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Press release from Business Wire

BreitBurn Energy Partners L.P. Reports First Quarter Results

Friday, May 03, 2013

BreitBurn Energy Partners L.P. Reports First Quarter Results

08:00 EDT Friday, May 03, 2013

LOS ANGELES (Business Wire) -- BreitBurn Energy Partners L.P. (the “Partnership”) (NASDAQ:BBEP) today announced financial and operating results for its first quarter of 2013.

Selected Results for the Quarter Included the Following:

  • Increased total net production to a quarterly record high of 2.35 MMBoe, which represented an 18% increase from the first quarter of 2012.
  • Increased net liquids production to a quarterly record high of 1.21 MMBoe, or 51% of total net production, which represented a 40% increase from the first quarter of 2012.
  • Increased Adjusted EBITDA, a non-GAAP financial measure, to $64.1 million, which represented a 4% increase from the first quarter of 2012.
  • Drilled the first 16 wells, completed 10 workovers, and spudded 22 additional wells of the Partnership's projected 135 well drilling program for 2013.
  • Declared cash distribution for the first quarter of 2013 of $0.475 per unit, or $1.90 per unit on an annualized basis on April 28, 2013, which represented a 4% increase from the first quarter of 2012.
  • Reduced borrowings to approximately $100 million under the Partnership's credit facility, which has total lender commitments of $900 million under its borrowing base and the ability to increase commitments to $1 billion with lender approval.

Management Commentary

Hal Washburn, CEO, said: “The Partnership is off to what we believe is a good start and a productive year. Our 2013 drilling program has already delivered better than expected results and we are on track with our $261 million capital program and delivery of our full year production guidance of between 9.5 million and 10.1 million Boe. We had five rigs running during the first quarter and expect to have as many as 11 rigs running later in the year. Our development program is focused on our high margin oil opportunities in both our legacy and newly acquired assets. We expect liquids production to increase by over 40% from the fourth quarter of 2012 to the fourth quarter of 2013 and exit the year with liquids comprising approximately 55% of total production. We continue to actively monitor the acquisition market and our balance sheet should allow us to move quickly on the right opportunity.”

Mark Pease, President and COO, said: “The first quarter was very active from an operational standpoint and set the foundation for increased activity later this year. We spent approximately $45 million in total capital and as planned, we expect to increase drilling activity significantly through mid-year. We expect to exit 2013 with about the same activity level as the first quarter, so the majority of our capital spending will occur in the second and third quarters. Over 95% of our 2013 capital spending will be on our high-margin oil projects, including those in Texas and California where we have been experiencing good drilling results.”

First Quarter 2013 Operating and Financial Results Compared to Fourth Quarter 2012

  • Total production increased to a record quarterly high of 2,346 MBoe in the first quarter of 2013 from 2,212 MBoe in the fourth quarter of 2012. Average daily production was 26,070 Boe/day in the first quarter of 2013 compared to 24,044 Boe/day in the fourth quarter of 2012.
    • Oil and NGL production was 1,206 MBoe compared to 1,005 MBoe.
    • Natural gas production was 6,844 MMcf compared to 7,243 MMcf.
  • Adjusted EBITDA, a non-GAAP financial measure, was $64.1 million in the first quarter of 2013 compared to $78.0 million in the fourth quarter of 2012. The decrease was primarily due to lower realized gains on commodity derivatives for both crude oil and natural gas, weaker oil differentials in Wyoming and Texas, weaker natural gas differentials in Michigan, as well as weaker natural gas liquids market prices.
  • Pre-tax lease operating expenses, which include district expenses, processing fees and transportation costs, were $19.42 per Boe in the first quarter of 2013 as compared to $18.88 per Boe in the fourth quarter of 2012.
  • General and administrative expenses, excluding non-cash unit-based compensation, were $4.29 per Boe in the first quarter of 2013 as compared to $4.44 per Boe in the fourth quarter of 2012.
  • Oil and natural gas sales revenues were $120.4 million for the first quarter of 2013, up from $113.2 million in the fourth quarter of 2012, primarily reflecting higher crude oil prices.
  • Realized gains on commodity derivative instruments were $5.2 million in the first quarter of 2013 compared to $22.5 million in the fourth quarter of 2012.
  • NYMEX WTI crude oil spot prices averaged $94.33 per barrel and Brent crude oil spot prices averaged $112.44 per barrel in the first quarter of 2013 compared to $88.01 per barrel and $110.15 per barrel, respectively, in the fourth quarter of 2012. Henry Hub natural gas spot prices averaged $3.49 per Mcf in the first quarter of 2013 compared to $3.40 per Mcf in the fourth quarter of 2012.
  • Realized crude oil and NGL prices averaged $78.12 per Boe and realized natural gas prices averaged $5.43 per Mcf in the first quarter of 2013, compared to $91.38 per Boe and $6.14 per Mcf, respectively, in the fourth quarter of 2012.
  • Net loss attributable to the Partnership, including the effect of unrealized losses on commodity derivative instruments, was $36.3 million, or $0.38 per diluted common unit, in the first quarter of 2013 compared to a net loss of $10.3 million, or $0.13 per diluted common unit, in the fourth quarter of 2012.
  • Oil and gas capital expenditures totaled $45 million in the first quarter of 2013 compared to $60 million in the fourth quarter of 2012.

