintain safe operations and enhance health, safety, and environmental systems.

● Plan and manage turnarounds and downtime.

Improve Operational Efficiencies

● Reduce or streamline variable costs incurred in production.

● Increase throughput capacity and optimize product slate.

● Increase tolling and terminaling revenue.

Seize Market Opportunities

● Leverage existing infrastructure to engage in renewable energy projects.

● Take advantage of market opportunities as they arise.

Optimize Existing Asset Base. During the twelve months ended December 31, 2025, the Nixon facility underwent one planned maintenance turnaround (12 days). Optimizing the Nixon refinery's processing units through maintenance turnarounds leverages our ability to meet customer demand and manage refining margins.

Improve Operational Efficiencies. During the twelve months ended December 31, 2025 we optimized the efficiency of the Nixon refinery's flare gas monitoring system. Improvements to the flare gas system will reduce greenhouse gas emissions, optimize combustion, and lower operational costs.

Seize Market Opportunities. In 2021, we announced plans to leverage our existing infrastructure to establish adjacent lines of business, capture growing market opportunities, and capitalize on renewable energy growth. Rising demand for renewable energy had been attributable to numerous factors, including growing public support, U.S. governmental actions to increase energy independence, and environmental concerns related to climate change. 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 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 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, could 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.

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, (iv) having favorable margins on refined products, and (v) collaborating with new partners to develop and finance clean energy projects. 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, negotiating with our creditors to restructure our applicable obligations, filing bankruptcy, or ceasing operating. 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.

Results of Operations

Below is a discussion and analysis of the factors contributing to our consolidated financial results of operations. This information should be read in conjunction with our financial statements in “Part II, Item 8. Financial Statements and Supplementary Data.” While management intends for the financial statements, together with the following information, to provide investors with a reasonable basis for assessing our historical operations, they should not serve as the only criteria for predicting future performance.

Major Influences on Results of Operations. Our results of operations and liquidity are highly dependent upon the margins that we receive for our refined products. The dollar per barrel commodity price difference between crude oil and condensate (input) and refined products (output) is the most significant driver of refining margins, and they have historically been subject to wide fluctuations. When the spread between these commodity prices decreases, our margins are negatively affected. To improve margins, we must maximize yields of higher-value finished petroleum products and minimize costs of feedstocks and operating expenses. Although an increase or decrease in the commodity price for crude oil and other feedstocks generally result 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 increases, the price of jet fuel per barrel will also generally increase, 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.

The general outlook for the oil and natural gas industry for the remainder of 2026 remains unclear given 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 can provide no assurances that refining margins will be positive and demand will increase.

How We Evaluate Our Operations. Management uses certain financial and operating measures to analyze segment performance. These measures are significant factors in assessing our operating results and profitability and include: Earnings before interest, income taxes, and depreciation and amortization ("EBITDA") on a consolidated and segment basis, refinery throughput, production and sales data, refinery downtime, tolling and terminaling revenue, and intercompany processing fees. We modified our segment presentation to incorporate applicable depreciation and amortization into our cost of goods sold subtotal. We believe this provides a more complete representation of our cost of goods sold. Prior periods have been modified to conform with this presentation.

Blue Dolphin Energy Company

December 31, 2025 | Page 26

Management Discussion and Analysis (Continued)

Consolidated Results. Our consolidated results of operations include certain other unallocated corporate activities and the elimination of intercompany transactions and therefore do not equal the sum of the operating results of our refinery operations and tolling and terminaling business segments.

2025 Versus 2024.

Overview. Net loss for 2025 was $5.6 million, or $0.38 per share, compared to a net loss of $8.6 million, or $0.58 per share, in 2024. The $3.0 million, or $0.20 per share, improvement between the periods was the result of more favorable refining margins partially 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).

Total Revenue from Operations. Total revenue from operations was $279.4 million for 2025 compared to total revenue from operations of $317.5 million for 2024, representing a decrease of 12.0%. The decrease in 2025 related to declines in both refinery operations and tolling and terminaling revenue. Refinery operations revenue in 2025 decreased primarily due to lower market pricing and lower sales volumes of nearly 11%; tolling and terminaling revenue in 2025 declined primarily due to lower tank rental fees.

Total Cost of Goods Sold. Total cost of goods sold was $270.7 million for 2025 compared to total cost of goods sold of $313.6 million for 2024, representing a decrease of 13.7%. The decrease in 2025 related to lower sales volume and market pricing associated with product sales mix.

Gross Profit. Gross profit totaled $8.7 million for 2025 compared to gross profit of $3.9 million for 2024. More favorable commodity prices partially offset by lower sales volume adversely impacted refinery operations gross profit in 2025 compared to 2024.

LEH Operating Fee, Related Party. For 2025 the LEH operating fee, related party totaled $1.0 million compared to $0.8 million for 2024, representing a 27.4% increase. The increase related to higher conversion costs, primarily from trucking expense.

Other Operating Expenses. Other operating expenses totaled $0.6 million for 2025 compared to $0.6 million for 2024. The less than $0.1 million decrease, was related to less pipeline decommissioning expense.

General and Administrative Expenses. General and administrative expenses totaled $5.3 million in 2025 compared to other operating and general and administrative expenses of $6.4 million in 2024. The $1.2 million, or 17.9%, decrease in 2025 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 2025 was $5.4 million compared to $5.9 million in 2024, The $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 2025 totaled $1.3 million compared to ($1.5) million in 2024, representing a increase of $2.8 million. The significant increase in 2025 was related to favorable refining margins, a $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.

	Twelve Months Ended
	December 31,
	2025			2024
	(in thousands)

Total revenue from operations	$	279,385		$	317,519

Total costs of good sold		270,705			313,629

Gross profit		8,680			3,890

LEH operating fee, related party		1,033			811
Other operating expenses		554			640
General and administrative expenses		5,291			6,443
Depreciation and amortization		296			232
Impairment of fixed assets		3,026			-
Bad debt expense		-			70
Interest, net		5,388			5,859
Total costs and expenses		15,588			14,055

Loss before income taxes		(6,908	)		(10,165	)

Income tax benefit		1,307			1,529

Net loss	$	(5,601	)	$	(8,636	)

Loss per common share
Basic	$	(0.38	)	$	(0.58	)
Diluted	$	(0.38	)	$	(0.58	)

	Twelve Months Ended
	December 31,
	2025			2024
	(in thousands)
Loss before income taxes	$	(6,908	)	$	(10,165	)

Add: depreciation and amortization		2,867			2,806
Add: interest, net		5,388			5,859
Consolidated EBITDA	$	1,347		$	(1,500	)

Downstream Operations. Our refinery operations business segment is owned by LE. Assets within this segment consist of a light sweet-crude, 15,000-bpd crude distillation tower, petroleum storage tanks, loading and unloading facilities, and approximately 56 acres of land. Refinery operations revenue is derived from refined product sales.

2025 Versus 2024

Total refined product sales by distillation (from light to heavy) for the periods indicated consisted of the following:

	Twelve Months Ended December 31,
	2025				2024
	(in thousands, except percent amounts)
LPG mix	$	48	0.0	%	$	318	0.1	%
Naphtha		60,474	21.9	%		77,845	24.8	%
Jet fuel		98,132	35.5	%		114,011	36.4	%
HOBM		43,667	15.8	%		39,045	12.5	%
AGO		73,922	26.8	%		82,360	26.2	%
	$	276,243	100.0	%	$	313,579	100.0	%

Blue Dolphin Energy Company

December 31, 2025 | Page 27

Management Discussion and Analysis (Continued)

Refinery Downtime. Refinery downtime decreased from 27 days in 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 turnaround (22 days), maintenance and repairs (2 days) and freezing weather conditions (3 days).

Refinery Operations Revenue. Refinery operations revenue was $276.2 million for 2025 compared to $313.6 million for 2024, representing a decrease of 11.9%. The decrease in 2025 related to lower market pricing and lower sales volumes.

Cost of Goods Sold. Cost of goods sold for refinery operations was $271.5 million for 2025 compared to $313.3 million for 2024, representing a decrease of 13.3%. The decrease in 2025 was related to lower sales volume and market pricing associated with product sales mix.

LEH Operating Fee, Related Party. For 2025 the LEH operating fee, related party totaled $1.0 million compared to $0.8 million for 2024, representing a 27.4% increase. The increase is related to higher conversion costs was related to less pipeline decommissioning expense.

Refining EBITDA. Refining EBITDA was $2.9 million in 2025 compared to ($0.4) million in 2024, representing a increase of 854.0%. The significant increase in 2025 was related to favorable refining margins, a $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.

Refining Operations EBITDA per Bbl. On a per barrel basis, refining EBITDA was $0.80 for 2025 compared to ($0.10) for 2024, representing an increase of $0.90 per barrel. The increase in 2025 related to more favorable refining margins.

	Twelve Months Ended
	December 31,
	2025			2024
	(in thousands)

Refinery operations revenue	$	276,243		$	313,579

Crude oil, fuel use, and chemicals		249,291			292,873
Other conversion costs		21,051			19,175
Depreciation and amortization		1,204			1,206
Cost of goods sold		271,546			313,254

LEH operating fee, related party		1,033			811
General and administrative expenses		1,965			1,105
Interest, net		2,953			3,313
Total costs and expenses		277,497			318,483

Loss before income taxes		(1,254	)		(4,904	)

Add: depreciation and amortization		1,204			1,206
Add: interest, net		2,953			3,313
Refining EBITDA	$	2,903		$	(385	)

Sales (Mbbls)		3,626			3,685

Refining operations EBITDA per bbl	$	0.80		$	(0.10	)

Midstream Operations. Our tolling and terminaling business segment is owned by LRM and NPS. Assets within this segment include petroleum storage tanks and loading and unloading facilities. Tolling and terminaling revenue is derived from storage tank rental fees, ancillary services fees (such as in-tank blending), and tolling and reservation fees for use of the naphtha stabilizer.

