Breitburn Energy Partners LP
May 9, 2016

Breitburn Energy Partners Reports First Quarter 2016 Results

LOS ANGELES--(BUSINESS WIRE)-- Breitburn Energy Partners LP (NASDAQ:BBEP) today announced financial and operating results for the first quarter 2016. Additional details concerning Breitburn's operations and financial results are available in its first quarter 2016 report on Form 10-Q, which will be filed with the Securities and Exchange Commission and will be available at the Investor Relations tab of the Company's website or at www.SEC.gov.

First Quarter 2016 Operating and Financial Results Compared to Fourth Quarter 2015

Impact of Derivative Instruments

Breitburn uses commodity derivative instruments to mitigate risks associated with commodity price volatility and to help maintain cash flows for operating activities, acquisitions, capital expenditures and distributions. Breitburn does not enter into derivative instruments for speculative trading purposes. Since Breitburn does not use hedge accounting to account for its derivative instruments, changes in the fair value of derivative instruments are recorded in Breitburn's earnings during each reporting period. These non-cash changes in the fair value of derivatives do not affect Adjusted EBITDA, cash flow from operations and distributable cash flow presented.

Production, Statement of Operations, and Realized Price Information

The following table presents production, selected income statement and realized price information for the three months ended March 31, 2016 and 2015, and the three months ended December 31, 2015:

  Three Months Ended
March 31,   December 31,   March 31,
Thousands of dollars, except as indicated   2016     2015     2015  
Oil sales $ 78,358 $ 108,024 $ 123,843
NGL sales 5,382 6,852 7,591
Natural gas sales 21,710 24,812 31,189
Gain on commodity derivative instruments 37,923 141,842 137,192
Other revenues, net   4,593     5,934     6,469  
Total revenues   147,966     287,464     306,284  
Lease operating expenses (a) 79,842 90,563 100,079
Production and property taxes (b)   9,909     9,033     13,544  
Total lease operating expenses   89,751     99,596     113,623  
Purchases and other operating costs 2,618 2,119 158
Salt water disposal costs 2,980 2,408 4,021
Change in inventory   (375 )   2,116     176  
Total operating costs   94,974     106,239     117,978  
Lease operating expenses before taxes, per Boe (a)(c) 16.29 17.74 19.81
Production and property taxes per Boe (b)   2.04     1.77     2.68  
Total lease operating expenses per Boe   18.33     19.51     22.49  
General and administrative expenses (excluding non-cash unit-based compensation)   17,616     14,508     25,335  
Net loss attributable to the partnership $

(103,786

) $ (890,878 ) $ (58,825 )
 
Basic net loss per unit $ (0.54 ) $ (4.25 ) $ (0.29 )
Diluted net loss per unit $ (0.54 ) $ (4.25 ) $ (0.29 )
 
Total production (MBoe) (d) 4,848 5,106 5,051
Oil (MBbl) 2,589 2,795 2,890
NGLs (MBbl) 498 526 459
Natural gas (MMcf) 10,567 10,712 10,211
Average daily production (Boe/d)   53,275     55,500     56,122  
Sales volumes (MBoe) (e)(f)(g)   4,927     5,151     4,999  
Average realized sales price (per Boe) (g) $ 21.40 $ 26.72 $ 32.52
Oil (per Bbl) (g) 29.37 37.31 43.62
NGLs (per Bbl) (g) 10.81 13.03 16.54
Natural gas (per Mcf) (g) $ 2.05 $ 2.32 $ 3.05
 
(a) Includes district expenses, processing fees, and transportation expenses.
(b) Includes ad valorem and severance taxes.
(c) Excludes non-cash unit-based compensation expenses of $0.9 million for the three months ended March 31, 2016.
(d) Natural gas is converted on the basis of six Mcf of gas per one Bbl of oil equivalent. This ratio reflects an energy content equivalency and not a price or revenue equivalency. Given commodity price disparities, the price for a Bbl of oil equivalent for natural gas is significantly less than the price for a Bbl of oil.
(e) Oil sales were 2,668 MBbl, 2,841 MBbl and 2,837 MBbl for the three months ended March 31, 2016, December 31, 2015 and March 31, 2015, respectively.
(f) Includes 90 MBoe of condensate purchased from third parties during the three months ended March 31, 2016.
(g) Excludes the effect of commodity derivative settlements.

