Breitburn Energy Partners LP (NASDAQ:BBEP) (Breitburn) today
announced financial and operating results for the second quarter of
2014.
Breitburn and QR Energy, LP (NYSE: QRE) also announced today the
signing of a definitive merger agreement pursuant to which
Breitburn will acquire QR Energy in a unit-for-unit exchange valued
at approximately $3.0 billion, including QR Energy’s existing net
debt and outstanding Class C Convertible Preferred Units.
Key Highlights for the Second Quarter
2014:
- Increased total production to a record
quarterly high of 3.4 MMBoe, which represents a 38% increase from
the second quarter of 2013.
- Increased oil and natural gas liquids
(NGL) production to a record quarterly high of 2.2 MMBoe, which
represents a 69% increase from the second quarter of 2013.
- Adjusted EBITDA, a non-GAAP financial
measure, was $110.0 million, which represents a 30% increase from
the second quarter of 2013.
- Drilled and completed 33 gross (30.4
net) wells and completed 14 gross (13.7 net) workovers.
- Declared cash distributions
attributable to the second quarter of 2014 of approximately $2.01
per unit on an annualized basis, which represents a 4.7% increase
from the second quarter of 2013.
- Distributable cash flow, a non-GAAP
financial measure, was $52.7 million, which represents a 9%
increase from the second quarter of 2013.
- Issued 8 million shares of 8.25% Series
A Cumulative Redeemable Perpetual Preferred Units at $25.00 per
unit, resulting in net proceeds of $193 million.
Management Commentary
Halbert S. Washburn, Breitburn’s Chief Executive Officer, said:
“We delivered another record quarter with total production reaching
approximately 3.4 million Boe, representing a 5% increase from the
first quarter of this year. We continued to move forward with our
robust capital program, drilling 33 gross wells and completing 14
workovers during the quarter. As a result of our liquids focused
capital program, oil and NGL production also increased to
approximately 65% of total production in the quarter. Most
importantly we are very pleased about the acquisition of QR Energy
that we announced earlier today. This combination combines
complementary, high quality asset portfolios and like-minded
operating philosophies to form the largest oil-weighted upstream
MLP. We believe this transaction will benefit the unitholders of
both companies and create significant value from an expanded
portfolio of assets and organic development opportunities.”
Second Quarter 2014 Operating and
Financial Results Compared to First Quarter 2014
- Total production was 3,373 MBoe in the
second quarter of 2014 compared to 3,219 MBoe in the first quarter
of 2014. Average daily production was 37.1 MBoe/day in the second
quarter of 2014 compared to 35.8 MBoe/day in the first quarter of
2014.
- Oil production increased to 1,901 MBbl
compared to 1,799 MBbl in the first quarter of 2014
- NGL production increased to 279 MBbl
compared to 258 MBbl in the first quarter of 2014
- Natural gas production increased to
7,163 MMcf compared to 6,971 MMcf in the first quarter of 2014
- Adjusted EBITDA was $110.0 million in
the second quarter of 2014 compared to $117.8 million in the first
quarter of 2014. The decrease was primarily due to higher commodity
derivative settlement payments and lower realized natural gas
prices, partially offset by higher crude oil volumes and
prices.
- Net loss attributable to common
unitholders was $106.6 million, or $0.89 per diluted common unit,
in the second quarter of 2014 compared to a net loss of $9.8
million, or $0.08 per diluted common unit, in the first quarter of
2014.
- Oil, NGL, and natural gas sales
revenues were $219.1 million in the second quarter of 2014,
compared to $223.6 million in the first quarter of 2014, primarily
due to lower realized natural gas prices partially offset by higher
realized oil prices and sales volumes.
- Lease operating expenses, which include
district expenses, processing fees and transportation costs, were
$21.03 per Boe in the second quarter of 2014 compared to $20.81 per
Boe in the first quarter of 2014.
- General and administrative expenses,
excluding non-cash unit-based compensation, were $3.06 per Boe in
the second quarter of 2014 compared to $3.78 per Boe in the first
quarter of 2014.