2025 Versus 2024

Tolling and Terminaling Total Revenue. Tolling and terminaling total revenue was $6.0 million in 2025 compared to $6.6 million in 2024, representing a decrease of 9.4%. The decrease in 2025 related to lower tank rental fees.

Tolling and Terminaling EBITDA. We had tolling and terminaling EBITDA of $5.1 million in 2025 compared to $4.7 million in 2024, representing a increase of $0.4 million. The 7.4% increase in 2025 compared to 2024 related to lower tolling and terminaling costs.

	Twelve Months Ended
	December 31,
	2025		2024
	(in thousands)

Tolling and terminaling revenue	$	5,957	$	6,576

Tolling and terminaling costs		607		1,643
Depreciation and amortization		1,367		1,368
Cost of goods sold		1,974		3,011

General and administrative expenses		298		231
Interest, net		1,774		1,961
Total costs and expenses		4,046		5,203

Income before income taxes		1,911		1,373

Add: depreciation and amortization		1,367		1,368
Add: interest, net		1,774		1,961
Tolling and terminaling EBITDA	$	5,052	$	4,702

Blue Dolphin Energy Company

December 31, 2025 | Page 28

Management Discussion and Analysis (Continued)

Non-U.S. GAAP Measures.

The following are non-U.S. GAAP measures we present for the years ended December 31, 2025 and 2024:

Consolidated EBITDA. Income (loss) before interest, taxes, and depreciation and amortization on a consolidated basis.

Refining EBITDA. Income (loss) before interest, taxes, and depreciation and amortization for our refinery operations business segment.

Refining operations EBITDA per bbl. Refining EBITDA divided by sales (Mbbls) for the reporting period.

Tolling and terminaling EBITDA. Income (loss) before interest, taxes, and depreciation and amortization for our tolling and terminaling business segment.

We present these measures because they provide management and investors with (i) important supplemental indicators of the operational performance of our business, (ii) additional criteria for evaluation of our performance relative to our peers, and (iii) supplemental information to investors about certain material non-cash and other items that may not continue at the same level in the future. EBITDA has limitations as an analytical tool and should not be considered in isolation or as substitutes for analysis of our results as reported under U.S. GAAP or as alternatives to net income (loss), operating income (loss), gross margin, or any other measure of financial performance presented in accordance with U.S. GAAP.

	Twelve Months Ended
	December 31,
	2025											2024
	Refinery Operations			Tolling & Terminaling		Corporate & Other			Total			Refinery Operations			Tolling & Terminaling		Corporate & Other			Total
	(in thousands)

Income (loss) before income taxes	$	(1,254	)	$	1,911	$	(7,565	)	$	(6,908	)	$	(4,904	)	$	1,373	$	(6,634	)	$	(10,165	)

Add: depreciation and amortization		1,204			1,367		296			2,867			1,206			1,368		232			2,806
Add: interest, net		2,953			1,774		661			5,388			3,313			1,961		585			5,859

EBITDA	$	2,903		$	5,052	$	(6,608	)	$	1,347		$	(385	)	$	4,702	$	(5,817	)	$	(1,500	)

Capital Resources and Liquidity

Working Capital.

As of December 31, 2025 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 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, representing a $5.3 million increase. Our significant debt in current liabilities at December 31, 2025 consisted of bank debt to Huntington and GNCU and related-party debt. Excluding accrued interest, we had current related-party and third-party debt of $44.4 million and $40.6 million as of December 31, 2025 and 2024, respectively. The $3.8 million increase in current debt between the periods primarily related to a $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, representing a $0.6 million decrease. Our current liabilities totaled $68.6 million at December 31, 2025 compared to $63.9 million at December 31, 2024, representing a $4.7 million increase, primarily related to borrowings in our Affiliate Revolving Credit agreement.

Liquidity. Cash and cash equivalents totaled $1.0 million and $0.1 million at December 31, 2025 and 2024, respectively, representing an increase of $0.9 million. A significant portion of our liquidity at December 31, 2025 was invested in inventory. Restricted cash, current totaled $1.0 million at both December 31, 2025 and 2024, respectively. Restricted cash, current related to a Huntington payment reserve account. Accounts receivable—related party, which was associated with the sale of jet fuel to LEH, totaled $8.1 million and $5.2 million at December 31, 2025 and 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 Fourth 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 2025 and 2024, 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.

Refining margins, which are affected by commodity prices and refined product demand, are volatile, and a reduction in refining margins will adversely affect the amount of cash we will have available for working capital. Similarly, capital, credit, and commodity markets, tariffs, as well as armed conflicts in the Middle East and Europe continue to evolve, and the extent to which these factors may impact our working capital, commodity prices, refined product demand, supply chain, financial condition, liquidity, results of operations, and prospects will depend on future developments, which cannot be predicted with any degree of confidence. 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.

Sources and Use of Cash.

Components of Cash Flows.

	Twelve Months Ended
	December 31,
	2025			2024
	(in thousands)
Cash Flows Provided By (Used In):
Operating activities	$	(766	)	$	(15,674	)
Investing activities		(13	)		(46	)
Financing activities		1,739			(1,917	)
Increase (decrease) in Cash and Cash Equivalents	$	960		$	(17,637	)

Blue Dolphin Energy Company

December 31, 2025 | Page 29

Management Discussion and Analysis (Continued)

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. The $14.9 million decrease in cash flow used from operations between the periods was primarily due to a reduction of inventory in 2025 and higher refining margins. Though reduced in 2025, inventory remained elevated due primarily to unfavorable product pricing, limited opportunities for customers who export to Mexico, and an intentional buildup by us during periods of low refining margins.

Capital Expenditures. Capital expenditures totaled $0.0 million for the twelve months ended December 31, 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 2026. However, to the extent we can capitalize on growth opportunities, we may finance capital expenditures through project-based government loans.

We account for capital expenditures in accordance with U.S. GAAP. We also classify capital expenditures as ‘maintenance’ if the expenditure maintains capacity or throughput or as ‘expansion’ if the expenditure increases capacity or throughput capabilities. Although classification is generally a straightforward process, in certain circumstances the determination is a matter of management judgment and discretion. We budget for maintenance capital expenditures throughout the year on a project-by-project basis. Management determines projects based on maintaining safe and efficient operations, meeting customer needs, complying with operating policies and applicable law, and producing economic benefits, such as increasing efficiency or lowering future expenses.

Financing Activities. During the twelve months ended December 31, 2025, Blue Dolphin made payments on debt principal totaling $4.3 million compared to payments on debt principal totaling $5.2 million for the twelve months ended December 31, 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. 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)" to our consolidated financial statements for additional disclosures related to related-party transactions.

Debt and Lease Obligations.

Debt Agreements.

Related-Party Agreements Summary. Blue Dolphin and certain of its subsidiaries are parties to the following debt agreements with related parties:

Original

Monthly

Principal

Payment

Loan Description

Parties

(in millions)

Maturity Date

(in millions)

Interest Rate

Loan Purpose

Second Amended and Restated Affiliate Revolving Credit Agreement

Blue Dolphin and Subsidiaries

$15.0 million maximum

Expiration of Initial Term or Renewal Term

Set-off against other obligations Borrower owes to Lender

WSJ Prime + 2.00%

Working capital

LEH and Subsidiaries

Amended and Restated BDPL-LEH Loan Agreement

LEH

$4.0 million

April 2027

0.05

12.00

Working capital

BDPL

Third-Party Agreements Summary. Blue Dolphin and certain of its subsidiaries are parties to the following debt agreements with third parties:

		Original			Monthly Principal
		Principal			and Interest Payment
Loan Description	Parties	(in millions)		Maturity	(in millions)		Interest Rate			Loan Purpose
Huntington Loans
LE Term Loan Due 2034 (in default)⁽¹⁾	LE	$	25.0	June 2034	$	0.3	WSJ Prime + 2.75%			Capital improvements
	Huntington
LRM Term Loan Due 2034 (in default)⁽¹⁾	LRM	$	10.0	December 2034	$	0.1	WSJ Prime + 2.75%			Capital improvements
	Huntington
GNCU Loan
NPS Term Loan Due 2031 (in default)⁽²⁾	NPS	$	10.0	October 2031	$	0.1		5.75	%	Working capital
	GNCU
SBA EIDLs
Blue Dolphin Term Loan Due 2051⁽³⁾	Blue Dolphin	$	2.0	June 2051	$	0.01		3.75	%	Working capital
	SBA
LE Term Loan Due 2050⁽⁴⁾	LE	$	0.15	August 2050	$	0.0007		3.75	%	Working capital
	SBA
NPS Term Loan Due 2050⁽⁴⁾	NPS	$	0.15	August 2050	$	0.0007		3.75	%	Working capital
	SBA
Equipment Loan Due 2031⁽⁵⁾	LE		0.138	March 2031		0.0028		12.7	%	Equipment Purchase
	Ritchie Bros. Financial Services

Blue Dolphin Energy Company

December 31, 2025 | Page 30

Management Discussion and Analysis (Continued)

⁽¹⁾

Our secured loan agreements with Huntington are subject to certain financial and non-financial covenants. As of December 31, 2025, LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034, respectively. With respect to non-financial covenants, we are required to have a balance of $1.0 million in a payment reserve account held by Huntington. At December 31, 2025 and 2024, restricted cash totaled $1.0 million.

