Breitburn Energy Partners LP (NASDAQ:BBEP) today announced financial and operating results for the second quarter 2015 and provided second half 2015 guidance.

Key Highlights

  • Closed the $1 billion strategic investment led by EIG Global Energy Partners on April 8th, resulting in approximately $500 million of current available liquidity.
  • Reported total production of 5.0 MMBoe, in-line with Breitburn's 2015 guidance.
  • Increased Adjusted EBITDA, a non-GAAP financial measure, to $162.9 million (including costs of $1.1 million for restructuring), a 48% increase from the second quarter of 2014 and a 10% increase from the first quarter of 2015.
  • Reduced lease operating expenses to $18.72 per Boe in the second quarter of 2015, 6% lower than the first quarter of 2015 and 14% lower than the fourth quarter of 2014.
  • Reported distributable cash flow of $58.5 million, or $0.27 per common unit, and distribution coverage ratio of 2.16x based on current monthly distribution of $0.04166 per common unit, or $0.50 per common unit on an annualized basis.
  • Based on Breitburn's current commodity hedge portfolio and assuming second half 2015 guidance production rate as set forth below, Breitburn's total production is 77% hedged for the remainder of 2015, 65% in 2016, and 41% in 2017 at attractive prices. The mark-to-market value of Breitburn's commodity hedge portfolio was approximately $544 million as of June 30th and approximately $670 million as of July 31st.

Management Commentary

Halbert S. Washburn, Breitburn’s Chief Executive Officer, said: "We are very pleased to report another solid quarter with production, cost reductions, and Adjusted EBITDA in-line with our guidance for the first half of the year. We have completed the integration of the QR Energy assets and our diverse portfolio continues to perform as expected in this challenging environment. Earlier this year, we announced a number of steps to address what we thought could be an extended period of weak commodity pricing. Those steps included dramatically reducing our capital budget, implementing an aggressive program to reduce operating costs and completing a significant workforce reduction plan. In addition, in April we raised almost $1 billion in external capital and reset our borrowing base to $1.8 billion, without a scheduled redetermination until April of 2016. We also reset our common unit distribution to $0.50 per unit. As a result of these actions, we currently have approximately $500 million of available liquidity under our credit facility, are on track to reduce bank debt throughout the year and have an excellent distribution coverage ratio of 2.16 times this quarter."

Mr. Washburn continued, "In addition, we continue to evaluate the most attractive alternatives for maximizing the value of our substantial acreage position in the Midland Basin. With over 22,000 gross surface acres and approximately 360 net identified locations, we have the ability to add meaningful production and reserves to our base business over the course of the next few years. This acreage provides us with significant strategic and operating flexibility particularly in the current commodity price environment."

Second Quarter 2015 Operating and Financial Results Compared to First Quarter 2015

