Stock Update (NASDAQ:BBEP): BreitBurn Energy Partners L.P. Reports Second Quarter 2015 Results and Provides Second Half 2015 Guidance


BreitBurn Energy Partners L.P. (NASDAQ:BBEP) announced financial and operating results for the second quarter 2015 and provided second half 2015 guidance.

Key Highlights

1. Closed the $1 billion strategic investment led by EIG Global Energy Partners on April 8th, resulting in approximately $500 million of current available liquidity.

2. Reported total production of 5.0 MMBoe, in-line with Breitburn’s 2015 guidance.

3. Increased Adjusted EBITDA, a non-GAAP financial measure, to $162.9 million (including costs of $1.1 million for restructuring), a 48% increase from the second quarter of 2014 and a 10% increase from the first quarter of 2015.

4. Reduced lease operating expenses to $18.72 per Boe in the second quarter of 2015, 6% lower than the first quarter of 2015 and 14% lower than the fourth quarter of 2014.

5. Reported distributable cash flow of $58.5 million, or $0.27 per common unit, and distribution coverage ratio of 2.16x based on current monthly distribution of $0.04166 per common unit, or $0.50 per common unit on an annualized basis.

6. Based on Breitburn’s current commodity hedge portfolio and assuming second half 2015 guidance production rate as set forth below, Breitburn’s total production is 77% hedged for the remainder of 2015, 65% in 2016, and 41% in 2017 at attractive prices. The mark-to-market value of Breitburn’s commodity hedge portfolio was approximately $544 million as of June 30th and approximately $670 million as of July 31st.

Management Commentary

Halbert S. Washburn, Breitburn’s Chief Executive Officer, said: “We are very pleased to report another solid quarter with production, cost reductions, and Adjusted EBITDA in-line with our guidance for the first half of the year. We have completed the integration of the QR Energy assets and our diverse portfolio continues to perform as expected in this challenging environment. Earlier this year, we announced a number of steps to address what we thought could be an extended period of weak commodity pricing. Those steps included dramatically reducing our capital budget, implementing an aggressive program to reduce operating costs and completing a significant workforce reduction plan. In addition, in April we raised almost $1 billion in external capital and reset our borrowing base to $1.8 billion, without a scheduled redetermination until April of 2016. We also reset our common unit distribution to $0.50 per unit. As a result of these actions, we currently have approximately $500 million of available liquidity under our credit facility, are on track to reduce bank debt throughout the year and have an excellent distribution coverage ratio of 2.16 times this quarter.”

Mr. Washburn continued, “In addition, we continue to evaluate the most attractive alternatives for maximizing the value of our substantial acreage position in the Midland Basin. With over 22,000 gross surface acres and approximately 360 net identified locations, we have the ability to add meaningful production and reserves to our base business over the course of the next few years. This acreage provides us with significant strategic and operating flexibility particularly in the current commodity price environment.”

Second Quarter 2015 Operating and Financial Results Compared to First Quarter 2015

