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BreitBurn Energy Partners L.P. Reports First Quarter Results

LOS ANGELES, May 10, 2010 (BUSINESS WIRE) -- BreitBurn Energy Partners L.P. (the "Partnership") (NASDAQ:BBEP) today announced financial and operating results for its first quarter of 2010.

Key Highlights

Management Commentary

Hal Washburn, CEO, said, "With the settlement of the Quicksilver lawsuit and the reinstatement of distributions, the first quarter of 2010 has proven to be a meaningful one for the Partnership. Following an excellent start to the year, our strong first quarter financial and operating results met or exceeded our expectations, with total production at 1,595 MBoe and adjusted EBITDA of $51.1 million. Additionally, over the last four months, we took advantage of improved crude oil prices and enhanced our hedge portfolio with new oil hedges at attractive prices, which will support our cash flows going forward."

Randy Breitenbach, President, said, "The Partnership is also extremely pleased to have recently completed the successful syndication of a new bank credit facility. The new facility, which expires in May 2014, has a borrowing base of $735 million and includes other terms that expand our financial flexibility. Along with settling the Quicksilver litigation and reinstating quarterly distributions, this represents one of the final steps in the plan we initiated one year ago to improve our financial flexibility and protect long term unitholder value."

First Quarter 2010 Operating and Financial Results Compared to Fourth Quarter 2009

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 $12.1 million during the first quarter of 2010. Realized losses from interest rate derivative instruments were $2.9 million. Non-cash unrealized gains from commodity derivative instruments were $39.9 million and non-cash unrealized gains from interest rate derivative instruments were $0.7 million for the period.

Production, Income Statement and Realized Price Information

The following table presents production, selected income statement and realized price information for the three months ended March 31, 2010 and 2009 and the three months ended December 31, 2009:

Three Months Ended
March 31, December 31, March 31,
Thousands of dollars, except as indicated 2010 2009 2009
Oil, natural gas and NGL sales (a) $ 80,469 $ 74,728 $ 57,643
Realized gains on commodity derivative instruments (b) 12,146 17,771 74,088
Unrealized gains (losses) on commodity derivative instruments (b) 39,919 (54,688 ) (4,068 )
Other revenues, net 632 452 276
Total revenues $ 133,166 $ 38,263 $ 127,939
Lease operating expenses and processing fees $ 30,491 $ 31,685 $ 29,226
Production and property taxes 5,579 6,118 4,705
Total lease operating expenses $ 36,070 $ 37,803 $ 33,931
Transportation expenses 847 926 1,248
Purchases 52 14 19
Change in inventory (1,118 ) (518 ) (917 )
Uninsured loss - - 100
Total operating costs $ 35,851 $ 38,225 $ 34,381
Lease operating expenses pre taxes per Boe (c) $ 19.12 $ 19.31 $ 17.91
Production and property taxes per Boe 3.50 3.75 2.93
Total lease operating expenses per Boe 22.62 23.06 20.84
General and administrative expenses excluding unit-based compensation $ 6,374 $ 6,184 $ 6,421
Net income (loss) $ 57,910 $ (39,693 ) $ 46,357
Net income (loss) per diluted limited partnership unit $ 1.02 $ (0.75 ) $ 0.84
Total production (MBoe) 1,595 1,632 1,603
Oil and NGL (MBoe) 727 744 742
Natural gas (MMcf) 5,207 5,335 5,169
Average daily production (Boe/d) 17,725 17,740 17,812
Sales volumes (MBoe) 1,594 1,642 1,583
Average realized sales price (per Boe) (d) (e) (f) $ 58.15 $ 56.48 $ 54.54
Oil and NGL (per Boe) (d) (e) (f) 72.79 69.72 62.38
Natural gas (per Mcf) (d) (e) 7.65 7.55 7.99
(a) Q1 2010, Q4 2009 and Q1 2009 include $124, $268 and $260, respectively, of amortization of an intangible asset related to crude oil sales contracts.
(b) Q1 2009 includes the effect of the early termination of oil and natural gas hedge contracts monetized for $45,632.
(c) Includes lease operating expenses, district expenses and processing fees. Q4 2009 and Q1 2009 exclude amortization of intangible asset related to the Quicksilver Acquisition.
(d) Includes realized gains on commodity derivative instruments.
(e) Q1 2009 excludes the effect of the early termination of oil and natural gas hedge contracts monetized for $45,632.
(f) Excludes amortization of intangible asset related to crude oil sales contracts. Includes crude oil purchases.

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 or loss and net cash flows from operating activities, our most directly comparable GAAP financial performance and liquidity measures, to Adjusted EBITDA for each of the periods indicated.