  • Total production was 5,015 MBoe in the second quarter of 2015 compared to 5,051 MBoe in the first quarter of 2015. Average daily production was 55.1 MBoe/day in the second quarter of 2015 compared to 56.1 MBoe/day in the first quarter of 2015.
    • Oil production decreased to 2,822 MBbl compared to 2,890 MBbl in the first quarter of 2015.
    • NGL production increased to 483 MBbl compared to 459 MBbl in the first quarter of 2015.
    • Natural gas production increased to 10,264 MMcf compared to 10,211 MMcf in the first quarter of 2015.
  • Adjusted EBITDA was $162.9 million (including $1.1 million of restructuring costs) in the second quarter of 2015 compared to $148.6 million (including $4.1 million of restructuring costs) in the first quarter of 2015, a 10% increase primarily due to higher oil sales revenue and lower lease operating and G&A expenses, partially offset by lower commodity derivative settlements.
  • Net loss attributable to common unitholders was $316.2 million, or $1.46 per diluted common unit, in the second quarter of 2015, which includes a non-cash goodwill impairment charge of $95.9 million, or $0.45 per unit, compared to net loss of $63.0 million, or $0.29 per diluted common unit, in the first quarter of 2015, which included non-cash impairment charges of approximately $59.1 million, or $0.28 per unit.
  • Oil, NGL and natural gas sales revenues were $189.6 million in the second quarter of 2015 compared to $162.6 million in the first quarter of 2015, primarily reflecting higher realized oil and NGL prices.
  • Lease operating expenses, which include district expenses, processing fees and transportation costs but exclude taxes, were $18.72 per Boe in the second quarter of 2015 compared to $19.81 per Boe in the first quarter of 2015, a 6% decrease primarily due to cost cutting efforts, lower fuel and utility costs, and lower workover expense.
  • General and administrative expenses, excluding non-cash unit-based compensation costs, were $16.8 million in the second quarter of 2015 compared to $25.3 million in the first quarter of 2015, primarily due to cost cutting efforts (including reduction in workforce) and $1.9 million lower integration costs.
  • Losses on commodity derivative instruments were $93.4 million in the second quarter of 2015 compared to gains of $137.2 million in the first quarter of 2015, primarily due to an increase in oil and natural gas futures prices during the second quarter of 2015. Derivative instrument settlement receipts were $100.6 million in the second quarter of 2015 compared to receipts of $126.4 million in the first quarter of 2015, primarily due to higher oil prices.
  • NYMEX WTI oil spot prices averaged $57.85 per Bbl and Brent oil spot prices averaged $61.65 per Bbl in the second quarter of 2015 compared to $48.49 per Bbl and $53.98 per Bbl, respectively, in the first quarter of 2015. Henry Hub natural gas spot prices averaged $2.75 per Mcf in the second quarter of 2015 compared to $2.90 per Mcf in the first quarter of 2015.
  • Average realized crude oil, NGL and natural gas prices, excluding the effects of commodity derivative settlements, were $53.29 per Bbl, $18.35 per Bbl and $2.57 per Mcf, respectively, in the second quarter of 2015 compared to $43.62 per Bbl, $16.54 per Bbl and $3.05 per Mcf, respectively, in the first quarter of 2015.
  • Oil, NGL and natural gas capital expenditures were $58 million in the second quarter of 2015, compared to $73 million in the first quarter of 2015.
  • Distributable cash flow, a non-GAAP financial measure, was $58.5 million in the second quarter of 2015 compared to $60.7 million in the first quarter of 2015.

Second Half 2015 Guidance (Assuming No Acquisitions)

The following 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.

($ in 000s)    

Second Half 2015 Guidance(1)

Total Production (MBoe):     9,620     —     10,220 Oil Production (MBbls) 5,400 — 5,800 NGL Production (MBbls) 850 — 950 Natural Gas Production (MMcfe)     20,220       —     20,820 Average Price Differential %: WTI Oil Price Differential % 89 % — 95%

Brent Oil Price Differential %(2)

87 % — 93% NGL Price Differential % (of WTI) 32 % — 38% Natural Gas Price Differential %     100 %     —     105%

Oil, NGL, and Natural Gas Sales Revenue(3)

$317,000 — $363,000 Realized Hedge Gains / (Losses)

 

$237,000

Other Revenue(4)

$11,000 — $13,000

Lease Operating Expenses / Boe(5)

$18.75 — $20.75

Other Operating Expenses(6)

$9,000 — $10,000 Production / Property Taxes (% of Sales Revenue) 8.25 % — 8.75% G&A (Excl. Unit Based Compensation) $30,000 — $32,000

Adjusted EBITDA(7)

$315,000 — $340,000

Cash Interest Expense(8)

$95,000 — $98,000

Preferred Equity Distributions(9)

 

$8,250

Maintenance Capital Expenditures(10)

 

$103,000

Distributable Cash Flow(11)

$105,000 — $135,000

Units Outstanding(12)

 

219,000

DCF per Unit $0.48 — $0.62

Common Unit DCF Coverage Ratio(13)

1.92x — 2.47x

(1)

 

Breitburn’s second half 2015 guidance is based on flat $50 per barrel WTI crude oil, $55 per barrel Brent crude oil, and $3.00 per Mcf natural gas price levels for second half 2015.

(2)

Approximately 15% of estimated crude oil production is expected to be sold based on Brent pricing.