  • Total production was 5,015 MBoe in the second quarter of 2015 compared to 5,051 MBoe in the first quarter of 2015. Average daily production was 55.1 MBoe/day in the second quarter of 2015 compared to 56.1 MBoe/day in the first quarter of 2015.
    • Oil production decreased to 2,822 MBbl compared to 2,890 MBbl in the first quarter of 2015.
    • NGL production increased to 483 MBbl compared to 459 MBbl in the first quarter of 2015.
    • Natural gas production increased to 10,264 MMcf compared to 10,211 MMcf in the first quarter of 2015.
  • Adjusted EBITDA was $162.9 million (including $1.1 million of restructuring costs) in the second quarter of 2015 compared to $148.6 million (including $4.1 million of restructuring costs) in the first quarter of 2015, a 10% increase primarily due to higher oil sales revenue and lower lease operating and G&A expenses, partially offset by lower commodity derivative settlements.
  • Net loss attributable to common unitholders was $316.2 million, or $1.46 per diluted common unit, in the second quarter of 2015, which includes a non-cash goodwill impairment charge of $95.9 million, or $0.45 per unit, compared to net loss of $63.0 million, or $0.29 per diluted common unit, in the first quarter of 2015, which included non-cash impairment charges of approximately $59.1 million, or $0.28 per unit.
  • Oil, NGL and natural gas sales revenues were $189.6 million in the second quarter of 2015 compared to $162.6 million in the first quarter of 2015, primarily reflecting higher realized oil and NGL prices.
  • Lease operating expenses, which include district expenses, processing fees and transportation costs but exclude taxes, were $18.72 per Boe in the second quarter of 2015 compared to $19.81 per Boe in the first quarter of 2015, a 6% decrease primarily due to cost cutting efforts, lower fuel and utility costs, and lower workover expense.
  • General and administrative expenses, excluding non-cash unit-based compensation costs, were $16.8 million in the second quarter of 2015 compared to $25.3 million in the first quarter of 2015, primarily due to cost cutting efforts (including reduction in workforce) and $1.9 million lower integration costs.
  • Losses on commodity derivative instruments were $93.4 million in the second quarter of 2015 compared to gains of $137.2 million in the first quarter of 2015, primarily due to an increase in oil and natural gas futures prices during the second quarter of 2015. Derivative instrument settlement receipts were $100.6 million in the second quarter of 2015 compared to receipts of $126.4 million in the first quarter of 2015, primarily due to higher oil prices.
  • NYMEX WTI oil spot prices averaged $57.85 per Bbl and Brent oil spot prices averaged $61.65 per Bbl in the second quarter of 2015 compared to $48.49 per Bbl and $53.98 per Bbl, respectively, in the first quarter of 2015. Henry Hub natural gas spot prices averaged $2.75 per Mcf in the second quarter of 2015 compared to $2.90 per Mcf in the first quarter of 2015.
  • Average realized crude oil, NGL and natural gas prices, excluding the effects of commodity derivative settlements, were $53.29 per Bbl, $18.35 per Bbl and $2.57 per Mcf, respectively, in the second quarter of 2015 compared to$43.62 per Bbl, $16.54 per Bbl and $3.05 per Mcf, respectively, in the first quarter of 2015.
  • Oil, NGL and natural gas capital expenditures were $58 million in the second quarter of 2015, compared to $73 million in the first quarter of 2015.
  • Distributable cash flow, a non-GAAP financial measure, was $58.5 million in the second quarter of 2015 compared to $60.7 million in the first quarter of 2015.

Second Half 2015 Guidance (Assuming No Acquisitions)

The following guidance is subject to all of the cautionary statements and limitations described below and under the caption “Cautionary Statement Regarding Forward-Looking Information.” In addition, estimates for Breitburn’s future production volumes are based on, among other things, assumptions of capital expenditure levels and the assumption that market demand and prices for oil and gas will continue at levels that allow for economic production of these products. The production, transportation and marketing of oil and gas are extremely complex and are subject to disruption due to transportation and processing availability, mechanical failure, human error, weather, and numerous other factors, including the inability to obtain expected supply of CO2. Breitburn’s estimates are based on certain other assumptions, such as well performance, which may actually prove to vary significantly from those assumed. Lease operating costs, including major maintenance costs, vary in response to changes in prices of services and materials used in the operation of our properties and the amount of maintenance activity required. Lease operating costs, including taxes, utilities and service company costs, move directionally with increases and decreases in commodity prices, and we cannot fully predict such future commodity or operating costs. Similarly, interest rates and price differentials are set by the market and are not within our control, and they can vary dramatically from time to time. Capital expenditures are based on our current expectations as to the level of capital expenditures that will be justified based upon the other assumptions set forth below as well as expectations about other operating and economic factors not set forth below. The foregoing guidance does not constitute any form of guarantee, assurance or promise that the matters indicated will actually be achieved. Rather, the foregoing guidance simply sets forth our best estimate today for these matters based upon our current expectations about the future based upon both stated and unstated assumptions. Actual conditions and those assumptions may, and probably will, change over the course of the year. (Original Source)

Shares of Breitburn Energy Partners closed yesterday at $2.64. BBEP has a 1-year high of $23.06 and a 1-year low of $2.55. The stock’s 50-day moving average is $4.00 and its 200-day moving average is $5.63.

On the ratings front, Breitburn Energy has been the subject of a number of recent research reports. In a report issued on June 15, Wunderlich Securities analyst Abhishek Sinha resumed coverage with a Hold rating on BBEP and a price target of $6, which represents a potential upside of 127.3% from where the stock is currently trading. Separately, on May 6, Credit Suisse’s Abhiram Rajendran maintained a Sell rating on the stock and has a price target of $6.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Abhishek Sinha and Abhiram Rajendran have a total average return of -22.9% and 18.8% respectively. Sinha has a success rate of 21.2% and is ranked #3703 out of 3727 analysts, while Rajendran has a success rate of 80.0% and is ranked #648.

BreitBurn Energy Partners LP is engaged in the acquisition, exploitation and development of oil, NGL and gas properties in the United States.