Impact of Derivative Instruments

The Partnership uses commodity derivative instruments to mitigate the risks associated with commodity price volatility 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 $5.2 million for the quarter ended March 31, 2013. Non-cash unrealized losses from commodity derivative instruments were $29.3 million for the quarter ended March 31, 2013.

Production, Statement of Operations, and Realized Price Information

The following table presents production, selected income statement and realized price information for the three months ended March 31, 2013 and 2012, and the three months ended December 31, 2012:

    Three Months Ended
Thousands of dollars, except as indicated

March 31,
2013

   

December 31,
2012

   

March 31,
2012

Oil, natural gas and NGLs sales(a)

$ 120,362 $ 113,179 $ 94,007
Realized gain on commodity derivative instruments 5,158 22,455 17,591
Unrealized loss on commodity derivative instruments (29,334 ) (18,740 ) (53,596 )
Other revenues, net   758     700     1,145  
Total revenues $ 96,944   $ 117,594   $ 59,147  
Lease operating expenses and processing fees $ 45,561 $ 41,769 $ 38,073
Production and property taxes   9,383     10,962     7,573  
Total lease operating expenses $ 54,944   $ 52,731   $ 45,646  
Purchases and other operating costs 318 267 370
Change in inventory   (3,109 )   578     (2,755 )
Total operating costs $ 52,153   $ 53,576   $ 43,261  

Lease operating expenses pre taxes per Boe(b)

$ 19.42 $ 18.88 $ 19.16
Production and property taxes per Boe 4.00 4.96 3.81
Total lease operating expenses per Boe   23.42     23.84     22.97  
General and administrative expenses (excluding unit-based compensation) $ 10,055   $ 9,815   $ 8,083  
Net income loss attributable to the partnership $ (36,300 ) $ (10,334 ) $ (49,970 )
Net income loss per diluted limited partner unit $ (0.38 ) $ (0.13 ) $ (0.76 )
 
Total production (MBoe) 2,346 2,212 1,987
Oil and NGLs (MBoe) 1,206 1,005 859
Natural gas (MMcf) 6,844 7,243 6,769
Average daily production (Boe/d)   26,070     24,044     21,835  
Sales volumes (MBoe)   2,270     2,203     1,899  

Average realized sales price (per Boe)(c)(d)

$ 55.23 $ 61.49 $ 58.66

Oil and NGLs (per Boe)(c)(d)

78.12 91.38 90.36

Natural gas (per Mcf)(c)

  5.43     6.14     6.18  

(a)

 

NGLs account for less than 5% of total production.

(b)

Includes lease operating expenses, district expenses, transportation expenses and processing fees.

(c)

Includes realized gain on commodity derivative instruments.

(d)

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. Management believes that these non-GAAP financial measures enhance comparability to prior periods.

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 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 2013 2012 2012
Reconciliation of net loss to Adjusted EBITDA:
 
Net loss attributable to the Partnership $ (36,300 ) $ (10,334 ) $ (49,970 )
 
Unrealized loss on commodity derivative instruments 29,334 18,740 53,596
Depletion, depreciation and amortization expense 47,790 40,497 38,281

Interest expense and other financing costs(a)

18,419 21,171 14,458
Unrealized gain on interest rate derivatives - (3,021 ) (164 )
(Gain) loss on sale of assets (9 ) 264 125
Income tax expense (benefit) 30 285 (559 )

Unit-based compensation expense(b)

4,808 5,329 5,591
Net operating cash flow from acquisitions, effective date through closing date   -     5,092     -  
Adjusted EBITDA $ 64,072   $ 78,023   $ 61,358  
 
 
Three Months Ended
March 31, December 31, March 31,
Thousands of dollars 2013 2012 2012
Reconciliation of net cash flows from operating activities to Adjusted EBITDA:
 
Net cash provided by operating activities $ 58,852 $ 25,506 $ 71,299
 
Increase (decrease) in assets net of liabilities relating to operating activities (12,140 ) 27,655 (23,168 )

Interest expense(a)(c)

17,180 19,885 13,206
Income from equity affiliates, net 129 (131 ) (154 )

Incentive compensation expense(d)

- (82 ) -
Income taxes 51 98 220
Non-controlling interest - - (45 )
Net operating cash flow from acquisitions, effective date through closing date   -     5,092     -  
Adjusted EBITDA $ 64,072   $ 78,023   $ 61,358  
 

(a)

 

Includes realized loss on interest rate derivatives.