Three Months Ended
March 31, December 31, March 31,
Thousands of dollars 2010 2009 2009
Reconciliation of consolidated net income to Adjusted EBITDA:
Net income (loss) attributable to the partnership $ 57,839 ($39,712 ) $ 46,350
Unrealized (gain) loss on commodity derivative instruments (39,919 ) 54,688 4,068
Depletion, depreciation and amortization expense 22,054 25,450 30,301
Interest expense and other financing costs (a) 6,551 7,590 7,841
Unrealized gain on interest rate derivatives (691 ) (1,757 ) (966 )
Gain on sale of commodity derivatives (b) - - (45,632 )
Loss on sale of assets 115 495 -
Income tax provision 144 (1,174 ) 468
Amortization of intangibles 124 437 780
Unit-based compensation expense (c) 4,883 2,933 3,629
Adjusted EBITDA $ 51,100 $ 48,950 $ 46,839
Three Months Ended
March 31, December 31, March 31,
Thousands of dollars 2010 2009 2009
Reconciliation of net cash from operating activities to Adjusted EBITDA:
Net cash from operating activities $ 44,635 $ 40,387 $ 70,747
Increase in assets net of liabilities relating to operating activities 770 2,584 14,194
Interest expense (a) (d) 5,727 6,766 7,018
Gain on sale of commodity derivatives (b) - - (45,632 )
Equity earnings from affiliates, net (158 ) (536 ) (282 )
Incentive compensation expense (e) - 8 471
Incentive compensation paid 80 41 139
Income taxes 117 (281 ) 191
Non-controlling interest (71 ) (19 ) (7 )
Adjusted EBITDA $ 51,100 $ 48,950 $ 46,839
(a) Includes realized gains/losses on interest rate derivatives.
(b) Represents the early termination of hedge contracts monetized in Q1 2009.
(c) Represents non-cash long term incentive compensation expense.
(d) Excludes debt amortization.
(e) Represents cash-based incentive compensation plan expense.

Hedge Portfolio Summary

The table below summarizes the Partnership's commodity derivative hedge portfolio as of May 10, 2010.

Year
2010 2011 2012 2013 2014
Gas Positions:
Fixed price swaps:
Hedged volume (MMBtu/d) 43,648 25,955 19,129 27,000 -
Average price ($/MMBtu) $ 8.18 $ 7.26 $ 7.10 $ 6.92 $ -
Collars:
Hedged volume (MMBtu/d) 3,580 16,016 19,129 - -
Average floor price ($/MMBtu) $ 9.00 $ 9.00 $ 9.00 $ - $ -
Average ceiling price ($/MMBtu) $ 11.70 $ 11.28 $ 11.89 $ - $ -
Total:
Hedged volume (MMBtu/d) 47,228 41,971 38,257 27,000 -
Average price ($/MMBtu) $ 8.25 $ 7.92 $ 8.05 $ 6.92 $ -
Oil Positions:
Fixed price swaps:
Hedged volume (Bbls/d) 2,559 3,890 3,539 5,000 1,748
Average price ($/Bbl) $ 82.35 $ 72.78 $ 72.40 $ 79.32 $ 90.42
Participating swaps: (a)
Hedged volume (Bbls/d) 1,931 1,439 - - -
Average price ($/Bbl) $ 65.07 $ 61.29 $ - $ - $ -
Average participation % 54.4 % 53.2 % - - -
Collars:
Hedged volume (Bbls/d) 1,525 2,048 2,477 500 -
Average floor price ($/Bbl) $ 104.00 $ 103.42 $ 110.00 $ 77.00 $ -
Average ceiling price ($/Bbl) $ 137.68 $ 152.61 $ 145.39 $ 103.10 $ -
Floors:
Hedged volume (Bbls/d) 500 - - - -
Average floor price ($/Bbl) $ 100.00 $ - $ - $ - $ -
Total:
Hedged volume (Bbls/d) 6,515 7,377 6,016 5,500 1,748
Average price ($/Bbl) $ 83.65 $ 79.02 $ 87.88 $ 79.11 $ 90.42
(a) A participating swap combines a swap and a call option with the same strike price

Other Information

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 888-297-8911 (international callers dial +1-913-325-2390) 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 May 17, 2010 by dialing 888-203-1112 (international callers dial +1-719-457-0820) and entering replay PIN 7497394, 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.

In addition, as previously reported to the SEC in our Form 8-K filed on April, 29, 2010, the Partnership will hold its first Annual Meeting of the Limited Partners of the Partnership on July 29, 2010 in Los Angeles, California, at a time and exact location to be specified in the proxy statement for the Annual Meeting. The Partnership will be asked to elect two directors to serve until the Annual Meeting of Limited Partners in the year 2012 and to elect two directors to serve until the Annual Meeting of Limited Partners in the year 2013. The Board of Directors has determined that for purposes of the Annual Meeting, a Limited Partner's notice of nominations of persons for election to the Board of Directors will be considered timely if such notice is delivered to the General Partner not later than the close of business on June 10, 2010, nor earlier than the open of business on May 10, 2010. The Annual Meeting will also be held for the purpose of ratifying the selection of PricewaterhouseCoopers LLP as independent registered public accounting firm of the Partnership for the fiscal year ending 2010, and transacting such other business as may properly come before the meeting or any adjournments or postponements thereof.

