Breitburn Energy Partners Prices Unit Issue - Analyst Blog

Los Angeles, CA-based Breitburn Energy Partners L.P. BBEP has priced an underwritten public offering of 7,000,000 8.25% Series A Preferred Units at $25.00 a piece, with a 30-day over-allotment option for an additional 1,000,000 units. The offering, which was announced on May 14, is likely to close on May 21.

The oil and natural gas explorer plans to use the net proceeds from this offering – expected at approximately $193.3 million assuming full exercise by the underwriters – to repay the debts under the firm's credit facility.

BreitBurn Energy Partners, which recently reported upbeat first quarter results on strong production, is an independent exploration and production partnership engaged in the acquisition, finding, and development of oil and gas properties. The entity's operations are spread over nine states with primary focus on the Oklahoma and Texas operating areas.

With a high-margin high-growth reserve base, balanced oil/gas portfolio and accretive acquisitions, Breitburn Energy Partners' asset portfolio is primed for high production growth and peer-leading returns. Moreover, a track record of consistent distribution hike, together with a business model focused on operational efficiencies and attractive acquisitions/growth projects, makes the partnership a good choice for investors looking for a steady, predictable income stream.

However, as is the case with other independent exploration and production firms, Breitburn Energy Partners' results are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces. Realized prices could differ significantly from our estimates, thereby affecting the partnership's revenues, earnings and cash flow.

As a result, BreitBurn Energy Partners currently retains a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.

However, some better-ranked domestic upstream energy stocks include Matador Resources Co. MTDR, Callon Petroleum Co. CPE and EPL Oil & Gas Inc. EPL. All the firms hold a Zacks Rank #1 (Strong Buy).

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