Provides 2009 Capital and Production Guidance
BreitBurn Energy Partners L.P. (the "Partnership") (NASDAQ:BBEP) today announced financial and operating results for its fourth quarter and full year 2008 and capital and production guidance for 2009.
Fourth Quarter 2008 Financial Results
- Oil and natural gas sales revenues, including realized gains and losses on commodity derivative instruments, increased to $96.3 million from $73.2 million in the fourth quarter of 2007, up 32% year over year.
- Although actual oil and gas prices were significantly lower in the fourth quarter of 2008 when compared to the fourth quarter of 2007, due to our extensive hedging portfolio realized crude oil and liquids prices averaged $60.81 per Boe and realized natural gas prices averaged $8.04 per Mcf. These compare favorably to average realized crude oil and liquids prices of $62.59 per Boe and average realized natural gas prices of $7.51 per Mcf in the fourth quarter of 2007.
- Adjusted EBITDA, a non-GAAP measure, rose by 17% to $50.9 million from $43.5 million in the fourth quarter of 2007.
- Per unit production expenses, which include lease operating expenses, production and property taxes and processing fees, declined to $19.21 per Boe from $19.70 per Boe in the fourth quarter of 2007.
- Recorded depletion, depreciation and amortization expense of $115.7 million, including a non-cash charge of $86.4 million due to price related reserve adjustments and impairment of long lived assets.
- General and administrative expenses, excluding unit-based compensation, increased to $9.0 million from $7.1 million in the fourth quarter of 2007, due principally to increased legal and other professional services expenses.
- Net income was $251.2 million, or $4.65 per diluted limited partner unit, compared to a net loss of $47.1 million, or $0.86 per diluted limited partner unit, in the fourth quarter of 2007.
- Distributable cash flow totaled $29.0 million.
- The Partnership paid a quarterly cash distribution of $27.4 million, or $0.52 per unit, for the fourth quarter.
- Oil and gas capital expenditures totaled $31.8 million during the fourth quarter.
Fourth Quarter 2008 Production Highlights
- Total aggregate production increased 22% to 1,689 MBoe from 1,389 MBoe in the fourth quarter of 2007. Production from the properties acquired from Quicksilver on November 1, 2007 represented 305.1 MBoe of this increase and was offset slightly by normal production declines in other fields.
- Oil and NGL production was 767 MBoe, compared to 738 MBoe in the fourth quarter of 2007.
- Natural gas production was 5,530 MMcf, compared to 3,906 MMcf in the fourth quarter of 2007.
Impact of Derivative Instruments
During the fourth quarter of 2008, non-cash unrealized gains from commodity derivative instruments were $346.4 million and non-cash unrealized losses from interest rate derivative instruments were $15.0 million. The Partnership uses commodity and interest rate derivative instruments to mitigate the risks associated with commodity price volatility and changing interest rates and to help maintain cash flows for operating activities, acquisitions, capital expenditures, and distributions. The Partnership does not enter into derivative instruments for speculative trading purposes. Non-cash gains or losses do not affect Adjusted EBITDA, cash flow from operations or the Partnership’s ability to pay its cash distributions.
Full Year 2008 Results
- Production volumes increased to 6,809 MBoe up from 3,019 MBoe in 2007, or 126%. Production from 2007 acquisitions accounted for substantially all of the year-over-year increase from 2007.
- Total revenues, including unrealized gains and losses on commodity derivative instruments, were $802.4 million, a $727.4 million increase from 2007.
- Sales revenues were $467.4 million, a $283.0 million increase from 2007, reflecting increased sales volumes from properties acquired in 2007 and higher realized prices.
- Adjusted EBITDA totaled $233.0 million, compared to $85.3 million in 2007; up 173%.
- Realized losses on commodity derivative instruments increased to $55.9 million, compared to losses of $6.6 million in 2007.
- Unrealized gains on commodity derivative instruments, reflecting lower crude oil and natural gas prices, were $388.0 million, compared to unrealized losses of $103.9 million in 2007.