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. The Partnership's 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 Regarding 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," "expectations," "going forward," "will," "could," "to be paid," 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 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, and the factors set forth under the heading "Risk Factors" incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2010, 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

BreitBurn Energy Partners L.P. and Subsidiaries
Unaudited Consolidated Statements of Operations
Three Months Ended
March 31,
Thousands of dollars, except per unit amounts 2010 2009
Revenues and other income items:
Oil, natural gas and natural gas liquid sales $ 80,469 $ 57,643
Gains on commodity derivative instruments, net 52,065 70,020
Other revenue, net 632 276
Total revenues and other income items 133,166 127,939
Operating costs and expenses:
Operating costs 35,851 34,381
Depletion, depreciation and amortization 22,054 30,301
General and administrative expenses 11,257 9,561
Loss on sale of assets 115 -
Total operating costs and expenses 69,277 74,243
Operating income 63,889 53,696
Interest and other financing costs, net 3,617 4,773
Losses on interest rate swaps 2,243 2,102
Other income, net (25 ) (4 )
Income before taxes 58,054 46,825
Income tax expense 144 468
Net income 57,910 46,357
Less: Net income attributable to noncontrolling interest (71 ) (7 )
Net income attributable to the partnership 57,839 46,350
Basic net income per unit $ 1.02 $ 0.85
Diluted net income per unit $ 1.02 $ 0.84
BreitBurn Energy Partners L.P. and Subsidiaries
Unaudited Consolidated Balance Sheets
March 31, December 31,
Thousands of dollars, except units outstanding 2010 2009
ASSETS
Current assets:
Cash $ 5,325 $ 5,766
Accounts and other receivables, net 59,918 65,209
Derivative instruments 75,451 57,133
Related party receivables 2,640 2,127
Inventory 7,084 5,823
Prepaid expenses 4,666 5,888
Intangibles 371 495
Total current assets 155,455 142,441
Equity investments 7,992 8,150
Property, plant and equipment
Property, plant and equipment 2,075,096 2,066,685
Accumulated depletion and depreciation (347,010 ) (325,596 )
Net property, plant and equipment 1,728,086 1,741,089
Other long-term assets
Derivative instruments 88,137 74,759
Other long-term assets 2,394 4,590
Total assets $ 1,982,064 $ 1,971,029
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable $ 17,800 $ 21,314
Book overdraft 878 -
Derivative instruments 22,950 20,057
Related party payables 13,000 13,000
Revenue and royalties payable 20,162 18,224
Salaries and wages payable 3,602 10,244
Accrued liabilities 10,299 9,051
Total current liabilities 88,691 91,890
Long-term debt 523,000 559,000
Deferred income taxes 2,519 2,492
Asset retirement obligation 36,681 36,635
Derivative instruments 38,302 50,109
Other long-term liabilities 2,102 2,102
Total liabilities 691,295 742,228
Equity:
Partners' equity 1,290,303 1,228,373
Noncontrolling interest 466 428
Total equity 1,290,769 1,228,801
Total liabilities and equity $ 1,982,064 $ 1,971,029
Common units outstanding (in thousands) 53,294 52,784
BreitBurn Energy Partners L.P. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
Three Months Ended
March 31,
Thousands of dollars 2010 2009
Cash flows from operating activities
Net income $ 57,910 $ 46,357
Adjustments to reconcile to cash flow from operating activities:
Depletion, depreciation and amortization 22,054 30,301
Unit-based compensation expense 4,883 3,158
Unrealized (gains) losses on derivative instruments (40,610 ) 3,102
Distributions greater than income from equity affiliates 158 282
Deferred income tax 27 277
Amortization of intangibles 124 780
Loss on sale of assets 115 -
Other 824 823

Changes in net assets and liabilities:

Accounts receivable and other assets 7,884 2,465
Inventory (1,261 ) (1,060 )
Net change in related party receivables and payables (513 ) 1,257
Accounts payable and other liabilities (6,960 ) (16,995 )
Net cash provided by operating activities 44,635 70,747
Cash flows from investing activities
Capital expenditures (9,954 ) (9,107 )
Net cash used by investing activities (9,954 ) (9,107 )
Cash flows from financing activities
Distributions - (28,038 )
Proceeds from the issuance of long-term debt 22,000 130,916
Repayments of long-term debt (58,000 ) (159,975 )
Book overdraft 878 (6,088 )
Net cash used by financing activities (35,122 ) (63,185 )
Decrease in cash (441 ) (1,545 )
Cash beginning of period 5,766 2,546
Cash end of period $ 5,325 $ 1,001

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 2010

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