Forward-looking Statements

The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the notes thereto included elsewhere in this report. This section of this report includes a number of forward-looking statements that reflect the Company's current views with respect to future events and financial performance. Forward-looking statements are often identified by words like" "believe," "expect," "estimate," "anticipate," "intend," "project," and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

The following discussion provides an analysis of the results of our operations, an overview of our liquidity and capital resources and other items related to our business. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in this Annual Report on Form 10-K for the year ended March 31, 2009.

Overview of Company and its Operations

Successor company references herein are referring to consolidated information pertaining to Blackwater Midstream Corp., (formerly Laycor Ventures Corp.), the registrant, our wholly owned subsidiary Blackwater New Orleans, LLC and to Laycor Ventures, Corp.

Predecessor company references herein are referring to NuStar Terminals Operations Partnership L.P. ("NuStar"), the former owner and manager of the storage terminal in Westwego, LA., and their operations at the storage terminal.

General. We were incorporated in the State of Nevada on March 23, 2004. We changed our name from Laycor Ventures Corp. to Blackwater Midstream Corp. on March 18, 2008 and on March 21, 2008, a change in the ownership and management control of the Company occurred. At that time, we changed our business objective to become an independent developer and manager of third party fuel, agricultural and chemical bulk liquid storage terminals. Commencing in May 2008 we hired new management and appointed a new board of directors.

Development Stage. From incorporation until March 2008, we were a development stage company primarily engaged in the acquisition and exploration of mining properties. As of July 9, 2008, we allowed our mining claim in the Rock Creek Project in British Columbia, Canada, to expire and discontinued our mining pursuits. The Ministry of the Environment designated the property, containing our claim, as a wildlife habitat area and we received a report from a geologist concluding that the property claim would unlikely yield enough mineral to allow us to be economically viable.

On June 26, 2008, we purchased a seven percent (7%) interest in Safeland Storage, L.L.C. ("Safeland") an unrelated party, Louisiana limited liability company, pursuant to a Membership Interest Purchase Agreement with Safeland. Contemporaneously, therewith, on June 26, 2008, we entered into a Purchase and Sale Agreement (the "Purchase and Sale Agreement") for the purchase of 435 acres of land near the town of Garyville, Louisiana, located in St. John the Baptist Parish, from Safeland. The closing of the Purchase and Sale Agreement was to take place within 120 days from June 26, 2008.

This land was considered to be an excellent location in which to develop and build (in phases) a new large-scale third party liquid bulk storage terminal. However, in November 2008 it was evident to Blackwater management that due to the worldwide economic credit crisis we would be unable to secure debt financing and raise capital that the proposed development of the Garyville, LA terminal would require to be economically feasible. The closing of the Purchase and Sale Agreement with Safeland did not take place. The Company still maintains a 7% interest in Safeland. Safeland will continue marketing the property and we will be entitled to 7% of the liquidating value of Safeland.

As part of our March 31, 2009 fiscal year-end analysis, we obtained from a third-party real estate appraiser a current valuation of our 7% minority investment in Safeland. Safeland's principle asset is the property located in Garyville, LA, as referenced above. This property is currently valued at approximately $7,760,000; therefore, our 7% share is valued at about $543,200. This amount was discounted approximately 25% to reflect our minority management interest; therefore, our investment is currently valued at approximately $407,400. Accordingly, we have recorded an adjustment to our investment of $1,092,600, as of March 31, 2009 in the other operating expenses section of our Consolidated Statement of Operations for the period December 23, 2008 through March 31, 2009.

We were in the development stage of developing and managing third party storage terminals from March 2008 through December 23, 2008, until we acquired the Westwego, LA liquid bulk storage terminal (the "Westwego Terminal") from NuStar. As of that date, we became operating company and were no longer in the development stage.

Westwego Terminal Operations. On September 9, 2008, we formed Blackwater New Orleans, LLC ("BNO"), a Louisiana limited liability company, as a wholly owned subsidiary of the Company, to acquire the Westwego Terminal.

The purchase price for the Westwego Terminal was $4,800,000, subject to certain adjustments for prepaid third-party fees, adjustment to inventory, and NuStar's transaction-related expenses. The Westwego Terminal has an approximate leasable capacity of 752,000 barrels.