(b)

Represents non-cash long-term unit-based incentive compensation expense.

(c)

Excludes amortization of debt issuance costs and amortization of senior note discount/premium.

(d)

Represents cash-based incentive compensation plan expense.

 

Hedge Portfolio Summary

The table below summarizes the Partnership's commodity derivative hedge portfolio as of May 3, 2013. Please refer to the updated Commodity Price Protection Portfolio via our website for additional details related to our hedge portfolio.

     

Year

2013       2014       2015       2016       2017
Oil Positions:
Fixed Price Swaps - NYMEX WTI
Hedged Volume (Bbls/d) 5,270 4,814 5,189 2,611 1,472
Average Price ($/Bbl) $ 91.45 $ 93.07 $ 94.67 $ 89.60 $ 86.32
Fixed Price Swaps - ICE Brent
Hedged Volume (Bbls/d) 4,200 4,800 3,300 4,300 298
Average Price ($/Bbl) $ 97.57 $ 98.88 $ 97.73 $ 95.17

$

97.50

Collars - NYMEX WTI
Hedged Volume (Bbls/d) 500 1,000 1,000 - -
Average Floor Price ($/Bbl) $ 77.00 $ 90.00 $ 90.00 $ - $ -
Average Ceiling Price ($/Bbl) $ 103.10 $ 112.00 $ 113.50 $ - $ -
Collars - ICE Brent
Hedged Volume (Bbls/d) - -

500

500 -
Average Floor Price ($/Bbl) $ - $ - $ 90.00 $ 90.00

$

-

Average Ceiling Price ($/Bbl) $ - $ -

$

109.50

$

101.25

$

-

Puts - NYMEX WTI
Hedged Volume (Bbls/d) 1,000 500

500

1,000

-

Average Price ($/Bbl) $ 90.00 $ 90.00 $ 90.00 $ 90.00

$

-

Total:
Hedged Volume (Bbls/d) 10,970 11,114 10,489 8,411

1,770

Average Price ($/Bbl) $ 93.00 $ 95.17 $ 94.74 $ 92.52 $ 88.20
 
Gas Positions:
Fixed Price Swaps - MichCon City-Gate
Hedged Volume (MMBtu/d) 37,000 7,500 7,500 7,000

-

Average Price ($/MMBtu) $ 6.50 $ 6.00 $ 6.00 $ 4.51 $

-

Fixed Price Swaps - Henry Hub
Hedged Volume (MMBtu/d) 24,445 38,600 43,200 20,700 5,571
Average Price ($/MMBtu) $ 4.71 $ 4.80 $ 4.83 $ 4.24 $ 4.51
Puts - Henry Hub
Hedged Volume (MMBtu/d)

-

6,000 6,694

 

-

 

-

Average Price ($/MMBtu)

$

-

$

5.00

$

1.12

$

-

$

-

Total:
Hedged Volume (MMBtu/d) 61,445 52,100 52,200 27,700 5,571
Average Price ($/MMBtu) $ 5.79 $ 4.99 $ 5.00 $ 4.31 $ 4.51
 
Calls - Henry Hub
Hedged Volume (MMBtu/d) 30,000 15,000 - - -
Average Price ($/MMBtu) $ 8.00 $ 9.00 $ - $ - $ -
Deferred Premium ($/MMBtu) $ 0.08 $ 0.12 $ - $ - $ -
 

Other Information

The Partnership will host an investor conference call to discuss its results today at 9:00 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 888-438-5519 (international callers dial +1-719-457-2083) 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, 2013 by dialing 877-870-5176 (international callers dial +1-858-384-5517) and entering replay PIN 5531578, 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 master 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 Michigan, Wyoming, California, Texas, Florida, 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 the Partnership's operations that are based on management's current expectations, estimates and projections about its operations. Words and phrases such as “believes,” “expect,” “future,” “impact,” “guidance,” “forecast,” “will be” 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 and other sources of liquidity to execute our business plan, prices and demand for natural gas and oil, increases in operating costs, uncertainties inherent in estimating our reserves and production, our ability to replace reserves and efficiently develop our current reserves, political and regulatory developments relating to taxes, derivatives and our oil and gas operations, risks relating to our acquisitions, 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, and if applicable, 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, the Partnership 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 Balance Sheets
 