- Losses on commodity derivative
instruments were $127.0 million in the second quarter of 2014
compared to losses of $40.2 million in the first quarter of 2014,
which primarily reflected an increase in crude oil and natural gas
futures prices during the second quarter of 2014. Derivative
instrument settlement payments were $17.0 million in the second
quarter of 2014 compared to payments of $13.5 million in the first
quarter of 2014.
- WTI oil spot prices averaged $103.35
per barrel and Brent oil spot prices averaged $109.69 per barrel in
the second quarter of 2014 compared to $98.68 per barrel and
$108.14 per barrel, respectively, in the first quarter of 2014.
Henry Hub natural gas spot prices averaged $4.61 per Mcf in the
second quarter of 2014 compared to $5.18 per Mcf in the first
quarter of 2014.
- Realized crude oil, NGL, and natural
gas prices, excluding the effects of commodity derivative
settlements, averaged $95.74 per Bbl, $38.26 per Bbl and $4.81 per
Mcf, respectively, in the second quarter of 2014, compared to
$92.12 per Bbl, $42.89 per Bbl and $6.51 per Mcf, respectively, in
the first quarter of 2014.
- Oil and gas capital expenditures were
$89 million in the second quarter of 2014 compared to $79 million
in the first quarter of 2014.
- Distributable cash flow, a non-GAAP
financial measure, was $52.7 million in the second quarter of 2014
compared to $60.3 million in the first quarter of 2014.
Distributable cash flow per common unit was approximately $0.431 in
the second quarter of 2014 compared to approximately $0.496 in the
first quarter of 2014.
Management Provides Second Half 2014
Production, Adjusted EBITDA and Capital Expenditures
Guidance
Excluding the effect of any acquisitions, Breitburn is
forecasting total production for the second half of 2014 to be
between 6.8 million and 7.2 million Boe, with oil production now
expected to be between 3.8 million and 4.2 million barrels, and
still expects to achieve its targeted December 2014 production exit
rate of between 38,400 and 40,800 Boe/d. This revised production
outlook is principally due to the recent performance of Breitburn’s
operations in the Permian Basin. Breitburn also expects second half
Adjusted EBITDA to be between $235 million and $255 million,
principally as a result of lower expected oil revenues. Total oil
and gas capital expenditures for the second half of 2014 are
expected to be between $170 million and $180 million.
Reconciliation of Adjusted EBITDA.
The Adjusted EBITDA range above assumes estimated net income
(before non-cash compensation) between $80 million and $102
million, less mark-to-market gains on commodity derivative
instruments of $40 million, plus DD&A of $137 million, plus
interest expense between $56 million (high end of Adjusted EBITDA)
and $58 million (low end of Adjusted EBITDA). Estimated 2014 net
income is based on oil prices of $105 per barrel for WTI oil, $110
per barrel Brent oil, and $4.00 per Mcfe for natural gas.
Consequently, differences between actual and forecast prices could
result in changes to gains or losses on mark to market of commodity
derivative instruments, DD&A, including potential impairments
of long-lived assets, and ultimately, net income.
The foregoing guidance is subject to all of the cautionary
statements and limitations described below and under the caption
“Cautionary Statement Regarding Forward-Looking Information.” In
addition, estimates for Breitburn’s future production volumes are
based on, among other things, assumptions of capital expenditure
levels and the assumption that market demand and prices for oil and
gas will continue at levels that allow for economic production of
these products. The production, transportation and marketing of oil
and gas are extremely complex and are subject to disruption due to
transportation and processing availability, mechanical failure,
human error, weather, and numerous other factors, including the
inability to obtain expected supply of CO2. Breitburn’s estimates
are based on certain other assumptions, such as well performance,
which may actually prove to vary significantly from those assumed.
