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Breitburn Energy Partners LP (OTCMKTS:BBEPQ) In Turnaround Mode

Breitburn Energy Partners LP (OTCMKTS:BBEPQ) In Turnaround Mode
Written by
Jarrod Wesson
Published on
July 24, 2017
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The share* price of Breitburn Energy Partners LP (OTCMKTS:BBEPQ), an oil and gas master limited partnership, increased sharply in July 2017, despite no relevant news put out to justify the move. Additionally, the social media assessment of the company increased recently. Logan Duvall wrote an article recently "Breitburn Energy: What Went Wrong And What To Expect". Yahoo Finance Conversations increased to 9,930 reactions registered as of July 19, 2017. Furthermore, the chatter on iHub increased. Because of all these reasons, we became interested in the company again. We will let you know what's going on, but first of all, have a look at the recent share price action.SourceBreitburn Energy Partners LPSource

BBEPQ is an independent oil and gas partnership exploring and developing oil, NGL, and natural gas assets in the US. Its strategy is based in the following principles:"- acquire long-lived assets with low-risk exploitation and development opportunities;- identify and implement successful exploitation techniques to optimize reserve recovery- reduce cash flow volatility through commodity price and interest rate derivatives- maximize asset value and cash flow stability "SourceThe following table shows the reserves and the production owned by BBEPQ. Have a look:


Why is the share price so low despite so many assets? The reason to explain it is the $3 billion in debt, for which voluntary bankruptcy was filed on May 15, 2016 under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York. Since that time, the company has been reorganizing the business, selling some divisions, and negotiating with debt holders. We believe that it was a necessary step, and a more consolidated and more competitive business structure may emerge from this process.

Recent Developments - Sale of divisions and Restructuring

What is the company doing to exit bankruptcy? The company soon found buyers for some assets and commenced restructuring efforts. This text is from the last quarterly earnings report; it noted $11.9 million received from the sale of assets:"In March 2016, we completed the sale of certain of our Mid-Continent assets for net proceeds of $11.9 million . The sale included all Mid-Continent properties acquired in the merger with QR Energy, LP in 2014, excluding five wells for which we have asset retirement obligations and over-riding royalty interests and royalty interests in an additional 42 wells. This transaction was effective January 1, 2016. We recognized a gain of $11.3 million from the Mid-Continent Sale." SourceRegarding the most recent news about the company, on June 20, 2017, it was put out that some investors had sued a Wells Fargo's broker for recommending BBEPQ right before the bankruptcy. Making an investment in the company at that time was quite a risky bet. It did not work out. The bank made its clients invest when the share price was trading at about $1. In our opinion, when the bankruptcy was declared, shareholders rushed to sell their positions pushing the share price even down. The share is now trading at ten times less than the value when Wells Fargo suggested its clients to invest.SourceAccording to this press release, JP Morgan also recommended the stock along with other oil operators:
"Linn Energy LLC (LINEQ), Peabody Energy Corp. (BTUUQ) (both its stock and bonds), Atlas Resource Partners LP3 (ARPJQ), Azure Midstream Partners (AZUR) and BreitBurn Energy Partners, LP (BBEPQ)." Source
Market participants who declared equity stakesThe following market participants declared large interests in BBEPQ:HolderSharesDate Reported% OutValueAlbert D Mason Inc154,074Mar 30, 20170.07%15,407Fisher Asset Management, LLC38,726Jun 29, 20170.02%1,549InterOcean Capital, LLC30,000Mar 30, 20170.01%3,000Norman Fields, Gottscho Capital Management, LLC20,000Jun 29, 20170.01%799SourceFinancial situationAs the company is working on its financial situation, selling assets and restructuring, it is key to check the financial figures of the company. The following are the numbers reported on the balance sheet. Note that the net assets are positive, some cash was reported, and the company has a large amount of receivables:Period Ending3/31/201712/31/20169/30/20166/30/2016Current Assets (All numbers in thousands)Cash And Cash Equivalents39,59771,12499,40390,460Short Term Investments----Net Receivables541,493550,404539,280543,110Inventory1,8409981,3631,361Other Current Assets6,8558,2309,56115,766Total Current Assets589,785630,756649,607650,697Long Term Investments7,2717,1606,9326,791Property Plant and Equipment3,347,4753,413,6463,470,9583,810,464Goodwill----Intangible Assets----Accumulated Amortization----Other Assets65,23963,84662,35763,696Deferred Long Term Asset Charges----Total Assets4,009,7704,115,4084,189,8544,531,648SourceAccounts Payable113,989132,570128,899116,634Short/Current Long Term Debt1,198,2591,198,2591,198,2591,197,329Other Current Liabilities20,24823,37122,02616,793Total Current Liabilities1,332,4961,354,2001,349,1841,330,756Long Term Debt3,0773,0943,0943,124Other Liabilities2,153,1802,149,3162,156,6652,154,688Deferred Long Term Liability Charges2,3902,7713,0403,536Minority Interest7,4067,0116,7526,850Negative Goodwill----Total Liabilities3,498,5493,516,3923,518,7353,498,954SourceConclusionLike may other oil and gas operators, BBEPQ had to face bankruptcy, because the oil price collapsed in 2014, and 2015. It reacted by selling assets and restructuring the business as the situation got worse.SourceIn our opinion, if BBEPQ continues in the same direction and survives, the company may grow when oil prices rise again. Many are saying that the recent OPEC production cuts may result, in the near future, in an oil price increase. That event would be a great catalyst for this stock. In this piece, we saw that JP Morgan and Wells Fargo recommended the stock when it was trading close to $1. Now, it is trading closer to $0.10, and the company is really making changes inside the organization to benefit the shareholders. While the company is still not out of the woods yet, the turnaround is heading in the right direction.*This company is a partnership, thus the shares may be called unitsWe will be updating our subscribers as soon as we know more. For the latest updates on BBEPQ, sign up below!Image courtesy of BLM California via FlickrDisclosure: We have no position in BBEPQ and have not been compensated for this article.

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