    March 31,         December 31,
Thousands 2013 2012
ASSETS
Current assets
Cash $ 7,610 $ 4,507
Accounts and other receivables, net 58,473 67,862
Derivative instruments 17,844 34,018
Related party receivables 1,147 1,413
Inventory 7,465 3,086
Prepaid expenses   1,576     2,779  
Total current assets 94,115 113,665
Equity investments 7,133 7,004
Property, plant and equipment
Oil and gas properties 3,411,617 3,363,946
Other assets   15,325     14,367  
3,426,942 3,378,313
Accumulated depletion and depreciation   (712,545 )   (666,420 )
Net property, plant and equipment 2,714,397 2,711,893
Other long-term assets
Derivative instruments 48,144 55,210
Other long-term assets 25,630 27,722
   
Total assets $ 2,889,419   $ 2,915,494  
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $ 42,159 $ 42,497
Derivative instruments 11,691 5,625
Revenue and royalties payable 21,038 22,262
Wages and salaries payable 5,282 10,857
Accrued interest payable 28,344 13,002
Accrued liabilities   27,060     20,997  
Total current liabilities 135,574 115,240
 
Credit facility 85,000 345,000
Senior notes, net 755,697 755,696
Deferred income taxes 2,466 2,487
Asset retirement obligation 99,792 98,480
Derivative instruments 4,421 4,393
Other long-term liabilities   4,576     4,662  
Total liabilities 1,087,526 1,325,958
Equity
Partners' equity   1,801,893     1,589,536  
Total equity 1,801,893 1,589,536
   
Total liabilities and equity $ 2,889,419   $ 2,915,494  
 
Common units outstanding 99,680 84,668
 
 
BreitBurn Energy Partners L.P. and Subsidiaries
Unaudited Consolidated Statements of Operations
 
    Three Months Ended
March 31,
Thousands of dollars, except per unit amounts 2013         2012
 
Revenues and other income items
Oil, natural gas and natural gas liquid sales $ 120,362 $ 94,007
Loss on commodity derivative instruments, net (24,176 ) (36,005 )
Other revenue, net   758     1,145  
Total revenues and other income items 96,944 59,147
Operating costs and expenses
Operating costs 52,153 43,261
Depletion, depreciation and amortization 47,790 38,281
General and administrative expenses 14,863 13,674
(Gain) loss on sale of assets   (9 )   125  
 
Operating loss (17,853 ) (36,194 )
 
Interest expense, net of capitalized interest 18,419 13,800
Loss on interest rate swaps - 494
Other income, net   (2 )   (4 )
Total other expense   18,417     14,290  
 
Loss before taxes (36,270 ) (50,484 )
 
Income tax expense (benefit)   30     (559 )
 
Net loss (36,300 ) (49,925 )
 
Less: Net income attributable to noncontrolling interest   -     (45 )
Net loss attributable to the partnership   (36,300 )   (49,970 )
 
Basic net loss per unit $ (0.38 ) $ (0.76 )
Diluted net loss per unit $ (0.38 ) $ (0.76 )
 
 
BreitBurn Energy Partners L.P. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
   
Year Ended
March 31,
Thousands of dollars 2013         2012
 
Cash flows from operating activities
Net loss $ (36,300 ) $ (49,925 )
Adjustments to reconcile net loss to cash flow from operating activities:
Depletion, depreciation and amortization 47,790 38,281
Unit-based compensation expense 4,808 5,591
Unrealized loss on derivative instruments 29,334 53,432
Income from equity affiliates, net (129 ) 154
Deferred income taxes (21 ) (779 )
(Gain) loss on sale of assets (9 ) 125
Other 905 809
Changes in assets and liabilities:
Accounts receivable and other assets 11,455 30,670
Inventory (4,379 ) (4,505 )
Net change in related party receivables and payables 266 2,085
Accounts payable and other liabilities   5,132     (4,639 )
Net cash provided by operating activities   58,852     71,299  
Cash flows from investing activities
Capital expenditures (38,143 ) (14,054 )
Proceeds from sale of assets 9 507
Property acquisitions   (2,503 )   -  
Net cash used in investing activities   (40,637 )   (13,547 )
Cash flows from financing activities
Issuance of common units 285,152 166,155
Distributions (40,602 ) (28,130 )
Proceeds from issuance of long-term debt, net 72,000 310,885
Repayments of long-term debt (332,000 ) (498,000 )
Change in book overdraft 338 (2,097 )
Long-term debt issuance costs   -     (5,513 )
Net cash used in financing activities   (15,112 )   (56,700 )
Increase in cash 3,103 1,052
Cash beginning of period   4,507     5,328  
Cash end of period $ 7,610   $ 6,380  

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

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