⁽²⁾

Loan requires monthly interest-only payments for the first thirty-six (36) months. Afterwards, principal and interest payments are due monthly through loan maturity. First payment was due and paid in November 2024. As of December 31, 2025 and the filing date of this report, the NPS Term Loan Due 2031 was in technical default for failure to provide audited financial statements for NPS, a wholly-owned subsidiary.

⁽³⁾	Original principal amount was $0.5 million; the Blue Dolphin Term Loan Due 2051 was modified to increase the principal amount by $1.5 million. Payments deferred for thirty (30) months; first payment due and paid in November 2023; interest accrues during deferral period; loan not forgivable.

⁽⁴⁾	Payments deferred for thirty (30) months; first payment made in February 2023; interest accrued during deferral period; loan not forgivable.

⁽⁵⁾	In March 2025, LE entered into the Equipment Loan Due 2031 to purchase mobile offices; the mobile offices are used at the Nixon facility.

Guarantees and Security.

Loan Description	Guarantees	Security
Huntington Loans
LE Term Loan Due 2034	● USDA	●	First priority lien on Nixon facility’s business assets (excluding accounts receivable and inventory)
	● Jonathan Carroll⁽¹⁾	●	Assignment of all Nixon facility contracts, permits, and licenses
	● Affiliate cross-guarantees	●	Absolute assignment of Nixon facility rents and leases, including tank rental income
		●	$5.0 million life insurance policy on Jonathan Carroll
LRM Term Loan Due 2034	● USDA	●	Second priority lien on rights of LE in crude distillation tower and other collateral of LE
	● Jonathan Carroll⁽¹⁾	●	First priority lien on real property interests of LRM
	● Affiliate cross-guarantees	●	First priority lien on all LRM fixtures, furniture, machinery, and equipment
		●	First priority lien on all LRM contractual rights, general intangibles, and instruments, except with respect to LRM rights in its leases of certain specified tanks for which Huntington has second priority lien
		●	Substantially all assets
GNCU Loan
NPS Term Loan Due 2031 (in default)	● USDA	●	Deed of trust lien on approximately 56 acres of land and improvements owned by LE
	● Jonathan Carroll⁽¹⁾	●	Leasehold deed of trust lien on certain property leased by NPS from LE
	● Affiliate cross-guarantees	●	Assignment of leases and rents and certain personal property
Amended and Restated BDPL-LEH Loan Agreement	---		Certain BDPL property
SBA EIDLs
Blue Dolphin Term Loan Due 2051	---	●	Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
LE Term Loan Due 2050	---	●	Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
NPS Term Loan Due 2050	---	●	Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
Equipment Loan Due 2031	---	●	First priority security interest in the mobile offices.

⁽¹⁾

Jonathan Carroll was required to personally guarantee repayment of borrowed funds and accrued interest.

Lease Agreements.

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 received an improvement allowance of $1.50 per square foot; the improvement allowance expired 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 $0.06 million and $0.03 for twelve months ended December 31, 2025 and 2024.

Tank Lease. LE leases tanks from Ingleside under the Second Amended and Restated Master Services Agreement. Lease expense associated with the Second Amended and Restated Master Services Agreement totaled $1.2 million and $1.3 million for the twelve months ended December 31, 2025 and 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 Second Amended and Restated Master Services Agreement.

Blue Dolphin Energy Company

December 31, 2025 | Page 31

Management Discussion and Analysis (Continued)

Outstanding Original Principal, Debt Issue Costs, and Accrued Interest. Related-party and third-party long-term debt, including outstanding original principal and accrued interest, as of the dates indicated was as follows:

Outstanding Original Principal.

	December 31,
	2025			2024
	(in thousands)
Huntington Loans
LE Term Loan Due 2034 (in default)	$	17,532		$	18,753
LRM Term Loan Due 2034 (in default)		7,326			7,793
Kissick Debt		-			1,432
GNCU Loan
NPS Term Loan Due 2031 (in default)		8,495			9,671
LEH
Line of credit payable, related party		9,847			3,250
Amended and Restated BDPL-LEH Loan Agreement		3,463			4,000
SBA EIDLs
Blue Dolphin Term Loan Due 2051		2,000			2,000
LE Term Loan Due 2050		150			150
NPS Term Loan Due 2050		150			150
Equipment Loan Due 2025		-			14
Equipment Loan Due 2031		127			-
		49,090			47,213

Less: Line of credit, related party		(9,847	)		(3,250	)
Less: Current portion of long-term debt, net		(34,561	)		(37,379	)
Less: Unamortized debt issue costs		(1,540	)		(1,743	)
	$	3,142		$	4,841

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, 2025 and 2024 due to being in default.

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

	December 31,
	2025			2024
	(in thousands)
Huntington Loans
LE Term Loan Due 2034 (in default)	$	1,674		$	1,674
LRM Term Loan Due 2034 (in default)		768			768
GNCU Loan
NPS Term Loan Due 2031 (in default)		730			730

Less: Accumulated amortization		(1,632	)		(1,429	)
	$	1,540		$	1,743

Amortization expense was $0.2 million for both 2025 and 2024.

Accrued Interest. Related-party and third-party accrued interest payable associated with long-term debt in our consolidated balance sheets, as of the dates indicated consisted of the following:

	December 31,
	2025			2024
	(in thousands)

LEH
Amended and Restated BDPL-LEH Loan Agreement	$	17		$	1,308
Jonathan Carroll
Guaranty fee agreements		7		$	129
Huntington Loans
LE Term Loan Due 2034 (in default)		41			48
LRM Term Loan Due 2034 (in default)		52			61
GNCU Loan
NPS Term Loan Due 2031 (in default)		15			17
SBA EIDLs
Blue Dolphin Term Loan Due 2051		51			93
LE Term Loan Due 2050		5			8
NPS Term Loan Due 2053		5			8
	193			1,672
Less: Accrued interest payable, current portion		(193	)		(1,672	)
Long-term interest payable, net of current portion	$	-		$	-

Blue Dolphin Energy Company

December 31, 2025 | Page 32

Management Discussion and Analysis (Continued)

Defaults. As of December 31, 2025 and through the filing date of this report, LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034, respectively. NPS was in default related to non-financial covenants under the NPS Term Loan Due 2031. Defaults may permit lenders to declare the amounts owed under the related loan agreements 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) LE or NPS will be able to refinance or restructure the debt, or (iii) the third party will provide a future forbearance or default waiver. Any exercise by lenders of their rights and remedies under 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.

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

Total Debt and Lease Obligations by Settlement. The table below summarizes our principal contractual debt and lease obligations at December 31, 2025, by expected settlement period:

			Between		Between
	Less than		1 and 3		3 and 5		5 Years
	1 Year		Years		Years		and Later		Total
	(in thousands)
Long-term debt
Third-party	$	33,370	$	144	$	168	$	2,098	$	35,780
Related-party		12,578		732		-		-		13,310
Total long-term debt		45,948		876		168		2,098		49,090

Lease obligations		217		-		-		-		217

	$	46,165	$	876	$	168	$	2,098	$	49,307

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

Blue Dolphin Energy Company

December 31, 2025 | Page 33

Management Discussion and Analysis (Continued)

Concentration of Customers Risk

Customers. We routinely assess the financial strength of our customers. To date, we have not experienced significant write-downs in accounts receivable balances. We believe that our accounts receivable credit risk exposure is limited.

						Portion of
						Accounts
	Number of		% Total			Receivable at
	Significant		Revenue			December 31,
Twelve Months Ended	Customers		from Operations			(in millions)

December 31, 2025		2		62.5	%	$	7.8
December 31, 2024		3		69.6	%	$	5.2

One of our significant customers is LEH, an Affiliate. LEH purchases most of our jet fuel under the Amended and Restated Jet Fuel Sales Agreement and sells the jet fuel to the DLA under preferential pricing terms due to its HUBZone certification. The Affiliate lifts the jet fuel, which is stored at the Nixon Facility, as needed. LEH accounted for 36.1% and 30.8% of our total revenue from operations for the twelve months ended December 31, 2025 and 2024, respectively. The Affiliate represented $10.0 and $5.2 million in accounts receivable, related party at December 31, 2025 and 2024, respectively.

Bank Accounts. Financial instruments that potentially subject us to concentrations of risk consist primarily of cash, trade receivables and payables. We maintain cash balances at financial institutions in Houston, Texas. The FDIC insures certain financial products up to a maximum of $250,000 per depositor. At December 31, 2025 and 2024, our cash balances (including restricted cash) exceeded the FDIC insurance limit per depositor by $1.5 million and $0.7 million, respectively. Instability and volatility in the capital, credit, and commodity markets, as well as with financial institutions, could adversely affect our cash balances (including restricted cash) in excess of FDIC insurance limits per depositor. In the event that banks in which we maintain our cash balances (including restricted cash) fail, there can be no assurance that the federal government and the Federal Reserve would intervene.

Regulatory Activities.

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)."