Lease operating costs, including major maintenance costs, vary in
response to changes in prices of services and materials used in the
operation of our properties and the amount of maintenance activity
required. Lease operating costs, including taxes, utilities and
service company costs, move directionally with increases and
decreases in commodity prices, and we cannot fully predict such
future commodity or operating costs. Similarly, interest rates and
price differentials are set by the market and are not within our
control, and they can vary dramatically from time to time. Capital
expenditures are based on our current expectations as to the level
of capital expenditures that will be justified based upon the other
assumptions set forth below as well as expectations about other
operating and economic factors not set forth below. The foregoing
guidance does not constitute any form of guarantee, assurance or
promise that the matters indicated will actually be achieved.
Rather, the foregoing guidance simply sets forth our best estimate
today for these matters based upon our current expectations about
the future based upon both stated and unstated assumptions. Actual
conditions and those assumptions may, and probably will, change
over the course of the year.
Impact of Derivative
Instruments
Breitburn uses commodity derivative instruments to mitigate
risks associated with commodity price volatility and to help
maintain cash flows for operating activities, acquisitions, capital
expenditures and distributions. Breitburn does not enter into
derivative instruments for speculative trading purposes. Because
Breitburn does not use hedge accounting to account for its
derivative instruments, changes in the fair value of derivative
instruments are recorded in Breitburn’s earnings during each
reporting period. These non-cash changes in the fair value of
derivatives do not affect Adjusted EBITDA, cash flow from
operations, distributable cash flow or Breitburn’s ability to pay
cash distributions for the reporting periods presented.
Total losses from commodity derivative instruments were
approximately $127.0 million for the second quarter of 2014, which
included payments of $17.0 million for derivative instruments that
settled during the period.
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
June 30, 2014 and 2013 and the three months ended March 31,
2014:
Three Months Ended Thousands of dollars,
except as indicated
June 30,2014
March 31,2014
June 30,2013
Oil sales $ 173,948 $ 167,086 $ 116,508 NGL sales 10,675 11,065
3,297 Natural gas sales 34,428 45,405 29,481 Gain (loss) on
commodity derivative instruments (127,000 ) (40,228 ) 66,993 Other
revenues, net 1,071 1,584 702
Total revenues $ 93,122 $ 184,912 $ 216,981 Lease
operating expenses (a) $ 70,923 $ 66,990 $ 48,544 Production and
property taxes (b) 16,001 15,659
11,066 Total lease operating expenses 86,924
82,649 59,610 Purchases and other operating costs 110
214 337 Change in inventory (3,974 ) (666 )
1,287 Total operating costs $ 83,060 $ 82,197 $
61,234 Lease operating expenses, pre taxes, per Boe (a) $ 21.03 $
20.81 $ 19.79 Production and property taxes per Boe (b)
4.74 4.86 4.51 Total lease
operating expenses per Boe $ 25.77 $ 25.67 $
24.30 General and administrative expenses (excluding unit-based
compensation) $ 10,322 $ 12,180 $ 8,727 Net income
(loss) $ (104,725 ) $ (9,758 ) $ 76,432 Less: distributions to
preferred unitholders 1,833 - -
Net income (loss) attributable to common unitholders $ (106,558 ) $
(9,758 ) $ 76,432 Total production (MBoe) (c) 3,373 3,219
2,453 Oil (MBbl) 1,901 1,799 1,163 NGLs (MBbl) 279 258 124 Natural
gas (MMcf) 7,163 6,971 6,994 Average daily production (Boe/d)
37,069 35,768 26,956 Sales
volumes (MBoe) (d) 3,289 3,233
2,528 Average realized sales price (per Boe) (e) (f) $ 66.59 $
69.12 $ 58.98 Oil (per Bbl) (e) (f) 95.74 92.12 93.95 NGLs (per
Bbl) (e) 38.26 42.89 26.61 Natural gas (per Mcf) (e) $ 4.81
$ 6.51 $ 4.22
(a)
Includes district expenses, transportation
expenses and processing fees.
(b)
Includes ad valorem and severance
taxes.
(c)
Natural gas is converted on the basis of
six Mcf of gas per one Bbl of oil equivalent. This ratio reflects
an energy content equivalency and not a price or revenue
equivalency. Given commodity price disparities, the price for a Bbl
of oil equivalent for natural gas is significantly less than the
price for a Bbl of oil.