- Depletion, depreciation and amortization expense increased to $179.9 million due to substantial increases in production volumes from properties acquired in 2007 as well as fourth quarter price related reserve adjustments and impairments of long lived assets.
- General and administrative expenses, excluding unit-based compensation, were $37.0 million, and were at the low end of guidance.
- Net income was $378.2 million, or $6.28 per diluted limited partnership unit, compared to a net loss of $60.4 million, or a loss of $1.83 per diluted limited partnership unit, in 2007.
Management Commentary
Hal Washburn, Chairman and Co-CEO of BreitBurn Energy Partners, said, “2008 was a very productive and challenging year for the partnership. Our principal operating focus was the integration and development of the significant oil and gas acquisitions we completed in 2007 and we are pleased that our 2008 results were generally in line with our full-year guidance despite the economic and other headwinds which arose unexpectedly in the second half of 2008. In addition to the progress we made growing the business during the year, the partnership also repurchased Provident Energy Trust’s interests in BreitBurn and as part of that transaction granted unitholders a new right to vote for the election of directors. We believe this was one of our most significant accomplishments on behalf of our unitholders in 2008.”
Mr. Washburn continued, “In light of the current market environment, we expect 2009 to be a year of increased internal focus. Given the substantial decline in oil and natural gas prices and the outlook for the broader economy, we have elected to significantly reduce our capital spending and are committed to reducing operating and general and administrative costs in 2009. Our current 2009 capital budget is approximately $20 million. However, despite the significant reduction in capital spending, we expect 2009 production to be between 6.1 and 6.5 million Boe because our assets have low natural declines. With improvements in commodity prices and the broader market environment, we will look to increase our capital spending and refocus on acquisition opportunities consistent with our long-term strategy.”
2008 Reserves
BreitBurn’s total estimated proved oil and gas reserves as of December 31, 2008, were 103.6 MMBoe under the current Securities and Exchange Commission (SEC) rules. The Standardized Measure of discounted (at 10%) net future cash flows from the production of these reserves is approximately $592 million using prices and costs in effect as of the dates such estimates were made and which are held constant throughout the life of the properties. Of the total estimated proved reserves, 75% were natural gas, 92% were classified as proved developed and 78% were located in Michigan, 12% in California, 6% in Wyoming, with the remaining 4% in Florida, Texas, Indiana, and Kentucky.
For 2008, production for the Partnership was approximately 6.8 MMBoe, or 18,605 Boe/day. During 2008, the Partnership added proved reserves totaling 8.2 MMBoe from additions. This equates to 121% of the Partnership’s production for 2008. Of the 8.2 MMBoe added, the majority — 6.7 MMBoe — were additions primarily in the Michigan Antrim trend where the Partnership drilled 116 wells.
The 8.2 MMBoe of reserve additions were offset by negative economic and technical revisions of 40.5 MMBoe. Approximately 94% of these reductions were due to economic (prices and costs) revisions resulting from using December 31, 2008 prices of $44.60 per barrel oil and $5.71 per MMBtu of gas as compared to December 31, 2007 prices of $95.95 per barrel and $6.80 per MMBtu.
In late December 2008, the SEC released its final rules on “Modernization of Oil and Gas Reporting” that will go into effect for the 2009 reporting year. Using the pricing methodology of the new rules for the 2008 reporting year, BreitBurn’s reserves would have been 140 MMBoe.
2009 Capital and Production Guidance
In response to the rapid and substantial decline in oil and natural gas prices, the outlook for the broader economy and the ongoing turmoil in the financing markets, we have elected to significantly reduce our capital spending and drilling activity in 2009. Our current 2009 capital budget is approximately $20 million, compared to approximately $129 million in 2008.
However, despite the significant reduction in capital spending, we expect 2009 production to be between 6.1 and 6.5 million Boe because our assets have low natural declines. If oil and natural gas prices improve in 2009 and we subsequently increase the scope of our capital program for these or other factors, we would expect an increase in our 2009 production rate and aggregate volumes.
