Print page | E-mail page | Download PDF
« Previous Release | Next Release »

Debt Levels Reduced; Key Metrics Meet or Exceed Annualized 2009 Guidance; 2009 Capital Spending Plan Increased

LOS ANGELES, Aug 10, 2009 (BUSINESS WIRE) -- BreitBurn Energy Partners L.P. (the "Partnership") (NASDAQ:BBEP) today announced financial and operating results for its second quarter of 2009.

Key Highlights

• The Partnership's successful debt reduction efforts continued during the second quarter through consistent operating cash flows and $25 million in hedge monetization proceeds. As of June 30, 2009, outstanding debt totaled $640 million.
• Subsequent to the quarter end, the Partnership used $23 million in proceeds from the sale of its non-core Permian Basin assets to further reduce debt. As of July 31, 2009, outstanding borrowings were approximately $613 million, representing $123 million in debt reduction in the first seven months of 2009.
• Operationally, the Partnership had an excellent quarter with total production at the high end of the 2009 guidance range despite its significantly reduced capital spending and drilling activity in the first half of 2009.
• The Partnership's expense and cost control programs achieved meaningful reductions in general and administrative expenses and lease operating expenses, with both metrics trending toward the lower end of the guidance range.
• The Partnership took advantage of the recent improvement in commodity prices and extended its hedging portfolio into 2013. The newly added hedges were entered into at the attractive price levels of $7.50 per MMBtu for natural gas and $76.62 per barrel for crude oil.

Management Commentary on Results and Increased 2009 Capital Spending Plan

Hal Washburn, Chairman and Co-CEO, said, "Our second quarter results reflect significant progress toward the goals we established for 2009. First, we significantly reduced our bank debt during the quarter. Subsequent to the quarter end, we closed the sale of our non-core Permian Basin assets, further accelerating our debt reduction efforts. Since year end we have paid down almost $125 million in borrowings and we are currently approaching debt levels of $600 million. We are very proud of our entire team for their work in bringing about this significant achievement. While we are not yet announcing the reinstatement of distributions, we have made substantial progress toward that goal. Again, the timing of our reinstating distributions will be based on a number of factors. One very important factor is the outcome of our October borrowing base redetermination. We remain committed to evaluating all reasonable alternatives to further reduce debt and reinstate distributions and will pursue them if management and the Board determine they are in the long term best interest of our unitholders."

Washburn continued, "Our team did an excellent job this quarter. Year to date production is at the high end of our guidance range on an annualized basis and lease operating expenses continue to decline and are near the low end of our guidance on an annualized basis. Our G&A costs, excluding unit based compensation, continue to decline as well and are currently trending toward the low end of our guidance range. The continued downward trend in both operating and G&A expenses reflects our ongoing efforts to reduce costs throughout the organization. Given our increased financial flexibility, and with the recent improvement in commodity prices, we are also increasing our capital spending plan for 2009 to approximately $32 million compared to our previously announced guidance of $20-$24 million. We intend to use this additional capital to expand production efforts at our oil properties. We continue to work toward our goal of returning our capital program to the level necessary to hold production flat going forward."

Second Quarter 2009 Operating and Financial Results Compared to First Quarter 2009

• Total production increased 3% to 1,654 MBoe in the second quarter from 1,603 MBoe in the first quarter.
  • Oil and NGL production was 762 MBoe compared to 742 MBoe.
  • Natural gas production was 5,349 MMcf compared to 5,169 MMcf.
• Lease operating expenses per Boe, which include district expenses and processing fees and exclude production/property taxes and transportation costs, decreased 6% to $16.88 per Boe in the second quarter from $17.91 per Boe in the first quarter. Annualized, these operating costs are at the low end of our guidance range of $16.25 - $18.50 per Boe.
• General and administrative expenses, excluding unit-based compensation, decreased 18% to $5.3 million, or $3.18 per Boe, in the second quarter from $6.4 million, or $4.01 per Boe in the first quarter. General and administrative expenses continued to decline sequentially and are trending toward the lower end of our guidance range.
• Adjusted EBITDA, a non-GAAP measure which excludes the impact of the monetization of selected 2011 and 2012 hedge contracts, increased 9% to $50.8 million in the second quarter from $46.8 million in the first quarter.
• Oil and natural gas sales revenues, including realized gains and losses on commodity derivative instruments, decreased 15% to $111.3 million in the second quarter from $131.7 million in the first quarter.
• Realized gains from commodity derivative instruments were $51.5 million in the second quarter as compared to $74.1 million in the first quarter. Realized gains included $25.0 million in the second quarter and $45.6 million in the first quarter from the monetization of selected 2011 and 2012 hedge contracts.
• NYMEX WTI crude oil averaged approximately $59.61 per barrel and NYMEX natural gas prices averaged approximately $3.81 per Mcf in the second quarter as compared to $43.14 per barrel and $4.47 per Mcf, respectively, in the first quarter.
• As a result of our extensive hedging portfolio realized crude oil and natural gas prices stayed relatively flat and averaged $65.47 per Boe and $7.09 per Mcf, respectively, in the second quarter as compared to $62.38 per Boe and $7.99 per Mcf, respectively, in the first quarter.
• Net loss was $108.5 million, or $2.06 per diluted limited partner unit, as compared to a net gain of $46.4 million, or $0.84 per diluted limited partner unit.
• Oil and gas capital expenditures totaled $3.6 million compared to $7.0 million.