(3)

Range based on the low and high values of production and differentials as set forth above.

(4)

Primarily consists of $9-$10 million in revenue related to the East Texas Salt Water Disposal System.

(5)

Lease operating expenses include processing fees, district expenses and transportation costs.

(6)

Represents costs related the East Texas Salt Water Disposal System.

(7)

Assuming the high and low range of Breitburn’s second half 2015 Guidance, Adjusted EBITDA is expected to range between $315 million and $340 million, and is comprised of estimated net loss (before non-cash compensation and non-cash distributions paid-in-kind to holders of 8.0% Series B Preferred Units) between ($136) million (low end of Adjusted EBITDA) and ($108) million (high end of Adjusted EBITDA), plus unrealized losses on commodity derivative instruments of $151 million, plus DD&A of $191 million, plus interest expense between $95 million (high end of Adjusted EBITDA) and $98 million (low end of Adjusted EBITDA), plus preferred distributions to holders of 8.25% Series A Preferred Units of $8.25 million. Differences between actual and forecast prices could result in changes to unrealized gains or losses on commodity derivative instruments, DD&A, including potential impairments of long-lived assets, and ultimately, net income.

(8)

Typically, Breitburn’s borrowings under its credit facility are based on 1-month LIBOR plus an applicable spread ranging from 175 bps to 275 bps. Cash interest expense assumes a 1-month LIBOR rate of 0.20%.

(9)

Reflects cash distributions paid to holders of 8.25% Series A Cumulative Redeemable Perpetual Preferred Units and assumes that distributions owed to holders of 8.0% Series B Perpetual Convertible Preferred Units will be paid in kind.

(10)

Maintenance capital expenditures exclude information technology spending of approximately $3.2 million. Maintenance capital is defined as the estimated amount of investment in capital projects and obligatory spending on existing facilities and operations needed to hold production approximately flat over a multi-year period.

(11)

Range based on (i) low end of EBITDA less high end of interest expense, maintenance capital, and preferred distributions and (ii) high end of EBITDA less the low end of interest expense, maintenance capital, and preferred distributions.

(12)

Includes all common units expected to receive distributions in cash.

(13)

Assumes constant annualized distribution rate of $0.50/unit.

 

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. Since 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.

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, 2015 and 2014, and the three months ended March 31, 2015:

    Three Months Ended June 30,     March 31,     June 30, Thousands of dollars, except as indicated 2015 2015 2014 Oil sales $ 154,425 $ 123,843 $ 173,948 NGL sales 8,861 7,591 10,675 Natural gas sales 26,350 31,189 34,428 (Loss) gain on commodity derivative instruments (93,432 ) 137,192 (127,000 ) Other revenues, net (a) 6,504   6,469   1,071   Total revenues $ 102,708   $ 306,284   $ 93,122   Lease operating expenses before taxes (b) $ 93,858 $ 100,079 $ 70,923 Production and property taxes (c) 15,348   13,544   16,001   Total lease operating expenses 109,206   113,623   86,924   Purchases and other operating costs 421 158 110 Salt water disposal costs 4,053 4,021 — Change in inventory 2,157   176   (3,974 ) Total operating costs $ 115,837   $ 117,978   $ 83,060   Lease operating expenses before taxes per Boe (b) $ 18.72 $ 19.81 $ 21.03 Production and property taxes per Boe (c) 3.06   2.68   4.74   Total lease operating expenses per Boe $ 21.78   $ 22.49   $ 25.77   General and administrative expenses (excluding non-cash unit-based compensation) $ 16,778   $ 25,335   $ 10,322   Net loss attributable to the partnership $ (305,707 ) $ (58,825 ) $ (104,725 ) Less: distributions to Series A preferred unitholders 4,125 4,125 1,833 Less: non-cash distributions to Series B preferred unitholders 6,408   —   —   Net loss attributable to common unitholders $ (316,240 ) $ (62,950 ) $ (106,558 )   Total production (MBoe) (d) 5,015 5,051 3,373 Oil (MBbl) 2,822 2,890 1,901 NGLs (MBbl) 483 459 279 Natural gas (MMcf) 10,264 10,211 7,163 Average daily production (Boe/d) 55,110   56,122   37,069   Sales volumes (MBoe) (e) 5,089   4,999   3,289   Average realized sales price (per Boe) (f) (g) $ 37.24 $ 32.52 $ 66.59 Oil (per Bbl) (f) (g) 53.29 43.62 95.74 NGLs (per Bbl) (f) 18.35 16.54 38.26 Natural gas (per Mcf) (f) $ 2.57   $ 3.05   $ 4.81   (a)   Includes revenue from the East Texas Salt Water Disposal System of $4.0 million, $4.1 million and zero for the three months ended June 30, 2015, March 31, 2015 and June 30, 2014. (b) Includes district expenses, processing fees and transportation costs. (c) Includes ad valorem and severance taxes. (d) 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. (e) Oil sales were 2,896 MBbl, 2,835 MBbl and 1,817 MBbl for the three months ended June 30, 2015, March 31, 2015 and June 30, 2014, respectively. (f) Excludes the effect of commodity derivative settlements. (g) Includes the per Boe effect of crude oil purchases.  