Non-GAAP Financial Measures

This press release, including the financial tables and other supplemental information and reconciliations of certain non-generally accepted accounting principles ("non-GAAP") measures to their nearest comparable generally accepted accounting principles ("GAAP") measures, may be used periodically by management when discussing Breitburn's financial results with investors and analysts, and they are also available at breitburn.com.

"Adjusted EBITDA" is among the non-GAAP financial measures used in this press release. This non-GAAP financial measure should not be considered as an alternative to GAAP measures such as net income, operating income, cash flow from operating activities or any other GAAP measure of liquidity or financial performance. Management believes that this non-GAAP financial measure enhances comparability to prior periods. Adjusted EBITDA is presented because management believes it provides additional information relative to the performance of Breitburn's assets, without regard to financing methods or capital structure. This non-GAAP financial measure may not be comparable to similarly titled measures of other publicly traded partnerships or limited liability companies because all companies may not calculate Adjusted EBITDA in the same manner.

Adjusted EBITDA

The following table presents a reconciliation of net loss and net cash flows from operating activities, our most directly comparable GAAP financial performance and liquidity measures, to Adjusted EBITDA for each of the periods indicated.

  Three Months Ended
March 31,   December 31,   March 31,
Thousands of dollars, except as indicated   2016     2015     2015  

Reconciliation of net loss to Adjusted EBITDA:

Net loss attributable to the partnership $ (103,786 ) $ (890,878 ) $ (58,825 )
Gain on commodity derivative instruments (37,923 ) (141,842 ) (137,192 )
Commodity derivative instrument settlements (a) (b) 135,360 144,083 126,357
Depletion, depreciation and amortization expense 83,723 123,312 109,824
Impairment of oil and natural gas properties 2,793 878,335 59,113
Interest expense and other financing costs 58,332 50,319 41,477
(Gain) loss on sale of assets (12,260 ) (1,542 ) 15

Income tax (benefit) expense

(95 ) 1,162 92
Unit-based compensation expense (c) 4,673 6,091 6,927
Restructuring costs - unit-based compensation (c)   638         814  
Adjusted EBITDA $ 131,455 $ 169,040 $ 148,602
 
Reconciliation of net cash flows from operating activities to Adjusted EBITDA:
 
Net cash provided by operating activities $ 126,809 $ 85,521 $ 141,149
(Decrease) increase in assets net of liabilities relating to operating activities (44,142 ) 35,665 (30,968 )
Interest expense (d) 48,846 48,364 38,729
Income from equity affiliates, net 90 94 (325 )
Noncontrolling interest 220 (202 )
Income taxes 44 (413 ) 93

(Loss) gain on marketable securities

  (412 )   11     (76 )
Adjusted EBITDA $ 131,455   $ 169,040   $ 148,602  
 
(a)   Excludes premiums paid at contract inception related to those derivative contracts that settled during the applicable periods of: $ 2,086 $ 1,682 $ 1,645
(b) Includes net cash settlements on derivative instruments for:
- Oil settlements received: $ 121,988 $ 123,492 $ 111,879
- Natural gas settlements received: 13,372 20,592 14,478
(c) Represents non-cash long-term unit-based incentive compensation expense.
(d) Excludes amortization of debt issuance costs and amortization of senior note discount/premium.

Summary of Commodity Derivative Instruments

The table below summarizes Breitburn's commodity derivative hedge portfolio as of May 6, 2016. Please refer to the Commodity Price Protection Portfolio at breitburn.com for additional information related to our hedge portfolio.