TCEQ. See "Part I, Item 3. Legal Proceedings—Resolved Matters—TCEQ Final Agreed Order."

Off-Balance Sheet Arrangements. None.

Accounting Standards.

Critical Accounting Policies and Estimates

Critical Accounting Policies. Our critical accounting policies relate to revenue recognition; inventory; property and equipment; income taxes; asset retirement obligations. See "Part II, Item 8. Financial Statements and Supplementary Data - Note (2), which summarized our significant accounting policies.

The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expense, and the disclosures of contingent assets and liabilities. We consider our critical accounting estimates to be those estimates that require complex or subjective judgment in the application of the accounting policy and that could significantly impact our financial results based on changes in those judgments. Changes in facts and circumstances may result in revised estimates and actual results may differ materially from those estimates. Our management has identified the following critical accounting estimates. Our significant accounting policies are described in "Part II, Item 8. Financial Statements and Supplementary Data - Note (2).

Estimates. The nature of our business requires that we make estimates and assumptions in accordance with U.S. GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Although commodity price volatility, recession, inflation, tariffs, armed conflicts in the Middle East and Europe and associated sanctions on Russian crude products, and severe weather resulting from climate change may impact our estimates and assumptions, we are continually working to mitigate future risks. However, the extent to which these factors may impact our business, financial condition, liquidity, results of operations, and prospects will depend on future developments, which cannot be predicted with any degree of certainty.

Impairment of Long-Lived Assets. We evaluate long-lived assets, including property, plant, and equipment and finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability is assessed by comparing the carrying value of the asset group to the undiscounted future cash flows expected to result from its use and eventual disposition. If the carrying value exceeds these undiscounted cash flows, an impairment loss is recognized based on the excess of carrying value over fair value.

The determination of future cash flows and fair value requires significant management judgment, including estimates of future revenues, operating costs, capital expenditures, and appropriate discount rates. These estimates are based on internal forecasts, market conditions, and other factors. Changes in these assumptions, particularly with respect to projected cash flows or discount rates, could materially affect the amount and timing of impairment charges.

Asset Retirement Obligations (ARO). We recognize asset retirement obligations associated with the retirement of tangible long-lived assets in the period in which the legal obligation is incurred, if a reasonable estimate of fair value can be made. The ARO liability is initially measured at fair value and subsequently accreted over time to reflect the passage of time, while the associated asset retirement cost is capitalized as part of the carrying amount of the related asset and depreciated over its useful life. The estimation of ARO liabilities involves significant judgment, including the timing and method of settlement, cost estimates for dismantlement, removal, site restoration, and the selection of appropriate discount rates. These estimates are subject to change based on regulatory requirements, technological advances, and market conditions. Revisions to these assumptions could result in material adjustments to the recorded obligation and related asset.

Valuation Allowance for Deferred Tax Assets. We recognize deferred tax assets and liabilities based on temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, as well as net operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, we consider both positive and negative evidence, including historical operating results, forecasts of future taxable income, the reversal of existing temporary differences, and tax planning strategies. Significant judgment is required in evaluating the weight of this evidence, particularly in estimating future taxable income. Changes in our assumptions regarding future profitability or tax strategies could materially impact the valuation allowance and our effective tax rate.

Management believes that the estimates and assumptions used in preparing the consolidated financial statements are reasonable; however, actual results could differ from these estimates, and such differences could be material to the financial statements.

New Accounting Standards and Disclosures

New Pronouncements Adopted. During the twelve months ended December 31, 2025 we adopted the following ASU:

●

On January 1, 2025, as the result of a new accounting pronouncement, we adopted ASU 2023-09, "Improvements to Income Tax Disclosures," which aments Topic 740 primarily through enhanced income tax disclosures, improving transparency in the the factors affecting income tax. The adoption of the accounting pronouncement has related in incremental disclosures within the notes to our Consolidated Financial Statements.

Blue Dolphin Energy Company

December 31, 2025 | Page 34

Management Discussion and Analysis (Continued)

New Pronouncements Issued, Not Yet Effective. We expect to adopt the following ASUs in future periods:

●

ASU 2024-03 — Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"). In November 2024, the FASB issued ASU 2024-03, requiring additional disclosure of certain costs and expenses within the notes to the consolidated financial statements. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. We are evaluating the provisions of ASU 2024-03 and the incremental disclosures that will be required in our consolidated financial statements.

●

ASU 2025-11 — Interim Reporting (Topic 270): Narrow-Scope Improvements. In December 2025, the FASB issued ASU 2025-11 which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have had a material impact on the company. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2025-11.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Stockholders of Blue Dolphin Energy Company

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Blue Dolphin Energy Company and Subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Related Party Transactions

As described in Note 3 to the consolidated financial statements, Lazarus Energy Holdings (LEH) is a controlling stockholder of the Company. In addition, there is a director and executive officer and various related parties in common between the Company and LEH. Each of these entities and individuals have been identified as a related party as of and for the year ended December 31, 2025. The Company is party to several transactions with related parties, including but not limited to, agreements for management of the operating facility, sale of jet fuel to LEH, and various credit facilities provided to the Company by LEH.

We identified the evaluation of the Company’s identification of related parties and related party transactions as a critical audit matter. This required a high degree of auditor judgment and subjectivity in performing procedures to evaluate the reasonableness of management’s procedures performed to identify related parties and identify and account for related party transactions.

Our audit procedures included (i) inquiring of executive officers, key members of management, the Audit Committee of the Board of Directors, and others within the Company regarding the existence of related party relationships and transactions, (ii) gaining an understanding of the Company’s process for identifying, authorizing, accounting for and disclosing related parties and related party transactions, (iii) confirming related party balances, (iv) reading agreements and contracts with related parties and evaluating whether authorization and approvals were obtained and if the terms and other information about the transactions are consistent with management’s responses from inquiries and other audit evidence obtained about the business purpose of the transactions, (v) reading the Company’s minutes from meetings of the Board of Directors, and (vi) evaluating the completeness and accuracy of disclosures in the consolidated financial statements.

Going Concern

As described in Note 1 to the consolidated financial statements, the Company has significant debt in default and has a working capital deficiency. The ability of the Company to continue as a going concern is dependent on its ability to generate sufficient cash to fund operations and meet its obligations as they become due. The Company has concluded that its plans, as described in Note 1, alleviate the substantial doubt related to its ability to continue as a going concern.

We identified the Company’s ability to continue as a going concern as a critical audit matter. Assessing the Company’s assertion on its ability to continue as a going concern is complex and involves a high degree of subjectivity and judgment as it relates to the reasonableness of the assumptions used and judgments made in the determination.

Our audit procedures included (i) inquiring of executive officers, key members of management, the Audit Committee of the Board of Directors, and others within the Company regarding factors that would have an impact on the Company’s ability to continue as a going concern, (ii) evaluating management’s plan for addressing the adverse effects of the conditions identified, including assessing the reasonableness of forecasted information and underlying assumptions by comparing to actual results of prior periods and actual results achieved to date, and utilizing our knowledge of the entity, its business and management in considering liquidity needs and the Company’s ability to generate sufficient cash flow, (iii) assessing the availability of additional credit, and (iv) evaluating the completeness and accuracy of disclosures in the consolidated financial statements.

We have served as the Company’s auditor since 2002.

/s/ UHY LLP

UHY LLP

Sterling Heights, Michigan

March 31, 2026

PCAOB Number: 01195

Blue Dolphin Energy Company

December 31, 2025 | Page 35

Consolidated Balance Sheets

	December 31,
	2025			2024
	(in thousands, except share amounts)

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,010		$	81
Restricted cash, current		1,000			1,000
Accounts receivable		276			713
Accounts receivable, related party		8,068			5,247
Prepaid expenses and other current assets		2,735			1,874
Deposits		185			185
Inventory		30,892			35,662
Total current assets		44,166			44,762

LONG-TERM ASSETS
Total property and equipment, net		50,012			52,433
Operating lease right-of-use assets, net		191			456
Surety bonds		350			1,255
Deferred tax assets, net		4,353			2,990
Total long-term assets		54,906			57,134

TOTAL ASSETS	$	99,072		$	101,896

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Long-term debt less unamortized debt issue costs, current portion (in default)	$	31,830		$	35,920
Line of credit, related party		9,847			3,250
Long-term debt, related party, current portion		2,731			1,459
Interest payable		169			235
Interest payable, related party		24			1,437
Accounts payable		12,263			11,630
Current portion of lease liabilities		217			264
Income taxes payable		56			18
Asset retirement obligations, current portion		6,025			2,999
Accrued expenses and other current liabilities		5,406			6,689
Total current liabilities		68,568			63,901

LONG-TERM LIABILITIES
Long-term lease liabilities, net of current		-			191
Long-term debt, net of current portion		2,410			2,300
Long-term debt, related party, net of current portion		732			2,541
Total long-term liabilities		3,142			5,032

TOTAL LIABILITIES		71,710			68,933

Commitments and contingencies (Note 15)

STOCKHOLDERS' EQUITY
Common stock ($0.01 par value, 20,000,000 shares authorized; 14,921,968 shares issued and outstanding at December 31, 2025 and 2024, respectively)(1)		149			149
Additional paid-in capital		39,758			39,758
Retained deficit		(12,545	)		(6,944	)
TOTAL STOCKHOLDERS' EQUITY		27,362			32,963

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	99,072		$	101,896

⁽¹⁾	Blue Dolphin has 2,500,000 shares of preferred stock, par value $0.10 per share, authorized. At both December 31, 2025 and 2024, there were no shares of preferred stock issued and outstanding.

