BreitBurn Energy Partners L.P. Reports First Quarter Results

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BreitBurn Energy Partners L.P. Reports First Quarter Results

LOS ANGELES--(BUSINESS WIRE)-- BreitBurn Energy Partners L.P. (the "Partnership") (NAS: 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 instruments5,15822,45517,591
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 costs318267370
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 Boe4.004.963.81
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)2,3462,2121,987
Oil and NGLs (MBoe)1,2061,005859
Natural gas (MMcf)6,8447,2436,769
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)

78.1291.3890.36

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 dollars201320122012
Reconciliation of net loss to Adjusted EBITDA:
 
Net loss attributable to the Partnership$(36,300)$(10,334)$(49,970)
 
Unrealized loss on commodity derivative instruments29,33418,74053,596
Depletion, depreciation and amortization expense47,79040,49738,281

Interest expense and other financing costs(a)

18,41921,17114,458
Unrealized gain on interest rate derivatives-(3,021)(164)
(Gain) loss on sale of assets(9)264125
Income tax expense (benefit)30285(559)

Unit-based compensation expense(b)

4,8085,3295,591
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 dollars201320122012
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)

17,18019,88513,206
Income from equity affiliates, net129(131)(154)

Incentive compensation expense(d)

-(82)-
Income taxes5198220
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)5,2704,8145,1892,6111,472
Average Price ($/Bbl)$91.45$93.07$94.67$89.60$86.32
Fixed Price Swaps - ICE Brent
Hedged Volume (Bbls/d)4,2004,8003,3004,300298
Average Price ($/Bbl)$97.57$98.88$97.73$95.17

$

97.50

Collars - NYMEX WTI<
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