Non-GAAP Financial Measures

This press release, including 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 at www.breitburn.com.

“Adjusted EBITDA” and “distributable cash flow” are among the non-GAAP financial measures used in this press release. 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, and 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 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, except as indicated 2015   2015   2014   Reconciliation of net loss to Adjusted EBITDA: Net loss attributable to the partnership $ (305,707 ) $ (58,825 ) $ (104,725 ) Loss (gain) on commodity derivative instruments 93,432 (137,192 ) 127,000 Commodity derivative instrument settlement receipts (payments) (a) (b) 100,576 126,357 (17,024 ) Depletion, depreciation and amortization expense 109,447 109,824 68,245 Impairments of oil and natural gas properties — 59,113 — Impairments of goodwill 95,947 — — Interest expense and other financing costs 62,007 41,477 30,208 Loss on sale of assets 122 15 334 Income tax expense (benefit) 259 92 (159 ) Unit-based compensation expense (c) 6,084 6,927 6,098 Restructuring costs - unit-based compensation   721     814     —   Adjusted EBITDA $ 162,888 $ 148,602 $ 109,977 Less: Maintenance capital (d) $ 52,000 $ 45,000 $ 26,999 Cash interest expense 48,250 38,729 28,399 Distributions to Series A preferred unitholders (e)   4,125     4,125     1,833   Distributable cash flow available to common unitholders $ 58,513   $ 60,748   $ 52,746     Distributable cash flow available per common unit (f) 0.270 0.282 0.431 Common unit distribution coverage (g) 2.16x 2.26x 0.86x   Reconciliation of net cash flows from operating activities to Adjusted EBITDA:   Net cash provided by operating activities $ 73,796 $ 141,149 $ 74,798 Increase (decrease) in assets net of liabilities relating to operating activities 40,736 (30,968 ) 7,300 Interest expense (h) 48,197 38,729 28,178 Income from equity affiliates, net 172 (325 ) (388 ) Noncontrolling interest (126 ) 93 — Income taxes 259 (76 ) 89 Gain on marketable securities   (146 )   —     —   Adjusted EBITDA $ 162,888   $ 148,602   $ 109,977     (a)   Excludes premiums paid at contract inception related to those derivative contracts that settled during the applicable periods of: $

1,663

$

1,645

$

2,118

(b) Includes net cash settlements on derivative instruments for: - Oil settlements received (paid):

83,265

111,879

(18,125

)

- Natural gas settlements received: $

17,311

$

14,478

$

1,101

(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 over a multi-year period. (e) Does not include paid-in-kind distributions on Series B Preferred Units. (f) Based on common units outstanding (including outstanding LTIP grants) at each distribution record date within the periods. (g) Does not include Series B Preferred Units on an as converted basis. (h) Excludes amortization of debt issuance costs and amortization of senior note discount/premium.    

Summary of Commodity Derivative Instruments

The table below summarizes Breitburn’s commodity derivative hedge portfolio as of August 5, 2015. For an overview of Breitburn's commodity hedge portfolio, please refer to the Summary of Commodity Price Protection Portfolio at www.breitburn.com.