The accompanying notes are an integral part of these consolidated financial statements.

Blue Dolphin Energy Company

December 31, 2025 | Page 36

Consolidated Statements of Operations

	Twelve Months Ended December 31,
	2025			2024
	(in thousands, except share and per-share amounts)
REVENUE FROM OPERATIONS
Refinery operations	$	276,243		$	313,579
Tolling and terminaling		3,142			3,940
Total revenue from operations		279,385			317,519

COSTS AND EXPENSES
Crude oil, fuel use, and chemicals		249,291			292,255
Other conversion costs		18,236			17,010
Tolling and terminaling costs		607			1,790
Depreciation and amortization		2,571			2,574
Total cost of goods sold		270,705			313,629
Other operating costs
LEH operating fee, related party		1,033			811
Other operating expenses		554			640
General and administrative expenses		5,291			6,443
Depreciation and amortization		296			232
Impairment of fixed assets		3,026			-
Bad debt expense		-			70
Total cost of operations		280,905			321,825

Loss from operations		(1,520	)		(4,306	)

OTHER INCOME (EXPENSE)

Interest and other income		3			205
Interest and other expense		(5,391	)		(6,064	)
Total other expense		(5,388	)		(5,859	)

Loss before income taxes		(6,908	)		(10,165	)

Income tax benefit		1,307			1,529

Net loss	$	(5,601	)	$	(8,636	)

Loss per common share:
Basic	$	(0.38	)	$	(0.58	)
Diluted	$	(0.38	)	$	(0.58	)

Weighted average number of common shares outstanding:
Basic		14,921,968			14,921,968
Diluted		14,921,968			14,921,968

The accompanying notes are an integral part of these consolidated financial statements.

Blue Dolphin Energy Company

December 31, 2025 | Page 37

Consolidated Statements of Stockholders’ Equity

	Common Stock
	Shares Issued and				Additional Paid-In		Retained Earnings			Total Stockholders'
	Outstanding		Par Value		Capital		(Deficit)			Equity
	(in thousands except share amounts)


Balance at December 31, 2023		14,921,968	$	149	$	39,758	$	1,692		$	41,599

Net loss		-		-		-		(8,636	)		(8,636	)

Balance at December 31, 2024		14,921,968	$	149	$	39,758	$	(6,944	)	$	32,963

Net loss		-		-		-		(5,601	)		(5,601	)

Balance at December 31, 2025		14,921,968	$	149	$	39,758	$	(12,545	)	$	27,362

The accompanying notes are an integral part of these consolidated financial statements.

Blue Dolphin Energy Company

December 31, 2025 | Page 38

Consolidated Statements of Cash Flows

	Twelve Months Ended December 31,
	2025			2024
	(in thousands)
OPERATING ACTIVITIES
Net loss	$	(5,601	)	$	(8,636	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,867			2,806
Deferred income tax		(1,365	)		(1,554	)
Amortization of debt issue costs		204			203
Bad debt		-			70
Impairment of ARO assets		3,026			-
Changes in operating assets and liabilities
Accounts receivable		437			(667	)
Accounts receivable, related party		(2,821	)		(1,063	)
Prepaid expenses and other current assets		44			(358	)
Inventory		4,770			(11,086	)
Long-term bond assets		-			(1,025	)
Asset retirement obligations		-			(1,505	)
Accounts payable, accrued expenses and other liabilities		(2,327	)		8,030
Accounts payable, related party		-			(889	)
Net cash used in operating activities		(766	)		(15,674	)

INVESTING ACTIVITIES
Capital expenditures		(13	)		(46	)
Net cash used in investing activities		(13	)		(46	)

FINANCING ACTIVITIES
Proceeds from related-party debt		8,675			3,250
Payments on related-party debt		(2,615	)		-
Payments on third party debt principal		(4,321	)		(5,167	)
Net cash provided by (used in) financing activities		1,739			(1,917	)
Net change in cash, cash equivalents, and restricted cash		960			(17,637	)

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD		1,081			18,718
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	2,041		$	1,081

Supplemental Information:
Non-cash investing and financing activities:
Financing of capital expenditures via long-term note	$	139		$	-
Right of use assets financed via operating leases	$	-		$	497
Interest paid	$	6,107		$	6,911

The accompanying notes are an integral part of these consolidated financial statements.

Blue Dolphin Energy Company

December 31, 2025 | Page 39

Notes to Consolidated Financial Statements

(1)

Organization

Company Overview. Blue Dolphin was formed in 1986 as a Delaware corporation. The company is an independent downstream energy company operating in the Gulf Coast region of the U.S. Operations primarily consist of a light sweet-crude, 15,000-bpd crude distillation tower, and approximately 1.25 million bbls of petroleum storage tank capacity in Nixon, Texas. Blue Dolphin trades on the OTCQX under the ticker symbol “BDCO.”

Assets are organized into two business segments: ‘refinery operations’ (owned by LE) and ‘tolling and terminaling services’ (owned by LRM and NPS). ‘Corporate and other’ includes Blue Dolphin subsidiaries BDPL (inactive pipeline and facilities assets), BDPC (inactive leasehold interests in offshore oil and gas wells), and BDSC (administrative services). See “Note (4)” to our consolidated financial statements for more information about our business segments.

Unless the context otherwise requires, references in this report to “we,” “us,” “our,” or “ours” refer to Blue Dolphin, one or more of its consolidated subsidiaries, or all of them taken as a whole.

Jonathan Carroll, our Chief Executive Officer, and an Affiliate together controlled 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 “Notes (3), (15), and (16)” to our consolidated financial statements for additional disclosures related to Affiliate agreements, arrangements, and risks associated with working capital deficits.

Working Capital. As of December 31, 2025 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 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, representing a $5.3 million increase. Our significant debt in current liabilities at December 31, 2025 consisted of bank debt to Huntington and GNCU and related-party debt. Excluding accrued interest, we had current related-party and third-party debt of $44.4 million and $40.6 million as of December 31, 2025 and 2024, respectively. The $3.8 million increase in current debt between the periods primarily related to a $8.7 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, representing a $0.6 million decrease. Our current liabilities totaled $68.6 million at December 31, 2025 compared to $63.9 million at December 31, 2024, representing a $4.7 million increase.

(2)

Principles of Consolidation and Significant Accounting Policies

Basis of Presentation. The accompanying consolidated financial statements, which include Blue Dolphin and its subsidiaries, have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC. These rules and regulations conform to the accounting principles contained in FASB’s ASC, the sole source of U.S. GAAP. All significant intercompany items have been eliminated in consolidation. Additionally, any material subsequent events that occurred after the date through which this report covers have been properly recognized or disclosed in our financial statements. In management’s opinion, all adjustments necessary for a fair presentation have been included, disclosures are adequate, and the presented information is not misleading.

Reclassifications. When necessary, we reclassified prior period financial information to conform to the current year's presentation.

Significant Accounting Policies. We present a summary of significant Blue Dolphin accounting policies to assist investors and other stakeholders in understanding our consolidated financial statements. Our consolidated financial statements and accompanying notes are representations of management, who are responsible for their integrity and objectivity. These accounting policies conform to U.S. GAAP and management consistently applied these accounting policies in the preparation of our consolidated financial statements.

Use of Estimates. The nature of our business requires that we make estimates and assumptions in accordance with U.S.GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. We assessed certain accounting matters that require consideration of forecasted financial information in context with information reasonably available to us as of December 31, 2025 and through the filing date of this report. We base our estimates and judgments on historical experience, various assumptions, and information we believe to be reasonable under the circumstances. Estimates and assumptions about future events and their effects cannot be perceived with certainty and, accordingly, we may adjust estimates as the operating environment changes, new events occur, or we gain greater insights or experience. While we believe the estimates and assumptions used to prepare these consolidated financial statements are appropriate, actual results could differ from our estimates.

Cash, Cash Equivalents, and Restricted Cash. Cash and cash equivalents represent liquid investments with an original maturity of three months or less. Cash balances are maintained in depository and overnight investment accounts with financial institutions that, at times, may exceed insured deposit limits. Although management historically deemed this a normal business risk, management continues to evaluate options to limit risk given current capital, credit, and commodity markets and financial institution health. Restricted cash, current and restricted cash, noncurrent at December 31, 2025 and 2024, if any, reflected amounts held in a payment reserve account by Huntington as security for payments under the LE Term Loan Due 2034. In the event that banks in which we maintain our cash balances (including restricted cash) fail, there can be no assurance that the federal government and the Federal Reserve would intervene. See "Notes (3) and (10)" to our consolidated financial statements for additional disclosures associated with covenants related to our secured loan agreements with related parties and third parties.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash as reported in the consolidated statements of cash flows:

	December 31,
	2025		2024
	(in thousands)
Cash and cash equivalents	$	1,010	$	81
Restricted cash, current		1,000		1,000
	$	2,010	$	1,081

Accounts Receivable and Allowance for Credit Losses. Accounts receivable are presented net of any necessary allowance(s) for credit losses. Receivables are recorded at the invoiced amount and generally do not bear interest. When necessary, an allowance for credit losses is established based on prior experience and other factors which, in management’s judgment, deserve consideration in estimating bad debts. Management assesses the collectability of the customer’s account based on current aging status, collection history, and financial condition. Based on a review of these factors, management establishes or adjusts the allowance for specific customers and the entire accounts receivable portfolio. We had an allowance for credit losses of $0 for both December 31, 2025 and 2024.