As of March 31, 2009 our asset portfolio and operations consisted of the Westwego Terminal. The above-the-ground storage tanks at the Westwego Terminal range in size from approximately a 5,000 barrel capacity to tanks with over a 100,000 barrel capacity. Our operations support many different commercial customers including refiners and chemical manufacturers. The diversity of our customer base, lends to the potential diversity of the products customers may want stored in our terminal. The products will however generally fall into the three broad categories: petroleum, chemical and agricultural.

Our income is derived from tank leasing, operational charges associated with blending services, throughput charges for receipt and delivery options and other services requested by our customers. The terms of our storage leasing contracts range from month-to-month, to multiple years, with renewal options. Cash generated from the operations at the Westwego Terminal is our primary source of liquidity for funding debt service, maintenance, and small-scale potential capital expenditures. Based on long-term contracts, we would seek debt financing to fund larger-scale capital expenditures.

At the Westwego Terminal, we generally receive our customer's liquid product by river barge at our Mississippi River dock. The product is transferred from barges to the leased storage tank via the terminal's internal pipeline apparatus. The customer's product is removed from storage at our terminal by truck, railcar and/or by barge. The length of time that the customer's product is held in storage without transfer varies depending upon the customer's needs.

As of March 31, 2009 and June 30, 2009 we had leased approximately 440,000 barrels of storage, for a storage utilization rate of approximately 58%. The products currently stored at the storage terminal are lubricating oils, crude naphthenic acid, 50% diaphragm grade caustic and sulfuric acid.

Growth of our Business. The importance of bulk terminal facilities in the refined product and chemical manufacturing segments has grown significantly over the past decade as the nation's product supply patterns have become increasingly more complex. Bulk liquid terminals allow producers to operate their refineries and manufacturing plants more efficiently by providing capacity to level out both increases and decreases in product demand. In addition, bulk liquid terminals provide a more efficient supply chain by storing the product either closer to the production or consumption locations.

Our current business model is to increase the utilization at the Westwego Terminal, expand storage at the terminal site as needed, and to pursue the acquisition of other underachieving, underutilized storage terminals through asset purchases and management agreements. We believe the considerable experience of the Company's management team will be a key factor in transitioning underperforming terminals into viable profit centers. We expect these acquisitions to provide immediate accretive results to the Company's operations, and will also allow us to serve the specific storage needs of our customers at our various terminals.

Critical Accounting Policies and Estimates

Our management has discussed the development and selection of the following critical accounting estimates with our audit committee and the audit committee has reviewed and approved these disclosures.

Revenue Recognition. Revenues for third-party terminals include storage tank lease fees, whereby a customer agrees to pay for a certain amount of tank storage over a certain period of time; and throughput fees, whereby a customer pays a fee based on volumes moving through the terminal. At our terminal, we also offer and provide blending, handling, filtering and certain other ancillary services. Revenue from storage tank lease fees are recognized at the beginning of each month. Revenue from throughput fees and ancillary fees are recognized as services are provided to the customer.

Property, Plant and Equipment. Property, plant and equipment, are comprised of real estate, buildings, warehouses, storage tanks, terminal assets, office equipment, computer software and heavy equipment and are stated at cost, less accumulated depreciation.

Assets are depreciated on a straight-line basis over their estimated useful lives, which range from 5 to 40 years. Repair and maintenance costs associated with existing assets that are minor in nature and do not extend the useful life of existing assets are charged to operating expenses as incurred.

Impairment of Long-lived Assets. Long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The evaluation of recoverability is performed using undiscounted estimated net cash flows generated by the related asset. If an asset is deemed to be impaired, the amount of impairment is determined as the amount by which the net carrying value exceeds discounted estimated net cash flows.

Results of Operations

For the Year Ended March 31, 2008.

During this period we were in the development stage of our mining activities in Canada and thus had no revenues. Expenses were primarily related to professional fees for auditing.

For the Period December 23, 2008 through March 31, 2009 compared to the Period January 1, 2008 through March 31, 2008.

The period December 23, 2008 through March 31, 2009 is the first period of storage terminal operations for Blackwater Midstream and for our new management team hired in May and June 2008. We became an operational entity when we acquired the Westwego Terminal on December 23, 2008. For the period January 1, 2008 through December 22, 2008, the Westwego Terminal was owned and operated by the predecessor company.