Impact of Derivative Instruments

The Partnership uses commodity and interest rate derivative instruments to mitigate the risks associated with commodity price volatility and changing interest rates and to help maintain cash flows for operating activities, acquisitions, capital expenditures, and distributions. The Partnership does not enter into derivative instruments for speculative trading purposes. Non-cash gains or losses do not affect Adjusted EBITDA, cash flow from operations or the Partnership's ability to pay cash distributions.

In June 2009, the Partnership terminated selected crude oil and natural gas derivative instruments covering a portion of its expected production in 2011 and 2012 and replaced them with new derivative instruments for the same 2011 and 2012 volumes. Net realized proceeds of approximately $25.0 million were immediately used to reduce outstanding borrowings under the Partnership's credit facility.

Including the effects of the $25.0 million hedge monetization noted above, realized gains from commodity derivative instruments were $51.5 million during the second quarter of 2009. Realized losses from interest rate derivative instruments were $3.2 million. Non-cash unrealized losses from commodity derivative instruments were $148.7 million and non-cash unrealized gains from interest rate derivative instruments were $3.5 million for the period. Excluding the effect of the hedge monetization, realized gains on commodity derivative instruments would have been $26.5 million and unrealized losses would have been $123.7 million for the period.

The effect of the hedge monetization is excluded from the calculation of realized prices and Adjusted EBITDA for the second quarter of 2009 as discussed herein.

Production, Income Statement and Realized Price Information

The following table presents production, selected income statement and realized price information for the three months ended June 30, 2009 and 2008 and the three months ended March 31, 2009:

Non-GAAP Financial Measures

This press release, the financial tables and other supplemental information, including the reconciliations of certain non-generally accepted accounting principles ("non-GAAP") measures to their nearest comparable generally accepted accounting principles ("GAAP") measures, may be used periodically by management when discussing the Partnership's financial results with investors and analysts and they are also available on the Partnership's website under the Investor Relations tab.

Among the non-GAAP financial measures used is "Adjusted EBITDA." This non-GAAP financial measure should not be considered as an alternative to GAAP measures, such as net income, operating income, cash flow from operating activities or any other GAAP measure of liquidity or financial performance.

Adjusted EBITDA is presented as management believes it provides additional information relative to the performance of the Partnership's business, such as our ability to meet our debt covenant compliance tests. This non-GAAP financial measure may not be comparable to similarly titled measures of other publicly traded partnerships or limited liability companies because all companies may not calculate Adjusted EBITDA in the same manner.

Adjusted EBITDA

The following table presents a reconciliation of net income (loss) and net cash from operating activities, our most directly comparable GAAP financial performance and liquidity measures, to Adjusted EBITDA for each of the periods indicated.

Hedge Portfolio Summary

The table below summarizes the Partnership's commodity derivative hedge portfolio as of August 10, 2009.

(a) A participating swap combines a swap and a call option with the same strike price.

Interest Rate Hedge Portfolio

We had the following interest rate swaps in place at August 10, 2009, to fix a portion of floating LIBOR-base debt on our credit facility:

Conference Call

The Partnership will host an investor conference call to discuss its results today at 10:00 a.m. (Pacific Time). Investors may access the conference call over the Internet via the Investor Relations tab of the Partnership's website (www.breitburn.com), or via telephone by dialing 888-740-6142(international callers dial +1-913-312-1451) a few minutes prior to register. Those listening via the Internet should go to the site 15 minutes early to register, download and install any necessary audio software. In addition, a replay of the call will be available through August 17, 2009 by dialing 888-203-1112 (international callers dial +1-719-457-0820) and entering replay PIN 7149020, or by going to the Investor Relations tab of the Partnership's website (www.breitburn.com). The Partnership will take live questions from securities analysts and institutional portfolio managers; the complete call is open to all other interested parties on a listen-only basis.

About BreitBurn Energy Partners L.P.

BreitBurn Energy Partners L.P. is a publicly traded independent oil and gas limited partnership focused on the acquisition, exploitation, development and production of oil and gas properties. These producing and non-producing crude oil and natural gas reserves are located in Northern Michigan, the Los Angeles Basin in California, the Wind River and Big Horn Basins in central Wyoming, the Sunniland Trend in Florida, and the New Albany Shale in Indiana and Kentucky. See www.BreitBurn.com for more information.

BBEP-IR

Cautionary Statement Relevant to Forward-Looking Information

This press release contains forward-looking statements relating to BreitBurn's operations that are based on management's current expectations, estimates and projections about its operations. Words and phrases such as "anticipates," "expects," "believes," "estimates," "future," "impact," "guidance," "ongoing efforts," "potential," "will pursue," "to mitigate the risks," "may be used," "continue," "trending," "to meet," various of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. These include risks relating to the Partnership's financial performance and results, availability of sufficient cash flow to execute our business plan, our level of indebtedness, a further significant reduction in the borrowing base under our bank credit facility, our ability to raise capital, prices and demand for natural gas and oil, our ability to replace reserves and efficiently develop our current reserves, the litigation instituted by Quicksilver Resources Inc. against us and the factors set forth under the heading "Risk Factors" incorporated by reference from our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, BreitBurn undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Unpredictable or unknown factors not discussed herein also could have material adverse effects on forward-looking statements.

SOURCE: BreitBurn Energy Partners L.P.

BreitBurn Energy Partners L.P.
James G. Jackson, 213-225-5900 ext. 273
Executive Vice President and Chief Financial Officer
or
Gloria Chu, 213-225-5900 ext. 210
Investor Relations

Copyright Business Wire 2009

Close window | Back to top