Breitburn Energy Partners LP (NASDAQ:BBEP) announced financial and operating results for the fourth quarter and full year 2015 as well as operational guidance for its expected performance in 2016.

Key Highlights

  • Annual production of 20.2 million Boe, at high-end of guidance, with average daily production of 55,288 Boe/d for the year.
  • Adjusted EBITDA, a non-GAAP financial measure, increased to $169 million in 4Q15, 8.2% higher than 3Q15, despite lower realized oil and NGL prices. 2015 Adjusted EBITDA of $636.8 million (including acquisition and integration costs of $12.6 million and restructuring costs of $5 million) was in line with guidance.
  • Pre-tax lease operating expenses were $17.74/Boe in 4Q15, 10.5% lower than 3Q15 and 18.5% lower than 4Q14. 2015 pre-tax lease operating expenses were $19.02/Boe, at low-end of guidance.
  • G&A expenses, excluding acquisition and integration costs and non-cash unit based compensation, were $2.48/Boe in 4Q15, 9.4% lower than 3Q15 and the best quarter in Breitburn’s history. 2015 G&A expenses, excluding acquisition and integration costs and non-cash unit based compensation, were $3.02/Boe, 13% lower than 2014.
  • The estimated fair value of Breitburn’s commodity hedge portfolio was approximately $666 million as of December 31, 2015.

Management Commentary

Halbert S. Washburn, Breitburn’s Chief Executive Officer, said: “We were very proactive last year in adapting to a volatile commodity price environment. We had strong operating and financial results, with production coming in at the high end of our guidance and our capital, operating, and G&A costs performing in line with or better than our guidance. We were also one of the first oil and gas companies to raise significant capital last year, and through our financing and cost cutting efforts, we were able to reduce our bank borrowings by nearly $1 billion in 2015. In light of the ongoing weakness in commodity prices, we are cutting our 2016 capital program by 60% to approximately $80 million, but because of our quality, long-lived, low-decline assets we only expect a 9% reduction to our 2016 production. With the continued hard work of our experienced team, we believe we are well-positioned to execute our operating plan successfully again this year.”

Fourth Quarter 2015 Operating and Financial Results Compared to Third Quarter 2015

  • Total production was 5,106 MBoe in the fourth quarter of 2015 compared to 5,008 MBoe in the third quarter of 2015. Average daily production was 55.5 MBoe/day in the fourth quarter of 2015 compared to 54.4 MBoe/day in the third quarter of 2015.
    • Oil production increased to 2,795 MBbl compared to 2,741 MBbl in the third quarter of 2015
    • NGL production increased to 526 MBbl compared to 485 MBbl in the third quarter of 2015
    • Natural gas production increased to 10,712 MMcf compared to 10,689 MMcf in the third quarter of 2015
  • Adjusted EBITDA was $169 million in the fourth quarter of 2015 compared to $156.3 million in the third quarter of 2015, an 8.2% increase. The increase was primarily due to higher commodity derivative instrument settlement receipts, lower operating costs, higher sales volume, and lower G&A expenses, partially offset by lower oil, natural gas and NGL sales revenue due to lower average realized commodity prices.
  • Net loss attributable to common unitholders was $902.3 million, or $4.25 per diluted common unit, in the fourth quarter of 2015, which included non-cash impairment charges of approximately $878.3 million, or $4.14 per common unit, primarily related to the impact that further deterioration in forecast future commodity prices had on our projected net revenues for certain of our oil and gas properties, compared to net loss of $1.3 billion, or $6.17 per diluted common unit, in the third quarter of 2015, which included non-cash impairment charges of approximately $1.4 billion, or $6.80 per unit.
  • Oil, NGL and natural gas sales revenues were $139.7 million in the fourth quarter of 2015 compared to $153.3 million in the third quarter of 2015, primarily due to lower realized oil and natural gas prices, partially offset by higher sales volumes.
  • Lease operating expenses, which include district expenses, processing fees, and transportation costs but exclude taxes, were $17.74 per Boe in the fourth quarter of 2015 compared to $19.83 per Boe in the third quarter of 2015. The decrease was due to lower operating costs, lower workover expenses and continued focus on lowering costs.
  • General and administrative expenses, excluding non-cash unit-based compensation costs, were $14.5 million in the fourth quarter of 2015 (including acquisition and integration costs of $1.8 million) compared to $16.9 million in the third quarter of 2015 (including acquisition and integration costs of $3.2 million). The decrease was primarily due to lower integration costs and lower employee related expenses.
  • Gains on commodity derivative instruments were $141.8 million in the fourth quarter of 2015 compared to gains of $253 million in the third quarter of 2015, primarily due to increases in oil and natural gas futures prices during the fourth quarter of 2015. Derivative instrument settlement receipts were $144.1 million in the fourth quarter of 2015 compared to receipts of $129 million in the third quarter of 2015, primarily due to lower oil prices.
  • NYMEX WTI oil spot prices averaged $41.94 per Bbl and Brent oil spot prices averaged $43.56 per Bbl in the fourth quarter of 2015 compared to $46.64 per Bbl and $50.41 per Bbl, respectively, in the third quarter of 2015.Henry Hub natural gas spot prices averaged $2.12 per Mcf in the fourth quarter of 2015 compared to $2.76 per Mcf in the third quarter of 2015.
  • Average realized crude oil, NGL, and natural gas prices, excluding the effects of commodity derivative settlements, averaged $37.31 per Bbl, $13.03 per Bbl and $2.32 per Mcf, respectively, in the fourth quarter of 2015 compared to $43.38 per Bbl, $12.44 per Bbl and $2.76 per Mcf, respectively, in the third quarter of 2015.
  • Oil, NGL and natural gas capital expenditures were approximately $36 million in the fourth quarter of 2015 compared to $46 million in the third quarter of 2015.