    Year 2015   2016       2017       2018       2019 Oil Positions: Fixed Price Swaps - NYMEX WTI Volume (Bbl/d) 20,043 15,504 13,519 493 — Average Price ($/Bbl) $ 93.27 $ 88.07 $ 85.05 $ 82.20 $ — Fixed Price Swaps - ICE Brent Volume (Bbl/d) 3,300 4,300 298 — — Average Price ($/Bbl) $ 97.73 $ 95.17 $ 97.50 $ — $ — Collars - NYMEX WTI Volume (Bbl/d) 2,025 1,500 — — — Average Floor Price ($/Bbl) $ 90.00 $ 80.00 $ — $ — $ — Average Ceiling Price ($/Bbl) $ 111.73 $ 102.00 $ — $ — $ — Collars - ICE Brent Volume (Bbl/d) 500 500 — — — Average Floor Price ($/Bbl) $ 90.00 $ 90.00 $ — $ — $ — Average Ceiling Price ($/Bbl) $ 109.50 $ 101.25 $ — $ — $ — Puts - NYMEX WTI Volume (Bbl/d) 500 1,000 — — — Average Price ($/Bbl) $ 90.00 $ 90.00 $ — $ — $ — Total: Volume (Bbl/d) 26,368 22,804 13,817 493 — Average Price ($/Bbl) $ 93.46 $ 89.01 $ 85.32 $ 82.20 $ —   Gas Positions: Fixed Price Swaps - MichCon City-Gate Volume (MMBtu/d) 16,658 25,000 20,000 7,000 4,000 Average Price ($/MMBtu) $ 4.33 $ 4.03 $ 3.84 $ 3.23 $ 3.30 Fixed Price Swaps - Henry Hub Volume (MMBtu/d) 54,891 36,050 19,016 1,870 — Average Price ($/MMBtu) $ 4.84 $ 4.24 $ 4.43 $ 4.15 $ — Collars - Henry Hub Volume (MMBtu/d) 18,000 630 595 — — Average Floor Price ($/MMBtu) $ 5.00 $ 4.00 $ 4.00 $ — $ — Average Ceiling Price ($/MMBtu) $ 7.48 $ 5.55 $ 6.15 $ — $ — Puts - Henry Hub Volume (MMBtu/d) 1,920 11,350 10,445 — — Average Price ($/MMBtu) $ 4.78 $ 4.00 $ 4.00 $ — $ — Deferred Premium ($/MMBtu) $ 0.64 (a) $ 0.66 $ 0.69 $ — $ — Total: Volume (MMBtu/d) 91,469 73,030 50,056 8,870 4,000 Average Price ($/MMBtu) $ 4.78 $ 4.13 $ 4.10 $ 3.42 $ 3.30   Basis Swaps- Henry Hub Volume (MMBtu/d) 14,400 — — — — Average Price ($/MMBtu) $ (0.19 ) $ — $ — $ — $ —  

(a) Deferred premiums of $0.64 apply to 420 MMBtu/d of the 2015 volume.

   

Premiums paid in 2012 related to oil and natural gas derivatives to be settled after June 30, 2015, are as follows:

    Year Thousands of dollars 2015     2016     2017     2018     2019 Oil $ 2,361 $ 7,438 $ 734 $ — $ — Natural gas $ 1,003 $ 952 $ — $ — $ —  

Other Information

Breitburn will host a conference call Thursday, August 6, 2015, at 12:00 pm (EDT) to discuss Breitburn’s second quarter 2015 results. The conference call may be accessed by calling 888-417-8465 (international callers dial 719-325-2215) or via webcast at http://ir.breitburn.com/. An archived edition of the conference call will also be available through August 13th by calling 877-870-5176 (international callers dial 858-384-5517) and entering replay PIN 6137597 or by visiting http://ir.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.

