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Strong Operational Performance; Key Metrics Continue to Meet or Exceed Annualized 2009 Guidance

LOS ANGELES, Nov 06, 2009 (BUSINESS WIRE) -- BreitBurn Energy Partners L.P. (the "Partnership") (NASDAQ:BBEP) today announced financial and operating results for its third quarter of 2009.

Key Highlights

• Operationally, the Partnership had a very strong quarter with total production above the high end of the 2009 guidance range despite the sale of the Lazy JL Field in Texas, effective July 1, 2009, and significant decreases in year-over-year capital spending.
• The Partnership's successful debt reduction efforts continued during the third quarter through consistent operating cash flows and the sale of the Lazy JL Field for $23 million. As of September 30, 2009, outstanding debt totaled $585 million.
• As of October 31, 2009, outstanding debt was approximately $576 million, representing $160 million in debt reduction in the first ten months of 2009.
• The Partnership announced the successful completion of its semi-annual borrowing base redetermination in early October, which resulted in the reaffirmation of its borrowing base at $732 million and no modification to any other terms of the Credit Agreement.
• Rising commodity prices allowed the Partnership to further strengthen its commodity price protection portfolio with the addition of new 2010, 2011, 2013, and 2014 hedges at attractive prices. The new hedges cover approximately 1,000,000 Bbls and 8,760,000 MMBtu of expected production during those years.

Management Commentary on Results

Hal Washburn, Chairman and Co-CEO, said, "We are pleased with the results we achieved this quarter and year-to-date, both operationally and financially. Our operations team continues to do a very good job improving the productivity of our asset base and managing costs in a volatile commodity price environment. We are particularly pleased with the ongoing improvements in our Eastern Division where the benefits of organizational changes made in the first quarter continue to have a positive impact on production even as we have reduced staffing levels in Michigan, Indiana and Kentucky below the levels in place when we acquired these properties in late 2007. Total production is trending above the high end of our guidance range and our annualized lease operating expenses and G&A costs are well within our guidance ranges for the year."

Washburn added, "In addition to our operational success, our financial flexibility continues to improve. We paid down an additional $55 million in debt during the quarter and have reduced borrowings by $160 million since year end 2008. As we move into 2010, our improved liquidity position will allow us the flexibility to accelerate capital spending to at least maintenance capital levels and eventually re-establish distributions when leverage has been reduced to acceptable levels."

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

• Total production decreased by less than 0.5% to 1,628 MBoe in the third quarter from 1,636 MBoe (pro forma for the sale of the Lazy JL Field) in the second quarter and is trending above the high end of our guidance range year-to-date.
  • Oil and NGL production was 743 MBoe compared to 744 MBoe (pro forma for the sale of the Lazy JL Field).
  • Natural gas production was 5,308 MMcf compared to 5,349 MMcf.
• Lease operating expenses per Boe, which include district expenses and processing fees and exclude production/property taxes and transportation costs, increased 4% to $17.53 per Boe in the third quarter from $16.88 per Boe in the second quarter. Year-to-date operating costs remain well within our guidance range of $16.25 - $18.50 per Boe.
• General and administrative expenses, excluding unit-based compensation, were $5.8 million, or $3.59 per Boe, in the third quarter compared to $5.3 million, or $3.18 per Boe, in the second quarter. Year-to-date general and administrative expenses, excluding unit-based compensation, are trending toward the lower end of our guidance range.
• Adjusted EBITDA, a non-GAAP measure, decreased 5% to $48.4 million in the third quarter from $50.8 million in the second quarter.
• Oil and natural gas sales revenues, including realized gains and losses on commodity derivative instruments (but excluding realized gains from hedge monetizations), increased 1% to $87.0 million in the third quarter from $86.4 million in the second quarter.
  • Realized gains from commodity derivative instruments were $24.3 million in the third quarter as compared to $51.5 million in the second quarter. Realized gains in the second quarter included $25.0 million from the monetization of selected 2011 and 2012 hedge contracts.
• NYMEX WTI crude oil averaged approximately $68.14 per barrel and NYMEX natural gas prices averaged approximately $3.44 per Mcf in the third quarter as compared to $59.61 per barrel and $3.81 per Mcf, respectively, in the second quarter.
• As a result of our extensive hedging portfolio, realized crude oil and natural gas prices increased and averaged $67.40 per Boe and $7.30 per Mcf, respectively, in the third quarter as compared to $65.47 per Boe and $7.09 per Mcf, respectively, in the second quarter.
• Net loss was $5.4 million, or $0.10 per diluted limited partner unit, in the third quarter as compared to a net loss of $108.5 million, or $2.06 per diluted limited partner unit, in the second quarter.
• Oil and gas capital expenditures totaled $7.2 million in the third quarter as compared to $3.3 million in the second quarter.

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.

Realized gains from commodity derivative instruments were $24.3 million during the third quarter of 2009. Realized losses from interest rate derivative instruments were $3.4 million. Non-cash unrealized losses from commodity derivative instruments were $11.6 million and non-cash unrealized losses from interest rate derivative instruments were $0.4 million for the period.

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. Realized gains from commodity derivative instruments of $51.5 million during the second quarter of 2009 included the impact of the hedge monetization.

Production, Income Statement and Realized Price Information

The following table presents production, selected income statement and realized price information for the three months ended September 30, 2009 and 2008 and the three months ended June 30, 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 November 6, 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 November 6, 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 888-204-6674 (international callers dial +1-913-312-0399) 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 November 13, 2009 by dialing 888-203-1112 (international callers dial +1-719-457-0820) and entering replay PIN 7153194, 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 California-based 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.

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 "believes," "future," "impact," "guidance," "ongoing improvements," "eventually," "will," "could," "may be used," "continue," "trending," and variations 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.

BBEP-IR

SOURCE: BreitBurn Energy Partners L.P.

Investor Relations Contacts:
BreitBurn Energy Partners L.P.
James G. Jackson
Executive Vice President and Chief Financial Officer
(213) 225-5900 x273
or
Gloria Chu
Investor Relations
(213) 225-5900 x210

Copyright Business Wire 2009

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