Blue Dolphin Energy Company

December 31, 2025 | Page 40

Notes to Consolidated Financial Statements (Continued)

Financial Instruments and Fair Value Measurements. Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and long-term debt. As of December 31, 2025 and 2024, the carrying amounts of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate their fair values because they are highly liquid or due to the short-term nature of these instruments. The carrying value of long-term debt approximates fair value as it carries interest rates that fluctuate with the prime rate.

We established a three-tier hierarchy that classifies fair value amounts recognized in the financial statements based on the observability of inputs used to estimate these fair values. The hierarchy considers fair value amounts based on observable inputs (Levels 1 and 2) to be more reliable and predictable than those based primarily on unobservable inputs (Level 3). At each balance sheet reporting date, we categorize our financial assets and liabilities using this hierarchy. The fair value of our longer term debt was $49.6 million and $45.4million, at December 31, 2025 and 2024, respectively.

Inventory. Inventory primarily consists of refined products, crude oil and condensate, and chemicals. We value inventory at the lower of cost or net realizable value with cost determined by the average cost method, and net realizable value determined based on estimated selling prices less associated delivery costs. If the net realizable value of our refined products inventory declines to an amount less than our average cost, we record a write-down of inventory and an associated adjustment to cost of goods sold. See “Note (7)” to our consolidated financial statements for additional disclosures related to inventory.

Property and Equipment.

Refinery and Facilities. We typically make ongoing improvements to the Nixon facility based on operational needs, technological advances, and safety and regulatory requirements. We capitalize additions to refinery and facilities assets, and we expense costs for repairs and maintenance as incurred. We record refinery and facilities at cost less any adjustments for depreciation or impairment. We adjust the asset and the related accumulated depreciation accounts for the refinery and facilities asset’s retirement and disposal, with the resulting gain or loss included in the consolidated statements of operations. For financial reporting purposes, we compute refinery and facilities assets depreciation using the straight-line method with an estimated useful life of 25 years; we depreciate refinery and facilities assets when placed in service. We did not record any impairment of our refinery and facilities assets for the periods presented.

Pipelines and Facilities. We record our pipelines and facilities at cost less any adjustments for depreciation or impairment. We computed depreciation using the straight-line method over estimated useful lives ranging from 10 to 22 years. Per FASB ASC guidance, we performed impairment testing of our pipeline and facilities assets in 2016. Upon completion of testing, we fully impaired our pipeline assets at December 31, 2016. See "Notes (11), (15), and (16)” for additional disclosures related to the decommissioning of our pipelines and facilities assets, related risks, and AROs.

Oil and Gas Properties. Our oil and gas properties are accounted for using the full-cost method of accounting, whereby all costs associated with the acquisition, exploration, and development of oil and gas properties, including directly related internal costs, are capitalized on a cost-center basis. Amortization of such costs and estimated future development costs are determined using the unit-of-production method. All leases associated with our oil and gas properties have expired, and our oil and gas properties have been fully impaired since 2011.

Construction in Progress (CIP). CIP expenditures, including capitalized interest, relate to the Nixon facility's construction and refurbishment activities and equipment. These expenditures are capitalized as incurred. Depreciation begins once the asset is placed in service. See "Note (8)” for additional disclosures related to refinery and facilities assets, oil and gas properties, pipelines and facilities assets, and CIP.

Leases. We determine whether a contract or agreement is or contains a lease at inception. If the contract is or includes a lease with a term greater than one year, we recognize an ROU asset and lease liability as of the commencement date based on the present value of the lease payments over the lease term. We determine the present value of the lease payments by using the implicit rate when readily determinable. If the implicit rate is not defined, we use the incremental borrowing rate to discount lease payments to present value. We adjust lease terms to include options to extend or terminate the lease when it is reasonably certain we will exercise those options.

For operating leases, we record lease costs on a straight-line basis over the lease term; we record lease expenses in the appropriate line on the income statement based on the leased asset’s intended use. For finance leases (previously referred to under U.S. GAAP as capital leases), we amortize lease payments for the ROU asset on a straight-line basis over the lesser of the leased asset’s useful life or the lease term; we record amortization expenses on the income statement in ‘depreciation and amortization expense;’ we record interest expense on the income statement in ‘interest and other expense.’

Revenue Recognition.

Refinery Operations Revenue. We recognize revenue from refined products sales when we meet our performance obligation to the customer. We meet our performance obligation when the customer receives control of the product. The customer accepts control of the product when the product is lifted. Under bill and hold arrangements, the customer takes control of the product when added to the customer’s bulk inventory as stored at the Nixon facility. We allocate a transaction price to each separately identifiable refined product load.

We consider a variety of facts and circumstances in assessing the point of a control transfer, including but not limited to: whether the purchaser can direct the use of the refined product, the transfer of significant risks and rewards, our rights to payment, and transfer of legal title. In each case, the term between the sale and when payment is due is not significant. We include incurred transportation, shipping, and handling costs in the cost of goods sold. We do not include excise and other taxes collected from customers and remitted to governmental authorities in revenue.

Tolling and Terminaling Revenue. Tolling and terminaling revenue represents fees under (i) terminal services agreements whereby a customer agrees to pay a certain fee per storage tank based on tank size over time for the storage of products and (ii) tolling agreements, whereby a customer agrees to pay a certain fee per gallon or barrel for throughput volumes moving through the naphtha stabilizer unit and a fixed monthly reservation fee for the use of the naphtha stabilizer unit.

We typically satisfy performance obligations for tolling and terminaling operations over time. We determine the transaction price at agreement inception based on the guaranteed minimum amount of revenue over the agreement term. We allocate the transaction price to the single performance obligation that exists under the agreement. We recognize revenue in the amount for which we have a right to invoice. Generally, payment terms do not exceed 30 days.

Revenue from storage tank customers may, from time to time, include fees for ancillary services, such as in-tank and tank-to-tank blending. These are optional customer services. The fixed cost under the customer’s storage tank agreement does not include ancillary services fees. We consider ancillary services as a separate performance obligation under the storage tank agreement. We satisfy the performance obligation and recognize the associated fee when we complete the requested service.

Deferred Revenue. Deferred revenue represents a liability related to a revenue-producing activity as of the balance sheet date. We record unearned revenue, which usually consists of customer prepayments, when we receive the cash payment. Once we satisfy the performance obligation, we recognize revenue in conformity with U.S. GAAP.

Income Taxes. Income tax expense includes federal and state taxes currently payable and deferred taxes arising from temporary differences between income for financial reporting and income tax purposes. Income taxes are calculated utilizing the applicable rates on items included in income determination for income tax purposes. Our effective tax rate may be different than expected if the federal and state statutory rates were applied to income from continuing operations due to certain items that are deductible or included in income for tax purposes that are not deductible or included for financial statement purpose.

The benefit of an uncertain tax position is recognized in the financial statements if it meets a minimum recognition threshold. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more-likely-than-not criteria, the benefit recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. At December 31, 2025 and 2024, there were no uncertain tax positions for which a reserve or liability was necessary.

Impairment or Disposal of Long-Lived Assets. We periodically evaluate our long-lived assets for impairment. Additionally, we reassess our long-lived assets when events or circumstances indicate that the carrying value of these assets may not be recoverable. The carrying value is not recoverable if it exceeds the sum of the undiscounted cash flows expected from the use and eventual disposition of the asset or group of assets. If the carrying value exceeds the sum of the undiscounted cash flows, an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset or group of assets is recognized. Management uses significant judgment in forecasting future operating results and projected cash flows. If conditions or assumptions change, material impairment charges could be necessary.

Commodity price market volatility associated with 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) may adversely impact the carrying value of certain of our long-lived assets. Management evaluated refinery and facilities assets for impairment as of December 31, 2025. We did not record any impairment of our long-lived assets for the periods presented.

Asset Retirement Obligations. We record a liability for the discounted fair value of an ARO in the period incurred. We also capitalize the corresponding cost by increasing the carrying amount of the related long-lived asset. The liability is accreted towards its future value each period, and we depreciate the capitalized cost over the useful life of the related asset. We recognize a gain or loss if we settle the liability for an amount other than the amount recorded.

Refinery and Facilities. We have no legal or contractual obligation to dismantle or remove the refinery and facilities assets. Further, we believe these assets have indeterminate lives because we cannot reasonably estimate the dates or ranges upon which we would retire these assets. Management will record an asset retirement obligation for these assets when a definitive obligation arises, and retirement dates are evident.

Pipeline and Facilities. Management uses significant judgment to estimate future asset retirement costs for our pipelines, related facilities, and oil and gas properties. These costs relate to dismantling and disposing of certain physical assets and restoring land and sea beds. Factors considered include regulatory requirements, structural integrity, water depth, reservoir depth, equipment availability, and mobilization efforts. We review our assumptions and estimates of future abandonment costs annually. See "Notes (11), (15), and (16)” for additional information related to AROs.

Contract Balances. The timing of revenue recognition, billings, and cash collections results in billed accounts receivable and customer pre-payments and deposits (contract liabilities) on our consolidated balance sheet. We bill amounts as customers lift products or upon signing of bulk sales contracts. We sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities. These deposits liquidate when we recognize the revenue.