  Year
2016   2017   2018   2019
Oil Positions:
Fixed Price Swaps - NYMEX WTI
Volume (Bbl/d) 17,404 14,519 1,493 1,000
Average Price ($/Bbl) $ 82.92 $ 82.81 $ 64.02 $ 56.35
Fixed Price Swaps - ICE Brent
Volume (Bbl/d) 4,300 298
Average Price ($/Bbl) $ 95.17 $ 97.50 $ $
Collars - NYMEX WTI
Volume (Bbl/d) 1,500
Average Floor Price ($/Bbl) $ 80.00 $ $ $
Average Ceiling Price ($/Bbl) $ 102.00 $ $ $
Collars - ICE Brent
Volume (Bbl/d) 500
Average Floor Price ($/Bbl) $ 90.00 $ $ $
Average Ceiling Price ($/Bbl) $ 101.25 $ $ $
Puts - NYMEX WTI
Volume (Bbl/d) 1,000
Average Price ($/Bbl) $ 90.00 $ $ $
Total:
Volume (Bbl/d) 24,704 14,817 1,493 1,000
Average Price ($/Bbl) $ 85.31 $ 83.11 $ 64.02 $ 56.35
 
Gas Positions:
Fixed Price Swaps - MichCon City-Gate
Volume (MMBtu/d) 29,000 24,000 17,500 10,000
Average Price ($/MMBtu) $ 3.91 $ 3.71 $ 3.10 $ 3.15
Fixed Price Swaps - Henry Hub
Volume (MMBtu/d) 42,050 21,016 2,870
Average Price ($/MMBtu) $ 4.02 $ 4.29 $ 3.74 $
Collars - Henry Hub
Volume (MMBtu/d) 630 595
Average Floor Price ($/MMBtu) $ 4.00 $ 4.00 $ $
Average Ceiling Price ($/MMBtu) $ 5.55 $ 6.15 $ $
Puts - Henry Hub
Volume (MMBtu/d) 11,350 10,445
Average Price ($/MMBtu) $ 4.00 $ 4.00 $ $
Deferred Premium ($/MMBtu) $ 0.66 $ 0.69 $ $
Total:
Volume (MMBtu/d) 83,030 56,056 20,370 10,000
Average Price ($/MMBtu) $ 3.98 $ 3.98 $ 3.19 $ 3.15

Premiums paid in 2012 related to oil and natural gas derivatives to be settled beyond March 31, 2016 were as follows:

  Year
Thousands of dollars 2016   2017
Oil $ 5,589 $ 734
Natural gas 715

About Breitburn Energy Partners LP

Breitburn Energy Partners LP is a publicly traded independent oil and gas master limited partnership focused on the acquisition, development, and production of oil and gas properties throughout the United States. Breitburn's producing and non-producing crude oil and natural gas reserves are located in Ark-La-Tex; the Midwest; the Permian Basin; the Mid-Continent; the Rockies; the Southeast; and California. See www.breitburn.com for more information.

Cautionary Statement Regarding Forward-Looking Information

This press release contains forward-looking statements relating to Breitburn's operations that are based on management's current expectations, estimates and projections about its operations. Words and phrases such as "believes," "expect," "future," "impact," "will be," "forecast" and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. These include risks relating to Breitburn's financial performance and results; availability of sufficient cash flow and other sources of liquidity to execute our business plan; changes in our business strategy, level of indebtedness and periodic redeterminations of the borrowing base under our credit facility and any deficiency that would have to be repaid; ability to continue to borrow under the credit facility; potential need to sell certain assets, restructure our debt, raise additional capital or seek bankruptcy protection; our future levels of indebtedness, liquidity, compliance with financial covenants and our ability to continue as a going concern; prices and demand for natural gas and oil; increases in operating costs; uncertainties inherent in estimating our reserves and production; our ability to replace reserves and efficiently develop our current reserves; political and regulatory developments relating to taxes, derivatives and our oil and gas operations; risks relating to our acquisitions; and the factors set forth under the heading "Risk Factors" incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission, and if applicable, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, Breitburn undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Unpredictable or unknown factors not discussed herein also could have material adverse effects on forward-looking statements.