Revenues. For the period December 23, 2008 through March 31, 2009 the storage tank revenues totaled approximately $661,000, with ancillary fees totaling approximately $99,000. This includes approximately $45,000 in revenues for prepaid tank storage rental paid to the predecessor company of the Westwego Terminal for the period December 23, 2008 through December 31, 2008. Monthly storage tank revenues increased from $195,481 in January 2009 to $210,271 for both February and March 2009 due to fees from a new customer.

Ancillary fees are earned based on a customer's particular needs; and, therefore, by their nature fluctuate from month to month. In January 2009, we provided special tank cleaning services to a customer, resulting in ancillary revenues of approximately $78,000. In February and March 2009, we provided only routine ancillary fees to customers and our ancillary revenues were about $13,500 and $6,500, respectively.

During the period January 1, 2008 through March 31, 2008, the terminal earned approximately $533,000 in storage tank revenues and approximately $47,000 from ancillary fees.

Operating Expenses. Our operating expense structure is essentially the same as that of our predecessor. We retained the employees and maintained the same vendors and suppliers. One-time repair and maintenance charges by the predecessor of approximately $100,000 make up the majority of variance between the operating costs of approximately $355,000 for period of January 1, 2008 through March 31, 2008 and approximately $253,000 for the period December 23, 2008 through March 31, 2009. Gross profit for the period from December 23, 2008 through March 31, 2009 was approximately $500,000, or 69%, of revenues. Gross profit for the period from January 1, 2008 through March 31, 2008 was approximately $225,000, or 38%, of revenues. The increase is attributable to increased customers and revenues during the period ended March 31, 2009 as compared to the period ended March 31, 2008 and higher costs of revenues during the period ended March 31, 2008.

Selling, General and Administration Expenses (SG&A). Our consolidated SG&A expenses for the period December 23, 2008 through March 31, 2009 were significantly higher (approximately $1,117,000) than those SG&A expenses reported for the predecessor for the period January 1, 2008 through March 31, 2008 (approximately $38,000). Our SG&A expenses include our corporate executive management salaries, executive management non-cash compensation (restrictive stock grants), expenses related to being a public company and other professional fees, insurance, and other expenses that were not allocated or expensed by the predecessor company to the terminal's operations. The table below outlines these differences.

                                         Successor                       Predecessor
                                      For the period                    For the period
                                     December 23, 2008                 January 1, 2008
Selling, General & Administrative         Through                          Through
Expenses                              March 31, 2009                    March 31, 2008
Management Salaries                          $  308,810       28%               $     -       0%

Management Non-cash Compensation                242,907       22%                     -       0%

Professional Fees                               204,606       18%                     -       0%

Insurance-Other                                  89,472       8%                  4,894       13%

Other SG&A Expenses                             270,981       24%                32,977       87%

Total SG&A Expenses                        $  1,116,776       100%            $  37,871       100%

Depreciation. Our consolidated depreciation expense for the period December 23, 2008 through March 31, 2009 was approximately $88,000; over 3 times higher than the predecessor's depreciation expense of approximately $28,000 for the period January 1, 2008 through March 31, 2008. This was due to a step-up in the value of the property, plant and equipment assets, based on the amount we actually paid upon the acquisition of the Westwego Terminal and different values of the estimated life of the assets.

Interest Expense. We recorded $44,454 in interest expense for the period December 23, 2008 through March 31, 2009; whereas the predecessor did not record any interest expense. The majority, approximately $34,000, of our consolidated interest expense was related to our loan agreement with JPMorgan Chase Bank associated with our acquisition of the Westwego Terminal. The remainder of approximately $10,000 relates to our related party loans.

Loss on Disposal of Asset. Pertaining to the tank leak incident at the Westwego, LA terminal in February 2009, we have recorded the amount paid by our insurance carrier and the expenses we have incurred as of March 31, 2009 in the consolidated statement of operations. During the period January 1, 2008 through March 31, 2008, the predecessor did not have any such activities. The table below summarizes amounts related to this incident.

                                                            Successor              Predecessor
                                                         For the period           For the period
                                                        December 23, 2008        January 1, 2008
                                                             through                 through
                                                         March 31, 2009           March 31, 2008
Pollution Insurance: Clean up & mitigation expenses
less deductible of $250,000                            $           181,585     $                  -
Pollution: Clean up & mitigation expenses                       (1,000,668 )                      -
Property: Tank disposal                                            (83,678 )                      -
 Loss on Disposal of Asset                             $          (902,761 )   $                  -

For the Period January 1, 2008 through December 22, 2008 compared to the Period January 1, 2007 through December 31, 2007.