About Breitburn Energy Partners LP

Breitburn Energy Partners LP is a publicly traded, independent oil and gas master limited partnership focused on the acquisition, 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 the following seven producing areas: Ark-La-Tex, Michigan/Indiana/Kentucky, the Permian Basin, the Mid-Continent, the Rockies, Florida, and California. 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,” “expect,” “future,” “impact,” “guidance,” “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 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 of dollars 2015 2014 ASSETS Current assets Cash $ 9,525 $ 12,628 Accounts and other receivables, net 154,309 166,436 Derivative instruments 309,239 408,151 Related party receivables 297 2,462 Inventory 1,342 3,727 Prepaid expenses 7,439   7,304   Total current assets 482,151 600,708 Equity investments 6,310 6,463 Property, plant and equipment Oil and natural gas properties 7,866,044 7,736,409 Other property, plant and equipment 140,054   60,533   8,006,098 7,796,942 Accumulated depletion and depreciation (1,609,796 ) (1,342,741 ) Net property, plant and equipment 6,396,302 6,454,201 Other long-term assets Intangibles 2,044 8,336 Goodwill — 92,024 Derivative instruments 235,554 319,560 Other long-term assets 123,182   157,042   Total assets $ 7,245,543   $ 7,638,334     LIABILITIES AND EQUITY Current liabilities Accounts payable $ 77,722 $ 129,270 Current portion of long-term debt 421 105,000 Derivative instruments 5,388 5,457 Distributions payable 732 733 Current portion of asset retirement obligation 3,912 4,948 Revenue and royalties payable 46,838 40,452 Wages and salaries payable 20,146 22,322 Accrued interest payable 19,772 20,672 Production and property taxes payable 25,214 25,207 Other current liabilities 6,805   7,495   Total current liabilities 206,950 361,556   Credit facility 1,309,000 2,089,500 Senior notes, net 1,787,887 1,156,560 Other long-term debt 2,579   1,100   Total long-term debt 3,099,466 3,247,160 Deferred income taxes 2,743 2,575 Asset retirement obligation 243,243 233,463 Derivative instruments 2,082 2,269 Other long-term liabilities 24,711   25,135   Total liabilities 3,579,195 3,872,158   Equity Series A preferred units, 8.0 million units issued and outstanding at each of June 30, 2015 and December 31, 2014 193,215 193,215 Series B preferred units, 47.2 million and 0 units issued and outstanding at June 30, 2015 and December 31, 2014, respectively 341,700 — Common units, 211.7 million and 210.9 million units issued and outstanding at June 30, 2015 and December 31, 2014, respectively 3,124,808 3,566,468 Accumulated other comprehensive loss (333 ) (392 ) Total partners' equity 3,659,390 3,759,291 Noncontrolling interest 6,958   6,885   Total equity 3,666,348   3,766,176   Total liabilities and equity $ 7,245,543   $ 7,638,334       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 2015     2014 2015     2014   Revenues and other income items Oil, natural gas and natural gas liquid sales $ 189,636 $ 219,051 $ 352,259 $ 442,607 (Loss) gain on commodity derivative instruments, net (93,432 ) (127,000 ) 43,760 (167,228 ) Other revenue, net 6,504   1,071   12,973   2,655   Total revenues and other income items 102,708 93,122 408,992 278,034 Operating costs and expenses Operating costs 115,837 83,060 233,815 165,257 Depletion, depreciation and amortization 109,447 68,245 219,271 131,746 Impairments of oil and natural gas properties — — 59,113 — Impairments of goodwill 95,947 — 95,947 — General and administrative expenses 22,862 16,420 55,124 35,149 Restructuring costs 1,773 — 6,691 — Loss on sale of assets 122   334   137   420   Total operating costs and expenses 345,988   168,059   670,098   332,572     Operating loss (243,280 ) (74,937 ) (261,106 ) (54,538 )   Interest expense, net of capitalized interest 61,404 30,208 101,069 60,866 Loss on interest rate swaps 603 — 2,415 — Other expenses (income), net 35   (261 ) (442 ) (773 ) Total other expense 62,042   29,947   103,042   60,093     Loss before taxes (305,322 ) (104,884 ) (364,148 ) (114,631 )   Income tax expense (benefit) 259   (159 ) 351   (148 )   Net loss (305,581 ) (104,725 ) (364,499 ) (114,483 )   Less: Net income attributable to noncontrolling interest 126   —   33   —   Net loss attributable to the partnership (305,707 ) (104,725 ) (364,532 )