(d)
Oil sales were 1,817 MBbl, 1,813 MBbl and
1,238 MBbl for the three months ended June 30, 2014, March 31, 2014
and June 30, 2013, respectively.
(e)
Excludes the effect of commodity
derivative settlements.
(f)
Includes 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 Breitburn’s financial results with investors and
analysts, and they are also available on Breitburn’s website under
the Investor Relations tab.
Among the non-GAAP financial measures used are “Adjusted EBITDA”
and “distributable cash flow.” These non-GAAP financial measures
should not be considered as alternatives 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 because management believes it
provides additional information relative to the performance of
Breitburn’s assets, without regard to financing methods or capital
structure. Distributable cash flow is used by management as a tool
to measure the cash distributions we could pay to our unitholders.
This financial measure indicates to investors whether or not we are
generating cash flow at a level that can support our distribution
rate to our unitholders. These non-GAAP financial measures 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 or distributable cash flow in the
same manner.
Adjusted EBITDA
The following table presents a reconciliation of net income
(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 June 30,
March 31, June 30, Thousands
of dollars 2014 2014 2013
Reconciliation of net income (loss) to Adjusted EBITDA: Net
income (loss) $ (104,725 ) $ (9,758 ) $ 76,432 Loss (gain) on
commodity derivative instruments 127,000 40,228 (66,993 ) Commodity
derivative instrument settlements (a) (b) (17,024 ) (13,500 ) 4,798
Depletion, depreciation and amortization expense 68,245 63,501
46,541 Interest expense and other financing costs 30,208 30,658
18,420 Loss on sale of assets 334 86 71 Income tax expense
(benefit) (159 ) 11 574 Unit-based compensation expense (c) 6,098
6,549 4,989
Adjusted EBITDA $ 109,977 $
117,775 $ 84,832 Less: Maintenance capital (d) $ 26,999 $ 28,932 $
19,511 Cash interest expense 28,399 28,571 17,073 Distributions to
preferred unitholders 1,833 — —
Distributable cash flow available to common unitholders $
52,746 $ 60,272 $ 48,248 Distributable cash
flow available per common unit (e) $ 0.431 $ 0.496 $ 0.476 Common
unit distribution coverage 0.86x 1.00x 1.00x
Reconciliation of net cash flows from operating activities to
Adjusted EBITDA: Net cash provided by operating activities $
74,798 $ 116,311 $ 38,570 Increase (decrease) in assets net of
liabilities relating to operating activities 7,300 (27,361 ) 29,074
Interest expense (f) 28,178 28,674 17,062 Income from equity
affiliates, net (388 ) 107 (130 ) Income taxes 89 44
256
Adjusted EBITDA $ 109,977 $ 117,775
$ 84,832 (a) Excludes premiums paid at contract
inception related to those derivative contracts that settled during
the periods of: $ 2,118 $ 2,095 $ 1,220 (b) Includes net cash
settlements on derivative instruments: - Oil settlements paid of: $
(18,125 ) $ (11,680 ) $ (3,572 ) - Natural gas settlements received
(paid) of: $ 1,101 $ (1,820 ) $ 8,370 (c) Represents non-cash
long-term unit-based incentive compensation expense. (d)
Maintenance Capital is management's estimate of the investment in
capital projects and obligatory spending on existing facilities and
operations needed to hold production approximately flat year over
year. (e) Includes common units outstanding (including outstanding
LTIP grants) at each distribution record date. (f) Excludes
amortization of debt issuance costs and amortization of senior note
discount/premium.
Hedge Portfolio Summary
The table below summarizes Breitburn’s commodity derivative
hedge portfolio as of July 22, 2014. Please refer to the updated
Commodity Price Protection Portfolio via our website for additional
details related to our hedge portfolio.