Production, Income Statement and Realized Price Information
The following table presents production, selected income statement and realized price information for the three months ended December 31 and September 30, 2008 and December 31, 2007 as well as full year 2008 and 2007:
| Three Months Ended | Year Ended | ||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||
| Oil, natural gas and natural gas liquid sales | $ | 81,321 | $ | 130,249 | $ | 81,042 | $ | 467,381 | $ | 184,372 | |||||||||
| Realized gains (losses) on commodity derivative instruments | 14,949 | (24,123 | ) | (7,851 | ) | (55,946 | ) | (6,556 | ) | ||||||||||
| Unrealized gains (losses) on commodity derivative instruments | 346,381 | 431,564 | (63,581 | ) | 388,048 | (103,862 | ) | ||||||||||||
| Other revenues, net | 596 | 806 | 429 | 2,920 | 1,037 | ||||||||||||||
| Total revenues | $ | 443,247 | $ | 538,496 | $ | 10,039 | $ | 802,403 | $ | 74,991 | |||||||||
| Lease operating expenses | 22,239 | 32,154 | 20,346 | 103,691 | 47,459 | ||||||||||||||
| Production and property taxes | 6,934 | 7,814 | 5,708 | 31,311 | 11,776 | ||||||||||||||
| Processing fees | 3,690 | 1,057 | 1,308 | 7,000 | 1,308 | ||||||||||||||
| Total lease operating expenses | $ | 32,862 | $ | 41,025 | $ | 27,362 | $ | 142,002 | $ | 60,543 | |||||||||
| Lease operating expenses pre taxes per Boe (a) | $ | 15.10 | $ | 19.36 | $ | 15.59 | $ | 15.95 | $ | 15.69 | |||||||||
| Production and property taxes per Boe | 4.11 | 4.63 | 4.11 | 4.60 | 3.90 | ||||||||||||||
| Total lease operating expenses per Boe | 19.21 | 23.98 | 19.70 | 20.55 | 19.60 | ||||||||||||||
| General and administrative expenses excluding unit-based compensation | $ | 8,954 | $ | 8,392 | $ | 7,122 | $ | 36,965 | $ | 17,485 | |||||||||
| Net income (loss) (b,c) | $ | 251,162 | $ | 454,454 | $ | (47,066 | ) | $ | 378,236 | $ | (60,357 | ) | |||||||
| Net income (loss) per limited partnership unit (b,c) | $ | 4.77 | $ | 8.63 | $ | (0.86 | ) | $ | 6.42 | $ | (1.83 | ) | |||||||
| Total Production (MBoe) | 1,689 | 1,689 | 1,389 | 6,809 | 3,019 | ||||||||||||||
| Oil and NGL (MBoe) | 767 | 762 | 738 | 3,078 | 2,330 | ||||||||||||||
| Natural gas (MMcf) | 5,530 | 5,564 | 3,906 | 22,384 | 4,134 | ||||||||||||||
| Average daily production (Boe/d) | 18,359 | 18,359 | 15,098 | 18,605 | 8,271 | ||||||||||||||
| Sales volumes (MBoe) | 1,759 | 1,657 | 1,345 | 6,857 | 3,146 | ||||||||||||||
| Average realized sales price (per Boe) (c) (d) | $ | 54.23 | $ | 63.95 | $ | 54.10 | $ | 59.49 | $ | 55.69 | |||||||||
| Oil and NGL (per Boe) (c) (d) | 60.81 | 81.31 | 62.59 | 71.51 | 58.93 | ||||||||||||||
| Natural gas (per Mcf) (c) | 8.04 | 8.38 | 7.51 | 8.24 | 7.36 | ||||||||||||||
| (a) Includes processing fees and excludes amortization of intangible asset related to acquisition from Quicksilver. | |||||||||||||||||||
| (b) Includes non-cash unrealized gains (losses) on derivative instruments. | |||||||||||||||||||
| (c) Includes realized gains (losses) on derivative instruments. | |||||||||||||||||||
| (d) Excludes amortization of intangible asset related to crude oil sales. | |||||||||||||||||||
Non-GAAP Financial Measures
This press release, the financial tables and other supplemental information, including the 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 the Partnership's financial results with investors and analysts and they are also available on the Partnership's website under the Investor Relations tab.
