News Column

Breitburn Energy Partners LP Reports Second Quarter 2014 Results and Provides Second Half 2014 Guidance

August 8, 2014



By a News Reporter-Staff News Editor at Energy Weekly News -- Breitburn Energy Partners LP (NASDAQ:BBEP) (Breitburn) announced financial and operating results for the second quarter of 2014.

Breitburn and QR Energy, LP (NYSE: QRE) also announced 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.

Keywords for this news article include: Oil & Gas, Natural Gas, Oil And Gas, Oil Production, Breitburn Energy Partners LP.

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Source: Energy Weekly News


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