Year
2014 2015
2016 2017
2018 Oil Positions: Fixed
Price Swaps - NYMEX WTI Hedged Volume (Bbls/d) 14,911 13,059 9,211
7,971 493 Average Price ($/Bbl) $ 92.73 $ 93.05 $ 86.73 $ 84.23 $
82.20 Fixed Price Swaps - ICE Brent Hedged Volume (Bbls/d) 4,950
3,374 4,300 298 - Average Price ($/Bbl) $ 99.05 $ 97.89 $ 95.17 $
97.50 $ - Collars - NYMEX WTI Hedged Volume (Bbls/d) 1,000 1,000 -
- - Average Floor Price ($/Bbl) $ 90.00 $ 90.00 $ - $ - $ - Average
Ceiling Price ($/Bbl) $ 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)
500 500 1,000 - - Average Price ($/Bbl) $ 90.00 $ 90.00 $ 90.00 $ -
$ - Total: Hedged Volume (Bbls/d) 21,361 18,433 15,011 8,269 493
Average Price ($/Bbl) $ 94.00 $ 93.61 $ 89.48 $ 84.71 $ 82.20
Gas Positions: Fixed Price Swaps - MichCon City-Gate
Hedged Volume (MMBtu/d) 7,500 7,500 17,000 10,000 - Average Price
($/MMBtu) $ 6.00 $ 6.00 $ 4.46 $ 4.48 $ - Fixed Price Swaps - Henry
Hub Hedged Volume (MMBtu/d) 41,600 47,700 24,700 8,571 1,870
Average Price ($/MMBtu) $ 4.75 $ 4.77 $ 4.23 $ 4.39 $ 4.15 Puts -
Henry Hub Hedged Volume (MMBtu/d) 6,000 1,500 - - - Average Price
($/MMBtu) $ 5.00 $ 5.00 $ - $ - $ - Total: Hedged Volume (MMBtu/d)
55,100 56,700 41,700 18,571 1,870 Average Price ($/MMBtu) $ 4.95 $
4.94 $ 4.32 $ 4.44 $ 4.15 Calls - Henry Hub Hedged Volume
(MMBtu/d) 15,000 - - - - Average Price ($/MMBtu) $ 9.00 $ - $ - $ -
$ - Deferred Premium ($/MMBtu) $ 0.12 $ - $ - $ - $ -
Premiums paid in 2012 related to oil and natural gas derivatives
to be settled in the third quarter of 2014 and beyond are as
follows:
Year
Thousands of dollars 2014
2015 2016
2017 2018
Oil $ 2,258 $ 4,683 $ 7,438 $ 734 $ - Natural gas $ 2,024 $ 1,989 $
952 $ - $ -
Other Information
Breitburn will host a conference call later today, Thursday,
July 24, 2014, at 9:00 a.m. (EDT) to discuss the transaction and
Breitburn’s second quarter results. Interested parties may access
the conference call over the Internet via the Investor Relations
tab of Breitburn’s website (www.breitburn.com), or via telephone by
dialing (888) 364-3108 (international callers dial +1 (719)
457-1512) a few minutes prior to the beginning of the call to
register. Those listening via the Internet should go to the site 15
minutes early to register and download and install any necessary
audio software. In addition, a replay of the call will be available
through July 31, 2014, by dialing (877) 870-5176 (international
callers dial +1 (858) 384-5517) and entering replay PIN 2705055, or
by going to the Investor Relations tab of Breitburn’s website
(www.breitburn.com). Breitburn will take questions from securities
analysts and institutional portfolio managers; the call is open to
all other interested parties on a listen-only basis.
Quarterly Report on Form
10Q
Breitburn’s financial statements and related footnotes will be
available in its 10Q for the quarter ended June 30, 2014, which
Breitburn expects to file with the SEC in early August and which
will be available via the Investor Relations tab of Breitburn’s
website (www.breitburn.com) or on the SEC website at
www.sec.gov.
About Breitburn Energy Partners
LP
Breitburn Energy Partners LP is a publicly-traded independent
oil and gas master limited partnership focused on the acquisition,
exploitation, development, and production of oil and gas properties
throughout the United States. Breitburn’s producing and
non-producing crude oil and natural gas reserves are located in
Michigan, Oklahoma, Texas, Wyoming, California, Florida, Indiana
and Kentucky. See www.breitburn.com for more information.