(114,483

)   Less: Distributions to Series A preferred unitholders 4,125 1,833 8,250 1,833 Less: Non-cash distributions to Series B preferred unitholders 6,408   —   6,408   —   Net loss attributable to common unitholders $ (316,240 ) $ (106,558 ) $ (379,190 ) $ (116,316 )   Basic net loss per common unit $ (1.46 ) $ (0.89 ) $ (1.75 ) $ (0.97 ) Diluted net loss per common unit $ (1.46 ) $ (0.89 ) $ (1.75 ) $ (0.97 )     Breitburn Energy Partners LP and Subsidiaries Unaudited Consolidated Statements of Comprehensive Income       Three Months Ended June 30,     Six Months Ended June 30, Thousands of dollars, except per unit amounts 2015     2014 2015     2014 Net loss $ (305,581 ) $ (104,725 ) $ (364,499 ) $ (114,483 )   Other comprehensive (loss) income, net of tax: Change in fair value of available-for-sale securities (a) (74 ) —   99   —   Total other comprehensive (loss) income (74 ) —   99   —     Total comprehensive loss (305,655 ) (104,725 ) (364,400 ) (114,483 )   Less: Comprehensive income attributable to noncontrolling interest 97   —   74   —     Comprehensive loss attributable to the partnership $ (305,752 ) $ (104,725 ) $ (364,474 ) $ (114,483 ) (a)   Net of income taxes benefit of less than $0.1 million and income tax expense of less than $0.1 million for the three months and six months ended June 30, 2015.     Breitburn Energy Partners LP and Subsidiaries Unaudited Consolidated Statements of Cash Flows       Six Months Ended June 30, Thousands of dollars 2015     2014   Cash flows from operating activities Net loss $ (364,499 ) $ (114,483 ) Adjustments to reconcile to cash flow from operating activities: Depletion, depreciation and amortization 219,271 131,746 Impairment of oil and natural gas properties 59,113 Impairment of goodwill 95,947 — Unit-based compensation expense 14,545 12,647 (Gain) loss on derivative instruments (41,345 ) 167,228 Derivative instrument settlement receipts (payments) 224,007 (30,524 ) Income from equity affiliates, net 153 281 Deferred income taxes 168 (281 ) Loss on sale of assets 137 420 Other 12,818 3,487 Changes in net assets and liabilities Accounts receivable and other assets 8,656 2,097 Inventory 2,385 (5,347 ) Net change in related party receivables and payables 2,165 1,322 Accounts payable and other liabilities (18,576 ) 22,516   Net cash provided by operating activities 214,945   191,109   Cash flows from investing activities Property acquisitions (17,663 ) (2,684 ) Capital expenditures (170,634 ) (188,758 ) Proceeds from sale of assets — 542 Proceeds from sale of available-for-sale securities 3,480 — Purchases of available-for-sale securities (3,637 ) — Other (853 ) (5,706 ) Net cash used in investing activities (189,307 ) (196,606 ) Cash flows from financing activities Proceeds from issuance of preferred units, net 337,895 193,397 Proceeds from issuance of common units, net 4,925 20,273 Distributions to preferred unitholders (8,250 ) — Distributions to common unitholders (81,183 ) (120,059 ) Proceeds from issuance of long-term debt, net 1,043,400 466,000 Repayments of long-term debt (1,296,500 ) (543,500 ) Change in bank overdraft 126 (2,425 ) Debt issuance costs (29,154 ) (1,632 ) Net cash (used in) provided by financing activities (28,741 ) 12,054   (Decrease) increase in cash (3,103 ) 6,557 Cash beginning of period 12,628   2,458   Cash end of period $ 9,525   $ 9,015  

Breitburn Energy Partners LPAntonio D'AmicoVice President, Investor Relations & Government AffairsorJessica TangInvestor Relations Manager213-225-0390