Computation of Earnings Per Share. We present basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. We calculate diluted EPS by dividing net income available to common stockholders by the diluted weighted average number of common shares outstanding. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue shares of common stock were converted to common stock that then shared in the entity’s earnings. We do not currently have issued options, warrants, or similar instruments. Convertible shares, if granted, are not included in the computation of earnings per share if anti-dilutive. See "Note (14)” for additional information related to EPS.

New Accounting Standards and Disclosures

New Pronouncements Adopted. During the twelve months ended December 31, 2025 we adopted the following ASU:

On January 1, 2025, as the result of a new accounting pronouncement, we adopted ASU 2023-09, "Improvements to Income Tax Disclosures," which aments Topic 740 primarily through enhanced income tax disclosures, improving transparency in the the factors affecting income tax. The adoption of the accounting pronouncement has related in incremental disclosures within the notes to our Consolidated Financial Statements.

New Pronouncements Issued, Not Yet Effective. We expect to adopt the following ASUs in future periods:

●

ASU 2024-03 — Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"). In November 2024, the FASB issued ASU 2024-03, requiring additional disclosure of certain costs and expenses within the notes to the consolidated financial statements. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. We are evaluating the provisions of ASU 2024-03 and the incremental disclosures that will be required in our consolidated financial statements.

●

ASU 2025-11 — Interim Reporting (Topic 270): Narrow-Scope Improvements. In December 2025, the FASB issued ASU 2025-11 which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have had a material impact on the company. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2025-11.

Blue Dolphin Energy Company

December 31, 2025 | Page 41

Notes to Consolidated Financial Statements (Continued)

(3)

Related-Party Transactions

Affiliate Agreements.

Financial and Operating Agreements. During 2025 and 2024, Blue Dolphin and certain subsidiaries were parties to the following financial and operating agreements with Affiliates:

Agreement/Transaction	Parties	Effective Date	Key Terms
Fourth Amended and Restated Operating Agreement⁽¹⁾	Blue Dolphin and subsidiaries LEH	04/01/2025	For LEH operation and management of all Blue Dolphin’s assets; 1-year term; expires 04/01/2026 or notice by either party at any time of material breach or 90 days Board notice; LEH receives management fee of 5% of all consolidated operating costs of Blue Dolphin and its subsidiaries, excluding crude costs, depreciation, amortization, and interest; LEH-provided services include personnel serving in a variety of capacities across all Blue Dolphin entities, including, but not limited to corporate executives such as the principal executive officer and principal financial and accounting officer; as a result, Blue Dolphin and its subsidiaries have no employees for reporting purposes; all personnel are employed and paid by LEH.
Amended and Restated Jet Fuel Sales Agreement	LE LEH	04/01/2023	Jet fuel sales by LE to LEH; 1-year automatic renewals; LEH lifts the jet fuel from LE as needed and sells it to the DLA under preferential pricing terms due to LEH's HUBZone certification.
NPS Terminal Services Agreement	NPS LEH	11/01/2022	LEH pays NPS a tank rental fee of $0.2 million per month to store jet fuel at the Nixon facility; 1-year term; either party may cancel upon 60 days’ prior written notice.
Second Amended and Restated Master Services Agreement	LE Ingleside	03/01/2023	For storage of LE products intended for customer receipt by barge; LE pays Ingleside a tank rental fee of $0.1 million per month; the agreement term is month-to-month.
LE Amended and Restated Guaranty Fee Agreement	LE Jonathan Carroll	01/01/2023	Relates to payoff of LE $25.0 million Huntington loan; as consideration for providing his personal guarantee, Jonathan Carroll receives a cash fee equal to 2.00% per annum of outstanding principal balance owed under the LE Term Loan Due 2034.
NPS Guaranty Fee Agreement	NPS Jonathan Carroll	01/01/2023	Relates to payoff of NPS $10.0 million GNCU loan; as consideration for providing his personal guarantee, Jonathan Carroll receives a cash fee equal to 2.00% per annum of outstanding principal balance owed under the NPS Term Loan Due 2031.
LRM Amended and Restated Guaranty Fee Agreement	LRM Jonathan Carroll	01/01/2023	Relates to payoff of LRM $10.0 million Huntington loan; as consideration for providing his personal guarantee, Jonathan Carroll receives a cash fee equal to 2.00% per annum of outstanding principal owed under the LRM Term Loan Due 2034.
Blue Dolphin Guaranty Fee Agreement	Blue Dolphin Jonathan Carroll	01/01/2023	Relates to payoff of Blue Dolphin $2.0 million SBA loan; as consideration for providing his personal guarantee, Jonathan Carroll receives a cash fee equal to 2.00% per annum of outstanding principal balance owed under the Blue Dolphin Term Loan Due 2051.
Office Sub-Lease Agreement	LEH BDSC	09/01/2024	LEH office space in Houston, Texas; sub-lease executed 10/30/24; 24-month extension of prior office sub-lease agreement; term expires 08/31/2026; rent approximately $0.003 million per month.
Ground Lease Agreement	LEH NPS	07/01/2025	LEH pays NPS a ground storage fee of $0.015 million per month to store equipment at the Nixon facility; month-to month basis terminating with a 30 days' cancellation notice

Debt Agreements. During 2025 and 2024, Blue Dolphin and certain subsidiaries were parties to the following debt agreements with Affiliates:

Original

Monthly

Principal

Payment

Loan Description

Parties

(in millions)

Maturity Date

(in millions)

Interest Rate

Loan Purpose

Second Amended and Restated Affiliate Revolving Credit Agreement

Blue Dolphin and Subsidiaries

$15.0 million maximum

Expiration of Initial Term or Renewal Term

Set-off against other obligations Borrower owes to Lender

WSJ Prime + 2.00%

Working capital

LEH and Subsidiaries

Amended and Restated BDPL-LEH Loan Agreement

LEH

$4.0 million

April 2027

0.05

12.00

Working capital

BDPL

Covenants, Guarantees and Security. The Amended and Restated BDPL-LEH Loan Agreement contains representations and warranties, affirmative and negative covenants, and events of default that we consider usual and customary for a credit facility of this type. Certain BDPL property serves as collateral under the Amended and Restated BDPL-LEH Loan Agreement

All transactions between us and LEH, its subsidiaries, or other Affiliates are considered related party transactions. These related party transactions are contemplated under related party agreements subject to review and approval of the independent members of the Board and its Audit Committee. Examples of related party agreements subject to this approval include loan agreements with LEH, the operating agreement (as amended, restated, supplemented or otherwise modified), the Amended and Restated Jet Fuel Sales Agreement, and other agreements described within this "Note (3)" and "Notes (15) and (16)." Each agreement is reviewed in its entirety as to its nature, scope and economics, and it is determined whether such transaction is fair to us and in the best interest of our non-Affiliate stockholders. In addition, a number of internal Blue Dolphin functions, such as corporate executives serving in the roles of principal executive officer and principal financial officer, are conducted through LEH pursuant to the operating agreement (as amended, restated, supplemented or otherwise modified). The Board and its Audit Committee believe that conducting a number of internal functions through LEH is good for us because the arrangement provides us with, among other things, business opportunities, funding when revenue from operations are insufficient to meet liquidity and working capital needs, and economies of scale.

Together, Jonathan Carroll and LEH owned 84.4% of Blue Dolphin’s Common Stock as of the filing date of this report.

Blue Dolphin Energy Company

December 31, 2025 | Page 42

Notes to Consolidated Financial Statements (Continued)

Related-Party Financial Impact

Consolidated Balance Sheets.

Accounts receivable and accounts payable, related party. We net settle amounts owed between Blue Dolphin and its subsidiaries and Affiliates under financial and operating agreements (as discussed elsewhere within this "Note (3)"). Amounts owed between the parties can vary significantly from period to period even if underlying transactions remain relatively stable based on settlement dates. We reflect any excess amounts owed by Affiliates to Blue Dolphin and its subsidiaries on our consolidated balance sheets within accounts receivable—related party. Except for debt, we reflect any excess amounts owed by Blue Dolphin and its subsidiaries to Affiliates on our consolidated balance sheets within accounts payable, related party. Accounts receivable and accounts payable, related-party as of the dates indicated was as follows:

	December 31,
	2025		2024
	(in thousands)

Current assets
Accounts receivable, related party	$	8,068	$	5,247
Current liabilities
Accounts payable, related party		-		-

Accounts receivable, related party at December 31, 2025 and 2024 reflected amounts owed by LEH to LE under the Amended and Restated Jet Fuel Sales Agreement.

Related-Party Debt. We reflect the amounts owed by Blue Dolphin and its subsidiaries to Affiliates under debt agreements on our consolidated balance sheets within long-term debt, related party and interest payable, related party and line of credit, related party. Related-party long-term debt, including outstanding original principal, as of the dates indicated was as follows:

	December 31,
	2025			2024
	(in thousands)
LEH
Amended and Restated BDPL-LEH Loan Agreement	$	3,463		$	4,000
Second Amended and Restated Affiliate Revolving Credit Agreement		9,847			3,250
LEH Total		13,310			7,250

Less: Long-term debt, related party, current portion		(2,731	)		(1,459	)
Less: Line of credit, related party		(9,847	)		(3,250	)
	$732			$2,541

Related-party accrued interest associated with long-term debt as of the dates indicated consisted was as follows:

	December 31,
	2025			2024
	(in thousands)
LEH
Amended and Restated BDPL-LEH Loan Agreement	$	17		$	1,308
Second Amended and Restated Affiliate Revolving Credit Agreement		-			-
LEH Total		17			1,308
Jonathan Carroll
Guaranty fee agreements		7			129
	24			1,437

Less: Long-term debt, related party, current portion		(24	)		(1,437	)
Long-term interest payable, related party, net of current portion	$	-		$	-

Years Ending December 31,	Principal
	(in thousands)

2026	$	12,578
2027		732
2028		-
2029		-
2030		-
Subsequent to 2030		-
	$	13,310

Consolidated Statements of Income.