Additional Information about the
Proposed Transactions and Where to Find It
In connection with the proposed transactions, Breitburn intends
to file with the SEC a registration statement on Form S-4 that will
include a prospectus of Breitburn and a proxy statement of QR
Energy. Each of Breitburn and QR Energy also plan to file other
relevant documents with the SEC regarding the proposed
transactions. INVESTORS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. You may obtain a free copy of the proxy
statement/prospectus (if and when it becomes available) and other
relevant documents filed by Breitburn and QR Energy with the SEC at
the SEC’s website at www.sec.gov. You may also obtain these
documents by contacting Breitburn Investor Relations in writing at
515 S. Flower Street, Suite 4800, Los Angeles, CA, 90071, or via
e-mail by using the “Contact Form” located at the Investor
Relations tab at www.breitburn.com or by calling (213) 225-0390; or
by contacting QR Energy Investor Relations in writing at 1401
McKinney Street, Suite 2400, Houston, TX 77010, or via e-mail at
ir@qracq.com or by calling (713) 452-2990.
Participants in the
Solicitation
Breitburn and QR Energy and their respective directors and
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transactions. Information about Breitburn’s
directors and executive officers is available in Breitburn’s proxy
statement dated April 25, 2014, for its 2014 Annual Meeting of
Unitholders. Information about QR Energy’s directors and executive
officers is available in QR Energy’s proxy statement dated February
3, 2014, for its Special Meeting of Unitholders held on March 10,
2014. Other information regarding the participants in the proxy
solicitations and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the proxy statement/prospectus and other relevant materials to be
filed with the SEC regarding the proposed transactions when they
become available. Investors should read the proxy
statement/prospectus carefully when it becomes available before
making any voting or investment decisions. You may obtain free
copies of these documents from Breitburn or QR Energy using the
sources indicated above.
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
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,” “expect,” “future,” “impact,”
“guidance,” “will be,” “will commence,” 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 Breitburn’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,
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 LP and Subsidiaries Unaudited
Consolidated Balance Sheets
June 30, December 31, Thousands
2014 2013 ASSETS Current assets Cash $
9,015 $ 2,458 Accounts and other receivables, net 97,630 96,862
Derivative instruments 2,240 7,914 Related party receivables 1,282
2,604 Inventory 9,237 3,890 Prepaid expenses 393
3,334
Total current assets
119,797 117,062
Equity investments 6,360 6,641
Property,
plant and equipment Oil and gas properties 4,988,859 4,818,639
Other assets 30,932 21,338 5,019,791
4,839,977 Accumulated depletion and depreciation (1,049,498
) (924,601 )
Net property, plant and equipment
3,970,293 3,915,376
Other long-term assets Intangibles, net
10,282 11,679 Derivative instruments 3,631 71,319 Other long-term
assets 75,489 74,205
Total
assets $ 4,185,852 $ 4,196,282
LIABILITIES AND
EQUITY Current liabilities Accounts payable $ 64,329 $
69,809 Derivative instruments 48,827 24,876 Distributions payable
1,833 - Revenue and royalties payable 36,308 26,233 Wages and
salaries payable 10,817 15,359 Accrued interest payable 19,515
19,690 Accrued liabilities 33,743 26,922
Total current liabilities 215,372 182,889 Credit facility
655,500 733,000 Senior notes, net 1,156,618 1,156,675 Deferred
income taxes 2,468 2,749 Asset retirement obligation 129,394
123,769 Derivative instruments 41,951 2,560 Other long-term
liabilities 4,922 4,820 Total