BBEP-IR

Breitburn Energy Partners LP and Subsidiaries
Consolidated Balance Sheets

(Unaudited)

 
  March 31,   December 31,
Thousands of dollars   2016     2015  
ASSETS
Current assets
Cash $ 81,691 $ 10,464
Accounts and other receivables, net 113,215 128,589
Derivative instruments 388,829 439,627
Related party receivables 1,518 2,274
Inventory 1,345 926
Prepaid expenses   3,470     6,447  
Total current assets 590,068 588,327
Equity investments 6,657 6,567
Property, plant and equipment
Oil and natural gas properties 7,855,082 7,898,117
Other property, plant and equipment   194,876     188,795  
8,049,958 8,086,912
Accumulated depletion and depreciation   (4,185,936 )   (4,154,030 )
Net property, plant and equipment 3,864,022 3,932,882
Other long-term assets
Derivative instruments 179,658 226,764
Other long-term assets   74,981     80,847  
Total assets $ 4,715,386   $ 4,835,387  
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $ 42,169 $ 50,412
Current portion of long-term debt 172,000 154,000
Derivative instruments 4,309 4,462
Distributions payable 733 733
Current portion of asset retirement obligation 1,679 2,341
Revenue and royalties payable 33,476 35,462
Wages and salaries payable 12,928 21,654
Accrued interest payable 61,415 19,517
Production and property taxes payable 20,178 24,292
Other current liabilities   7,834     5,133  
Total current liabilities 356,721 318,006
Credit facility 1,025,000 1,075,000
Senior notes, net 1,754,840 1,752,194
Other long-term debt   3,779     3,148  
Total long-term debt 2,783,619 2,830,342
Deferred income taxes 3,704 3,844
Asset retirement obligation 247,956 252,037
Derivative instruments 752 255
Other long-term liabilities   19,751     25,008  
Total liabilities 3,412,503 3,429,492
Equity
Series A preferred units, 8.0 million units issued and outstanding at March 31, 2016 and December 31, 2015 193,215 193,215
Series B preferred units, 49.6 million and 48.8 million units issued and outstanding at March 31, 2016 and December 31, 2015, respectively 359,611 353,471
Common units, 213.7 million and 213.5 million units issued and outstanding at March 31, 2016 and December 31, 2015, respectively 742,713 852,114
Accumulated other comprehensive income (loss)   49     (229 )
Total partners' equity 1,295,588 1,398,571
Noncontrolling interest   7,295     7,324  
Total equity   1,302,883     1,405,895  
Total liabilities and equity $ 4,715,386   $ 4,835,387  
 
Breitburn Energy Partners LP and Subsidiaries
Consolidated Statements of Operations

(Unaudited)

 
  Three Months Ended
March 31,
Thousands of dollars, except per unit amounts   2016       2015  
 
Revenues and other income items
Oil, natural gas and natural gas liquid sales $ 105,450 $ 162,623
Gain on commodity derivative instruments, net 37,923 137,192
Other revenue, net   4,593     6,469  
Total revenues and other income items 147,966 306,284
Operating costs and expenses
Operating costs 94,974 117,978
Depletion, depreciation and amortization 83,723 109,824
Impairment of oil and natural gas properties 2,793 59,113
General and administrative expenses 21,414 32,262
Restructuring costs 2,809 4,918
(Gain) loss on sale of assets   (12,260 )   15  
Total operating costs and expenses   193,453     324,110  
Operating loss (45,487 ) (17,826 )
 