Total revenue from operations. Revenue from Affiliates under the Amended and Restated Jet Fuel Sales Agreement and the NPS Terminal Services Agreement as of the dates indicated was as follows:

	Twelve Months Ended December 31,
	2025				2024
	(in thousands, except percent amounts)
Refinery operations
LEH	$	98,479	35.2	%	$	95,577	30.1	%
Third-Parties		177,764	63.6	%		218,002	68.7	%
Tolling and terminaling
LEH		2,250	0.8	%		2,160	0.7	%
Third-Parties		892	0.4	%		1,780	0.6	%
	$	279,385	100.0	%	$	317,519	100.0	%

Blue Dolphin Energy Company

December 31, 2025 | Page 43

Notes to Consolidated Financial Statements (Continued)

Interest expense. Interest expense associated with guaranty fee agreements and a debt agreement with Affiliates as of the dates indicated was as follows:

	Twelve Months Ended December 31,
	2025		2024
	(in thousands)
Jonathan Carroll
Guaranty Fee Agreements
Tied to First Term Loan Due 2034	$	364	$	386
Tied to NPS Term Loan Due 2031		181		199
Tied to Second Term Loan Due 2034		152		161
Tied to Blue Dolphin Term Loan Due 2051		40		40
LEH
Amended and Restated BDPL-LEH Loan Agreement		528		424
Second Amended and Restated Affiliate Revolving Credit Agreement		855		160
		-		-
	$	2,120	$	1,370

Other. BDSC received sub-lease income from LEH totaling $0.03 million for both twelve months ended December 31, 2025 and 2024.

The LEH operating fee, related party under the Fourth Amended and Restated Operating Agreement totaled $1.0 million for the twelve months ended December 31, 2025 compared to approximately $0.8 million for the twelve months ended December 31, 2024. The increase was related to higher manufacturing overhead costs, including insurance and transportation expense.

Related Party Netting Agreement. A Related Party Netting Agreement between LEH and LE was approved by the Board on March 27, 2026 effective as of December 15, 2025. Under the terms of the agreement, LEH shall provide LE with an in-kind credit offset of $2.1 million associated with refinery processing equipment construction in progress. To effectuate the offset, LEH shall provide LE with an in-kind credit of $2.1 million as of the effective date under the Second Amended and Restated Affiliate Revolving Credit Agreement. See "Note (16).

Lease expense associated with the Second Amended and Restated Master Services Agreement (as discussed elsewhere within this "Note (3)" and in "Note (12)" to our consolidated financial statements) totaled $1.2 million and $1.3 million for the twelve months ended December 31, 2025 and 2024, respectively.

(4)

Revenue and Segment Information

We have two reportable business segments: (i) refinery operations, which derives revenue from refined product sales, and (ii) tolling and terminaling, which derives revenue from storage tank rental fees, ancillary services fees (such as for in-tank blending) and tolling and reservation fees for use of the naphtha stabilizer at the Nixon refinery. ‘Corporate and other’ includes information for BDSC, BDPL, and BDPC.

Our chief operating decision maker ("CODM") is our Chief Executive Officer. For our refining segment, significant expenses relate to crude oil, fuel use, and chemicals, and other conversion costs. For our tolling and terminaling segment, significant expenses relate to fees associated with an intercompany tolling agreement. The CODM reviews segment profit or loss on a monthly and quarterly basis and considers trend analyses as well as other market factors when making decisions about resource allocation. The measure of segment assets reported on our consolidated balance sheets and reviewed by our CODM is total assets.

Revenue from Contracts with Customers.

Disaggregation of Revenue. We present revenue in the table below under ‘Segment Information’ separated by business segment because management believes this presentation is beneficial to users of our financial information.

Receivables from Contracts with Customers. We present accounts receivable from contracts with customers as accounts receivable, net on our consolidated balance sheets.

Contract Liabilities. Our contract liabilities consist of unearned revenue from customers in the form of prepayments. We include unearned revenue in accrued expenses and other current liabilities on our consolidated balance sheets. See “Note (9)” to our consolidated financial statements for more information related to unearned revenue.

Remaining Performance Obligations. Most of our customer contracts are settled immediately and therefore have no remaining performance obligations.

Contract Balances.

	December 31,
	2025		2024
	(in thousands)

Accounts receivable (including related-party), beginning of period	$	5,960	$	4,300
Accounts receivable (including related-party), end of period		8,344		5,960

Unearned revenue, beginning of period	$	2,727	$	3,243
Unearned revenue, end of period		780		2,727

Blue Dolphin Energy Company

December 31, 2025 | Page 44

Notes to Consolidated Financial Statements (Continued)

Business segment information for the periods indicated (and as of the dates indicated) was as follows:

	Twelve Months Ended
	December 31,
	2025														2024
	Refinery Operations			Tolling & Terminaling		Corporate & Other			Intercompany Elimination (1)			Consolidated			Refinery Operations			Tolling & Terminaling		Corporate & Other			Intercompany Elimination (1)			Consolidated
	(in thousands)

Segment revenue	$	276,243		$	5,957	$	-		$	(2,815	)	$	279,385		$	313,579		$	6,576	$	-		$	(2,636	)	$	317,519

Crude oil, fuel use, and chemicals		249,291			-		-			-			249,291			292,873			-		-			-			292,873
Other conversion costs		21,051			-		-			(2,815	)		18,236			19,175			-		-			(2,636	)		16,539
Tolling and terminaling costs		-			607		-			-			607			-			1,643		-			-			1,643
Depreciation and amortization		1,204			1,367		-			-			2,571			1,206			1,368		-			-			2,574
Total costs of goods sold		271,546			1,974		-			(2,815	)		270,705			313,254			3,011		-			(2,636	)		313,629

LEH operating fee, related party		1,033			-		-			-			1,033			811			-		-			-			811
General and administrative expenses		1,965			298		6,054			-			8,317			1,105			231		5,177			-			6,513
Other operating expenses⁽²⁾		-			-		554			-			554			-			-		640			-			640
Depreciation and amortization		-			-		296			-			296			-			-		232			-			232
Interest, net		2,953			1,774		661			-			5,388			3,313			1,961		585			-			5,859
Total costs and expenses		277,497			4,046		7,565			(2,815	)		286,293			318,483			5,203		6,634			(2,636	)		327,684

Income (loss) before income taxes		(1,254	)		1,911		(7,565	)		-			(6,908	)		(4,904	)		1,373		(6,634	)		-			(10,165	)

Income tax benefit		-			-		1,307			-			1,307			-			-		1,529			-			1,529

Net income (loss)	$	(1,254	)	$	1,911	$	(6,258	)	$	-		$	(5,601	)	$	(4,904	)	$	1,373	$	(5,105	)	$	-		$	(8,636	)

⁽¹⁾	Fees associated with an intercompany tolling agreement related to naphtha volumes.

⁽²⁾	Includes costs and expenses associated with our pipeline and facilities assets.

	Twelve Months Ended
	December 31,
	2025		2024
	(in thousands)
Capital expenditures
Refinery operations	$	13	$	46
Total capital expenditures	$	13	$	46

	December 31,
	2025		2024
	(in thousands)
Identifiable assets
Refinery operations	$	78,150	$	78,996
Tolling and terminaling		16,017		16,904
Corporate and other		4,905		5,996
Total identifiable assets	$	99,072	$	101,896

Blue Dolphin Energy Company

December 31, 2025 | Page 45

Notes to Consolidated Financial Statements (Continued)

(5)

Concentration of Risk

Bank Accounts. Financial instruments that potentially subject us to concentrations of risk consist primarily of cash, trade receivables and payables. We maintain cash balances at financial institutions in Houston, Texas. The FDIC insures certain financial products up to a maximum of $250,000 per depositor. At December 31, 2025 and 2024, our cash balances (including restricted cash) exceeded the FDIC insurance limit per depositor by $1.5 million and $0.7 million, respectively. Instability and volatility in the capital, credit, and commodity markets, as well as with financial institutions, could adversely affect our cash balances (including restricted cash) in excess of FDIC insurance limits per depositor. In the event that banks in which we maintain our cash balances (including restricted cash) fail, there can be no assurance that the federal government and the Federal Reserve would intervene.

Key Supplier . Operation of the Nixon refinery depends on our ability to purchase adequate amounts of crude oil and condensate. Pursuant to a crude supply agreement with MVP effective January 1, 2024, we source light-sweet Eagle Ford crude oil for the Nixon facility. 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.

Significant Customers. We routinely assess the financial strength of our customers. To date, we have not experienced significant write-downs in accounts receivable balances. We believe that our accounts receivable credit risk exposure is limited.

Portion of

Accounts

Number of

% Total

Receivable at

Significant

Revenue

December 31,

Twelve Months Ended

Customers

from Operations

(in millions)

December 31, 2025

BLUE DOLPHIN ENERGY CO 10-K