Among the non-GAAP financial measures used are "Adjusted EBITDA” and “distributable cash flow”. These non-GAAP financial measures 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.
Adjusted EBITDA and distributable cash flow are presented as management believes they provide additional information and metrics relative to the performance of the Partnership's business, such as the cash distributions we expect to pay to our unitholders, as well as our ability to meet our debt covenant compliance tests. Management believes that these financial measures indicate to investors whether or not cash flow is being generated at a level that can sustain or support an increase in our quarterly distribution rates. These non-GAAP financial measures 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 and distributable cash flow in the same manner.
Adjusted EBITDA and Distributable Cash Flow
The following table presents a reconciliation of net income (loss) and net cash from operating activities, our most directly comparable GAAP financial performance and liquidity measures, to Adjusted EBITDA for each of the periods indicated. It also presents distributable cash flow.
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| Thousands of dollars | 2008 | 2007 | 2008 | 2007 | ||||||||||||
| Reconciliation of consolidated net income (loss) to Adjusted EBITDA: | ||||||||||||||||
| Net income (loss) | $ | 251,162 | $ | (47,066 | ) | $ | 378,236 | $ | (60,357 | ) | ||||||
| Unrealized (gain) loss on commodity derivative instruments | (346,381 | ) | 63,581 | (388,048 | ) | 103,862 | ||||||||||
| Depletion, depreciation and amortization expense (c) | 115,705 | 15,678 | 179,933 | 29,422 | ||||||||||||
| Write-down of crude oil inventory | 1,172 | - | 1,172 | - | ||||||||||||
| Interest expense and other financing costs (b) | 10,631 | 4,635 | 31,868 | 6,258 | ||||||||||||
| Unrealized (gain) loss on interest rate derivatives | 15,046 | - | 17,314 | - | ||||||||||||
| Income tax expense (benefit) | 677 | (667 | ) | 1,939 | (1,229 | ) | ||||||||||
| Non-cash unit based compensation | 2,091 | 5,133 | 7,481 | 5,133 | ||||||||||||
| Amortization of intangibles | 792 | 2,174 | 3,131 | 2,174 | ||||||||||||
| Adjusted EBITDA | $ | 50,895 | $ | 43,468 | $ | 233,026 | $ | 85,263 | ||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| Thousands of dollars | 2008 | 2007 | 2008 | 2007 | ||||||||||||
| Reconciliation of net cash from operating activities to Adjusted EBITDA: | ||||||||||||||||
| Net cash from operating activities | $ | 35,735 | $ | 11,003 | $ | 226,696 | $ | 60,102 | ||||||||
| Add: | ||||||||||||||||
| Increase (decrease) in net assets and liabilities relating to operating activities | 2,848 | 33,978 | (30,939 | ) | 30,371 | |||||||||||
| Interest expense (including realized losses on interest rate swaps) | 10,631 | 2,348 | 31,868 | 3,545 | ||||||||||||
| Equity in earnings from affiliates, net | (426 | ) | 47 | (1,198 | ) | 28 | ||||||||||
| Incentive compensation plans paid | 606 | 314 | 6,952 | 3,776 | ||||||||||||
| Incentive compensation expense (a) | 376 | (4,178 | ) | 574 | (12,999 | ) | ||||||||||
| Other | 1,138 | - | (739 | ) | 531 | |||||||||||
| Minority interest | (13 | ) | (44 | ) | (188 | ) | (91 | ) | ||||||||
| Adjusted EBITDA | $ | 50,895 | $ | 43,468 | $ | 233,026 | $ | 85,263 | ||||||||
| Cash interest expense (b) | (9,795 | ) | (2,349 | ) | (29,255 | ) | (3,545 | ) | ||||||||
| Maintenance capital expenditures | (12,139 | ) | (5,796 | ) | (61,135 | ) | (22,256 | ) | ||||||||
| Distributable cash flow | $ | 28,961 | $ | 35,323 | $ | 142,636 | $ | 59,462 | ||||||||
| (a) Represents incentive compensation plan expense expected to be settled in cash. | ||||||||||||||||
| (b) Includes realized losses on interest rate derivatives. | ||||||||||||||||
| (c) Includes impairments and price related DD&A adjustments of $86.4 million for the three months and year ended December 31, 2008. | ||||||||||||||||
Hedge Portfolio Summary
The table below summarizes the Partnership’s commodity derivative hedge portfolio as of February 27, 2009.