Revenues. For the period ended December 22, 2008 storage tank revenues totaled approximately $2,060,000, with ancillary fees totaling approximately $237,000, for a total of approximately $2,297,000. This total is approximately 12% less than for the comparable year ended December 31, 2007, during which storage tank revenues totaled approximately $2,255,000 and ancillary fees totaled approximately $366,000. The decrease in revenues is a result of the loss of customers leasing storage at the Westwego Terminal.

Operating Expenses For the period ended December 22, 2008, operating expenses were approximately $1,700,000 as compared to $2,607,000 for the year ended December 31, 2007. This decrease of approximately 17.5% is primarily attributable to the corresponding decrease in activity at the terminal and also due to a decrease in the amounts spent on tank inspections, tank cleaning and maintenance and repairs preformed during the year 2007. Gross profit for the period ended December 22, 2008 was approximately 26% and gross profit for the year ended 2007 was approximately 21%, again reflecting the additional amounts spent on tank inspections, tank cleaning and maintenance and repairs performed in 2007, but not during 2008.

Selling General and Administration Expenses (SG&A). These expenses decreased approximately $40,000 from the year ended December 2007 to the period ended December 22, 2008; however, they maintained their percentage of revenue amount of about 9% for both periods.

Depreciation. Depreciation expense for the year 2007 was approximately $110,000 and depreciation expenses for the period ended December 22, 2008 was approximately $101,000. The difference can be attributed to the selling of the Westwego Terminal on December 23, 2008 and therefore the reduction in depreciation expense reported by the predecessor.

Other Income. During the period January 1, 2008 through December 22, 2008 the predecessor did not record any other income. In March 2007, the predecessor received $8,738,041 in a legal settlement pertaining to damages to the ship dock at the Westwego Terminal that occurred in January 2005. The proceeds exceeded the recorded receivable by $5,229,891, which is included in other income on the Statement of Consolidated Operations.

Net Profit from Continuing Operations. Net profit for the period ended December 2007 was approximately $200,000 (excluding the insurance claim recorded of $5,229,288); which is approximately 7.6% of revenues. The net profit for the period ended December 22, 2008 was approximately $291,000; which is about 12.7% of revenues. The difference can be attributed to the additional amounts spent on tank inspections, tank cleaning and maintenance and repairs performed in 2007, but not during 2008.

Liquidity and Capital Resources.

For the Year Ended March 31, 2008.

For the year ended March 31, 2008, we had not generated any revenues from our business operations.

As of March 31, 2008, our total assets were $5,472 and our total liabilities were $7,942. We had cash and cash equivalents of $3,574.

At March 31, 2008, we had negative working capital of $2,470. Operating Expenses for the fiscal year ended March 31, 2008 were $27,752. Our operating expenses consisted primarily of professional fees and claim administration.

We had no long-term debt.

Off Balance-Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2008.

For the Period December 23, 2008 through March 31, 2009 compared to the Period January 1, 2008 through March 31, 2008.

As shown in the accompanying consolidated financial statements, we incurred a consolidated net loss of $2,736,971 for the period December 23, 2008 through March 31, 2009. This figure includes non-cash expenses for depreciation of $88,194, an impairment charge of $1,092,600 for our minority management investment in Safeland Storage, LLC, a loss on tank disposal associated with our insurance incident for $83,678 and stock based compensation to members of management for $248,339. Without these non-cash expenses, we would have recorded a net loss of $1,224,160 for the period. The predecessor's operations resulted in a net profit of $159,199 for the period January 1, 2008 through March 31, 2008. Our operations at the newly acquired Westwego Terminal are generating revenues.

As of March 31, 2009 we had negative working capital of $1,963,635. As of March 31, 2008 we had negative working capital of $2,470.

As of March 31, 2009, our total assets were $6,554,896 and our total liabilities were $4,812,064. At March 31, 2008, our total assets were $5,472 and our total liabilities were $7,942.

At March 31, 2009, we had cash totaling $512,825. At December 22, 2009 we had cash of $2,560,650; therefore, during the period we had a net decrease in cash of $2,047,825. During the period of December 23, 2008 through March 31, 2009, we generated $78,186 from our operating activities, we used proceeds of $2,426,011 to purchase the Westwego Terminal and other assets, and received cash proceeds in the amount of $300,000 from financing activities.

