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A Quick Look at BreitBurn Energy Partners L.P. (BBEP)’s Earnings

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Oil and gas partnership BreitBurn Energy Partners L.P. (NASDAQ:BBEP) is out with its first quarter earnings. The company reported a loss of $0.38 a unit on revenue of $120.4 million. Both missed estimates, as analysts were expecting earnings of $0.15 a unit on revenue of $138.5 million. Adjusted EBITDA for the quarter came in at $64.1 million, which is up 4% from the first quarter of last year. However, this is down from last quarter, which saw adjusted EBITDA of $78 million.

Overall, BreitBurn Energy Partners L.P. (NASDAQ:BBEP) missed analysts’ expectations. The real driving force behind the numbers was that realized gains on its commodity hedges fell from $22.5 million last quarter to just $5.2 million this quarter. The bottom line was further affected by weaker oil, NGL and natural gas price differentials in several of its operating areas. Otherwise, it was a fine quarter for the company.

Production
Total production for the quarter hit a quarterly record for the company, at 2.35 million barrels of oil equivalent, or MMBoe, which was an increase of 18% year over year. Liquids production drove the growth this quarter, as it, too, hit a new quarterly high. Overall, liquids production jumped 40% over the first quarter of last year, and now represents 51% of BreitBurn Energy Partners L.P. (NASDAQ:BBEP)’s production.

For the full year, the company sees its production coming in between 9.5 MMBoe and 10.1 MMBoe as it continues to deliver on its $261 million capital spending plan. It’s focusing its efforts on high-margin oil opportunities, which will receive 95% of that planned capital spend. The company expects that this will drive its liquids production to comprise 55% of total production by the end of the year.

Capital plans
For the quarter, BreitBurn Energy Partners L.P. (NASDAQ:BBEP) spent $45 million to drill 16 wells, complete 10 workovers, and start another 22 wells. The company is planning to ramp up its activity in the next two quarters as it moves forward on its plans to spend $261 million to drill 135 wells. Most of these projects will be concentrated on its oil-heavy assets in Texas and California. These high-margin oil projects should drive incremental cash flow, which is important to support the company’s distribution growth.

Outlook
In addition to its capital plans, BreitBurn Energy Partners L.P. (NASDAQ:BBEP) looks to be very active in the acquisition market. The company recently reduced borrowings on its credit facility to under $100 million, giving it plenty of dry powder to make a deal. It is targeting at least $500 million in acquisitions this year after spending $950 million over the past two years to close nine deals. Those acquisitions were a key reason why the BreitBurn was recently able to raise its distribution by 4%.

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