Full Year 2015 Results

  • Total production was 20.2 million Boe in 2015 compared to 14.1 million Boe in 2014. Production volumes increased by 6.1 million Boe, or 43%, primarily due to production from properties acquired in the QRE merger.
  • Adjusted EBITDA was $636.8 million in 2015 (including acquisition and integration costs of $12.6 million and restructuring costs of $5 million) compared to $473.8 million in 2014. The increase reflects the full year effect of the QRE merger, higher commodity derivative instrument settlement receipts and lower operating costs, partially offset by lower oil, natural gas and NGL sales revenue due to lower average realized commodity prices.
  • Net loss attributable to common unitholders was $2.6 billion, or $12.39 per diluted common unit, in 2015, which included non-cash impairment charges of approximately $2.4 billion, or $11.24 per common unit, compared to a net income of $411.3 million, or $3.02 per diluted common unit, in 2014, which included non-cash impairment charges of approximately $149 million, or $1.11 per common unit.
  • Total oil, NGL and natural gas sales were $645.3 million in 2015, a decrease of 25% from 2014 primarily due to lower commodity prices partially offset by higher volumes from the full year effect of production from properties acquired in the QRE merger.
  • Lease operating expenses, which include district expenses, processing fees, and transportation costs but exclude taxes, were $383.8 million compared to $291.4 million in 2014, reflecting the full year effect of lease operating costs from properties acquired in the QRE merger.
  • General and administrative expenses, excluding unit-based compensation related costs but including $12.6 million in acquisition and integration costs, were $73.5 million compared to $63.6 million in 2014, which included $14 million in acquisition and integration costs. The increase was primarily due to higher payroll expense for additional personnel attributable to the QRE merger.
  • Gains on commodity derivative instruments were $438.6 million in 2015 compared to gains of $566.5 million in 2014. Derivative instrument settlement receipts were $500 million in 2015 compared to receipts of $27.8 million in 2014, primarily due to lower oil prices.
  • Average realized oil and NGL prices, excluding the effect of commodity derivative instruments, for 2015, were $44.46 per Bbl and $15.02 per Bbl, respectively, compared to NYMEX WTI oil prices of $48.49 per barrel. Average realized natural gas prices, excluding the effect of commodity derivative instruments, were $2.67 per Mcf compared to Henry Hub prices of $2.62 per Mcf.

Liquidity

As of February 25, 2016, we had approximately $1.2 billion in borrowings outstanding under our credit facility. The borrowing base at December 31, 2015 was $1.8 billion and is scheduled to be redetermined in April 2016, at which time we expect it to be significantly decreased. Although our lenders have the discretion to redetermine the borrowing base below our current outstanding borrowings, we do not expect that to occur in April 2016. If commodity prices remain depressed or further decline, we expect our borrowing base to be reduced again at the subsequent borrowing base redetermination in October 2016, which could further impact and limit our liquidity.

2015 Estimated Proved Reserves

Total estimated proved reserves as of December 31, 2015, were 239.3 MMBoe compared to total estimated proved reserves of 315.3 MMBoe as of December 31, 2014. The standardized measure of discounted future net cash flows related to our estimated proved reserves was approximately $1.3 billion as of December 31, 2015, compared to approximately $4.5 billion as of December 31, 2014. Of the total estimated proved reserves, 54% were oil, 8% were NGLs and 38% were natural gas, and 80% were classified as proved developed. Set forth below is a breakdown of Breitburn’s total estimated proved reserves among its seven operating areas:

       
        % Estimated Proved
Operating Area       Reserves
Midwest       21.5%
Ark-La-Tex       19.6%
Permian Basin       18.7%
Mid-Continent       13.5%
Rockies       10.7%
Southeast       8.5%
California       7.5%
         

The unweighted average first-day-of-the-month oil and natural gas prices used to determine our total estimated proved reserves as of December 31, 2015, were $50.28 per Bbl of oil for WTI NYMEX and$2.59 per MMBtu of natural gas for Henry Hub.

2016 Operational Guidance (Excludes Acquisitions, Divestitures or Financing Transactions)

Breitburn’s 2016 Operational Guidance is subject to all of the cautionary statements and limitations described below and therein and under the caption “Cautionary Statement Regarding Forward-Looking Information.” 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, and estimated future volumes may be lower due to the impact of wells being shut-in or not being repaired due to their being uneconomic at current or commodity prices. 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 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. Breitburn’s 2016 Operational Guidance does not constitute any form of guarantee, assurance or promise that the matters indicated will actually be achieved; rather it 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 closed yesterday at $0.53, up $0.04 or 7.07%. BBEP has a 1-year high of $7.92 and a 1-year low of $0.46. The stock’s 50-day moving average is $0.60 and its 200-day moving average is $1.65.

On the ratings front, Breitburn has been the subject of a number of recent research reports. In a report issued on December 2, UBS analyst Shneur Gershuni maintained a Sell rating on BBEP, with a price target of $1.50, which implies an upside of 183.0% from current levels. Separately, on December 1, Wunderlich Securities’ Abhishek Sinha reiterated a Hold rating on the stock and has a price target of $2.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Shneur Gershuni and Abhishek Sinha have a total average return of 0.2% and -28% respectively. Gershuni has a success rate of 46% and is ranked #1899 out of 3675 analysts, while Sinha has a success rate of 20% and is ranked #3638.

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