liabilities 2,206,225 2,206,462
Equity Series A preferred
units, 8.0 million units issued and outstanding at June 30, 2014
and 0 at December 31, 2013 193,226 - Common units, 120.2 million
units issued and outstanding at June 30, 2014 and 119.2 million at
December 31, 2013 1,786,401 1,989,820
Total equity 1,979,627 1,989,820
Total liabilities
and equity $ 4,185,852 $ 4,196,282
Breitburn Energy Partners LP and Subsidiaries Unaudited
Consolidated Statements of Operations
Three Months Ended Six Months Ended
June 30, June 30, Thousands of dollars, except per
unit amounts 2014 2013 2014
2013 Revenues and other income
items Oil, natural gas and natural gas liquid sales $ 219,051 $
149,286 $ 442,607 $ 269,648 Gain (loss) on commodity derivative
instruments, net (127,000 ) 66,993 (167,228 ) 42,817 Other revenue,
net 1,071 702 2,655
1,460 Total revenues and other income items 93,122
216,981 278,034 313,925
Operating costs and expenses
Operating costs 83,060 61,234 165,257 113,387 Depletion,
depreciation and amortization 68,245 46,541 131,746 94,331 General
and administrative expenses 16,420 13,716 35,149 28,579 Loss on
sale of assets 334 71 420
62 Total operating costs and expenses 168,059
121,562 332,572 236,359
Operating income (loss) (74,937 ) 95,419
(54,538 ) 77,566 Interest expense, net of capitalized
interest 30,208 18,420 60,866 36,839 Other income, net (261
) (7 ) (773 ) (9 ) Total other expense
29,947 18,413 60,093
36,830
Income (loss) before taxes (104,884 )
77,006 (114,631 ) 40,736 Income tax expense (benefit)
(159 ) 574 (148 ) 604
Net income (loss) (104,725 ) 76,432 (114,483 ) 40,132
Less: distributions to preferred unitholders 1,833
- 1,833 -
Net
income (loss) attributable to common unitholders $ (106,558 ) $
76,432 $ (116,316 ) $ 40,132 Basic net income
(loss) per common unit $ (0.89 ) $ 0.75 $ (0.97 ) $ 0.41
Diluted net income (loss) income per common unit $ (0.89 ) $
0.75 $ (0.97 ) $ 0.41
Breitburn
Energy Partners LP and Subsidiaries Unaudited Consolidated
Statements of Cash Flows
Six Months Ended June 30, Thousands of dollars
2014 2013 Cash flows from
operating activities Net income (loss) $ (114,483 ) $ 40,132
Adjustments to reconcile net loss to cash flow from operating
activities: Depletion, depreciation and amortization 131,746 94,331
Unit-based compensation expense 12,647 9,797 Loss (gain) on
derivative instruments 167,228 (42,817 ) Derivative instrument
settlement receipts (payments) (30,524 ) 9,956 Income from equity
affiliates, net 281 (1 ) Deferred income taxes (281 ) 297 Loss on
sale of assets 420 62 Other 3,487 2,239 Changes in assets and
liabilities: Accounts receivable and other assets 2,097 (13,050 )
Inventory (5,347 ) (1,801 ) Net change in related party receivables
and payables 1,322 649 Accounts payable and other liabilities
22,516 (2,372 ) Net cash provided by operating
activities 191,109 97,422
Cash flows
from investing activities Property acquisitions (2,684 ) 598
Capital expenditures (188,758 ) (100,211 ) Other (5,706 ) - Deposit
for oil and gas properties - (85,980 ) Proceeds from sale of assets
542 160 Net cash used in investing
activities (196,606 ) (185,433 )
Cash flows from
financing activities Proceeds from issuance of preferred units,
net 193,397 - Proceeds from issuance of common units, net 20,273
285,016 Distributions to preferred unitholders - - Distributions to
common unitholders (120,059 ) (88,757 ) Proceeds from issuance of
long-term debt, net 466,000 397,000 Repayments of long-term debt
(543,500 ) (507,000 ) Change in book overdraft (2,425 ) (291 )
Long-term debt issuance costs (1,632 ) (328 ) Net
cash used in financing activities 12,054
85,640
Increase (decrease) in cash 6,557 (2,371 )
Cash beginning of period 2,458 4,507
Cash end of period $ 9,015 $ 2,136
Breitburn Energy Partners LPAntonio D'AmicoVice President,
Investor Relations & Government AffairsorJessica TangInvestor
Relations Manager(213) 225-0390