Interest expense, net of capitalized interest 55,989 39,665
Loss on interest rate swaps 2,343 1,812
Other expense (income), net   282     (477 )
Total other expense   58,614     41,000  
Loss before taxes (104,101 ) (58,826 )
Income tax (benefit) expense   (95 )   92  
Net loss (104,006 ) (58,918 )
Less: Net loss attributable to noncontrolling interest   (220 )   (93 )
Net loss attributable to the partnership   (103,786 )   (58,825 )
Less: Distributions to Series A preferred unitholders 4,125 4,125
Less: Non-cash distributions to Series B preferred unitholders 7,386
Less: Net loss attributable to participating units       (1,432 )
Net loss used to calculate basic and diluted net loss per unit $ (115,297 ) $ (61,518 )
 
Basic net loss per common unit $ (0.54 ) $ (0.29 )
Diluted net loss per common unit $ (0.54 ) $ (0.29 )
 
Weighted average number of units used to calculate basic and diluted net loss per unit (in thousands):
Basic 213,661 210,931
Diluted 213,661 210,931
 
Breitburn Energy Partners LP and Subsidiaries
Consolidated Statements of Comprehensive Loss

(Unaudited)

 
  Three Months Ended March 31,
Thousands of dollars, except per unit amounts   2016       2015  
Net loss $ (104,006 ) $ (58,918 )
 
Other comprehensive income, net of tax:
Change in fair value of available-for-sale securities (a)   470     173  
Total other comprehensive income   470     173  
Total comprehensive loss   (103,536 )   (58,745 )
Less: Comprehensive loss attributable to noncontrolling interest   (28 )   (23 )
Comprehensive loss attributable to the partnership $ (103,508 ) $ (58,722 )
 

(a) Net of income taxes of $0.2 million and $0.1 million for the three months ended March 31, 2016 and 2015, respectively.

 
Breitburn Energy Partners LP and Subsidiaries
Consolidated Statements of Cash Flows

(Unaudited)

 
  Three Months Ended March 31,
Thousands of dollars   2016       2015  
 
Cash flows from operating activities
Net loss $ (104,006 ) $ (58,918 )
Adjustments to reconcile cash flows from operating activities:
Depletion, depreciation and amortization 83,723 109,824
Impairment of oil and natural gas properties 2,793 59,113
Unit-based compensation expense 5,311 7,741
Gain on derivative instruments (35,580 ) (135,380 )
Derivative instrument settlement receipts 133,828 124,904
Income from equity affiliates, net (90 ) 325
Deferred income taxes (140 ) 168
(Gain) loss on sale of assets (12,260 ) 15
Other 8,182 (41 )
Changes in assets and liabilities:
Accounts receivable and other assets 12,109 30,043
Inventory (419 ) (185 )
Net change in related party receivables and payables 756 2,462
Accounts payable and other liabilities   32,602     1,078  
Net cash provided by operating activities   126,809     141,149  
Cash flows from investing activities
Property acquisitions (3,942 ) (13,993 )
Capital expenditures (26,965 ) (97,230 )
Proceeds from sale of assets 11,796
Proceeds from sale of available-for-sale securities 5,118
Purchases of available-for-sale securities (5,416 )
Other       (853 )
Net cash used in investing activities   (19,409 )   (112,076 )
Cash flows from financing activities
Proceeds from issuance of common units, net (63 )
Distributions to preferred unitholders (4,126 ) (4,125 )
Distributions to common unitholders (54,122 )
Proceeds from issuance of long-term debt, net 37,000 193,600
Repayments of long-term debt (69,000 ) (168,500 )
Principal payments on capital lease obligations (19 )
Change in book overdraft (25 ) 199
Debt issuance costs   (3 )    
Net cash used in financing activities   (36,173 )   (33,011 )
Increase (decrease) in cash 71,227 (3,938 )
Cash beginning of period   10,464     12,628  
Cash end of period $ 81,691   $ 8,690  

Breitburn Energy Partners LP
Antonio D'Amico
Vice President, Investor Relations & Government Affairs
or
Jessica Tang
Investor Relations Manager
(213) 225-0390

Source: Breitburn Energy Partners LP

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