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BreitBurn Energy Partners L.P. (BBEP), Linn Energy LLC (LINE): This Dividend Stock Is a Bit Risky

Shares of BreitBurn Energy Partners L.P. (NASDAQ:BBEP) moved higher after the company released its first-quarter 2013 results. BreitBurn Energy Partners L.P. (NASDAQ:BBEP) saw growth in various aspects of its operations. However, there are also rising concerns about its distribution coverage ratio, which missed estimates. BreitBurn Energy Partners L.P. (NASDAQ:BBEP)’s quarter ended with a coverage ratio of only about 0.7x, which is below the target rate of 1.1x to 1.2x.

A coverage ratio of 1.0 would have put the company on the safe side of being able to payout 100% of its earnings to its investors. Distribution coverage of about 0.7 could imply that BreitBurn Energy Partners L.P. (NASDAQ:BBEP) might be paying more than it is earning. While the company’s cash flow from operations matches closely with its distributions, its free cash flow has been negative.

However, this is not much of an issue in a single quarter. But if it persists for several quarters, then that would be alarming. Even then, it is best to check the financials for better analysis of its distribution coverage.


One of the highlights of the first quarter 2013 report was total net oil and gas production. It saw a remarkable increase by 18% at approximately 2.3 million barrels of oil equivalent (MMBoe), compared to the 1.9 MMBoe output in the year-ago quarter. This is also higher by 6% compared to the total net production of 2.2 MMBoe in the prior quarter.

Its net liquids production also jumped to 1.2 MMBoe, up 40% from the 859 MMBoe in Q1 of 2012. This is higher by 20% compared to the previous quarter. The total production of natural gas also saw a quarter-over-quarter increase from approximately 6.7 million cubic feet (MMcf) to 6.8 MMcf. However, it sequentially declined from 7.2 MMcf total gas production in Q4 2012.

Another major highlight of the first-quarter results was the notable increase in revenue. It posted $96.9 million in total revenue, up 64% from the year-ago quarter at $59.1 million. But this is 17% lower than the previous quarter’s value of approximately $117.6 million.

While the company incurred net losses quarter-over-quarter, the net loss improved from $50 million to $36 million. The adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also improved from $61 million to $64 million. But just like the total revenue, the adjusted EBITDA sequentially dropped from $78 million.

During the first quarter, BreitBurn Energy Partners L.P. (NASDAQ:BBEP) had five rigs running; 16 wells drilled, and 10 completed workovers. According to its CEO, Hal Washburn, the company is on track of its goals. He further said that the first-quarter results delivered beyond expectations.

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