Acquisition of the Westwego Terminal. On December 23, 2008, BNO acquired the Westwego Terminal from NuStar. The Westwego Terminal was purchased by BNO "as-is". The purchase price for the Westwego Terminal was $4,800,000, subject to certain adjustments for prepaid third-party fees, adjustment to inventory, and NuStar's transaction-related expenses.

Long-term Debt and Notes Payable. In connection with this purchase, BNO entered into an agreement (the "JPM Loan Agreement') with JP Morgan Chase Bank, N.A. ("JPM") to finance $2,500,000 of the purchase price of the storage terminal, which amount bears interest at the annual rate of 1.5% above the Prime Rate, subject to certain minimum rate requirements. BNO paid consecutive monthly installments of interest only from January 31, 2009 through March 31, 2009. Beginning on April 30, 2009, BNO pays monthly principal installments of $41,667. All unpaid principal and accrued and unpaid interest is finally due and payable on March 31, 2014.

On April 21, 2009, JPM and the Company agreed to amend Section 3.1 D of the Credit Agreement, in which the Company initially agreed to, at all times, maintain in an account (the "JPM Account") at JPM an amount equal to at least twelve (12) months of principal due and payable under the Term Note. The agreed amendment waives this minimum balance requirement, provided that and so long as
(i) the JPM Account continues to be pledged to JPM pursuant to the terms of the Assignment and (ii) commencing April 30, 2009 and continuing on the last day of each calendar month thereafter, proceeds from the JPM Account are applied to pay the scheduled monthly principal installments of $41,667 each that are due and payable under the Term Note.

The JPM Loan Agreement is secured by a mortgage on, among other things, BNO's right, title and interest in the immovable property, buildings, structures, machinery, equipment and improvements on the premises located at 660 LaBauve Drive, Westwego, Jefferson Parish, Louisiana, as well as BNO's deposit accounts at JPM. The JPM Loan Agreement includes customary events of default including, but not limited to, the failure of BNO to pay any principal or interest when due, the breach of any representation or warranty in any of JPM's loan documents, or the insolvency or bankruptcy of BNO. Upon the occurrence of an event of default, the JPM Loan Agreement will become due and payable automatically and without notice.

Related party Loans. In December 2008, we borrowed $125,000 and $100,000 from Ter Mast Beheer Utrecht, B.V. and Isaac Suder, respectively, and recorded the receipt of these funds as a current liability; in advance of agreeing to loan terms and security agreements. In January 2009 we borrowed $75,000 from No Logo Air, Inc. and recorded the receipt of these funds as a current liability. On January 20, 2009, we entered into a loan and security agreement, effective January 1, 2009, with each of Ter Mast Beheer Utrecht, B.V., No Logo Air, Inc. and Isaac Suder, in the principal amount of $125,000, $75,000 and $100,000, respectively (collectively, the "Insider Loans"). Ter Mast Beheer Utrecht, B.V. and No Logo Air, Inc. are each owned and controlled by Mathijs van Houweninge, a director of BWMS. Isaac Suder is the father of Michael Suder, a director of BWMS and its President and Chief Executive Officer. Collectively, Ter Mast Beheer Utrecht, B.V., No Logo Air, Inc. and Isaac Suder are hereinafter referred to as the "Creditors".

The Insider Loans bear interest at the annual rate of 12%. Monthly installments of interest only payments commenced on January 31, 2009 and continue through maturity. In addition, principle installments of $9,015, $5,409 and $7,212 to Ter Mast Beheer Utrecht B.V., No Logo Air, Inc. and Isaac Suder, respectively, commenced on April 30, 2009 and continue through maturity. All unpaid principal and accrued and unpaid interest on the Insider Loans is finally due and payable on June 30, 2010.

If any amount due and owing pursuant to the Insider Loans is not promptly paid when due, then all installments payable thereon shall, at the option of the respective Creditor, immediately mature, and become due and owing.

In April 2009, the Creditors individually and jointly agreed to grant the Company's management the ability to choose when to make principal payments beginning in April 2009, without penalty.

The Insider Loans are secured by a security interest on BWMS's interest in its wholly owned subsidiary, BNO.

Additionally, BWMS and the Creditors entered into an Intercreditor agreement, . . .