BreitBurn Energy Partners L.P. (NASDAQ:BBEP)

CAPS Rating: 5 out of 5

An independent oil and gas partnership focused on the acquisition, exploitation and development of oil and gas properties.


Player Avatar NtscrbEnergy (48.56) Submitted: 3/13/2007 8:05:43 AM : Underperform Start Price: $15.32 BBEP Score: +105.31

BreitBurn Energy Partners L.P. a 95.55% owned indirect subsidiary of Provident Energy Trust, the Canadian energy trust, is primarily involved in acquisition, exploration and development of oil and gas properties, with reserves located in the Los Angeles Basin in California and the Wind River and Big Horn Basins in central Wyoming. The company classifies its revenues into three key segments: Oil, natural gas and NGL sales; Realized and Unrealized derivative instruments; and Other revenue. The core Oil, natural gas and NGL sales segment provide over 65% to the over all revenues, where oil sales form the major chunk of the inflows.
The company’s current performance is showing mixed signals, the Average daily production witnessed a drop from the earlier near 5000 levels to the present 4,572 barrels of oil equivalent per day (boe). Also the general and administrative expense is witnessing a rising trend, although they were also impacted by $4.5 million expense due to the partnership's management incentive plans. Conversely, the ongoing acquisition strategy has positively impacted the reserves that have now grown to 30.7 million boe, while revenue and profits also notched a respectable count.
Looking ahead, the latest acquisition of Permian Basin’s high quality oil properties, with total proved reserves of approximately 2 million barrels of oil equivalent will further positively impact company’s reserve, while it has also driven the stock rise over 25% in previous two months. However, it will be very difficult for the company to beat the benchmark from this high level, considering the falling average production and no other major acquisition in sight. Moreover, with over 70% of the company’s production hedged, thought it will provide a certain cash flow, it will not be sufficient in delivering huge returns. Further, given the high operating costs and mediocre quality oil it will be better to stay away from the stock at these levels.

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