| Year | Year | Year | Year | ||||||||||||
| 2009 | 2010 | 2011 | 2012 | ||||||||||||
| Gas Positions: | |||||||||||||||
| Fixed Price Swaps: | |||||||||||||||
| Hedged Volume (MMBtu/d) | 45,802 | 43,869 | 25,955 | 19,129 | |||||||||||
| Average Price ($/MMBtu) | $ | 8.14 | $ | 8.20 | $ | 8.48 | $ | 8.85 | |||||||
| Collars: | |||||||||||||||
| Hedged Volume (MMBtu/d) | 1,740 | 3,405 | 16,016 | 19,129 | |||||||||||
| Average Floor Price ($/MMBtu) | $ | 9.00 | $ | 9.00 | $ | 9.00 | $ | 9.00 | |||||||
| Average Ceiling Price ($/MMBtu) | $ | 16.36 | $ | 12.79 | $ | 11.28 | $ | 11.89 | |||||||
| Total: | |||||||||||||||
| Hedged Volume (MMMBtu/d) | 47,542 | 47,275 | 41,971 | 38,257 | |||||||||||
| Average Price ($/MMBtu) | $ | 8.17 | $ | 8.26 | $ | 8.64 | $ | 8.93 | |||||||
| Oil Positions: | |||||||||||||||
| Fixed Price Swaps: | |||||||||||||||
| Hedged Volume (Bbls/d) | 1,838 | 2,308 | 2,116 | 1,939 | |||||||||||
| Average Price ($/Bbl) | $ | 75.51 | $ | 83.12 | $ | 63.79 | $ | 63.30 | |||||||
| Participating Swaps: (a) | |||||||||||||||
| Hedged Volume (Bbls/d) | 2,847 | 1,993 | 1,439 | - | |||||||||||
| Average Price ($/Bbl) | $ | 62.86 | $ | 64.40 | $ | 61.29 | $ | - | |||||||
| Average Part. % | 60.9 | % | 55.5 | % | 53.2 | % | - | ||||||||
| Collars: | |||||||||||||||
| Hedged Volume (Bbls/d) | 594 | 1,279 | 2,048 | 3,077 | |||||||||||
| Average Floor Price ($/Bbl) | $ | 92.31 | $ | 102.84 | $ | 103.43 | $ | 110.00 | |||||||
| Average Ceiling Price ($/Bbl) | $ | 122.92 | $ | 136.16 | $ | 152.61 | $ | 145.39 | |||||||
| Floors: | |||||||||||||||
| Hedged Volume (Bbls/d) | 500 | 500 | - | - | |||||||||||
| Average Floor Price ($/Bbl) | $ | 100.00 | $ | 100.00 | $ | - | $ | - | |||||||
| Total: | |||||||||||||||
| Hedged Volume (Bbls/d) | 5,778 | 6,080 | 5,603 | 5,016 | |||||||||||
| Average Price ($/Bbl) | $ | 73.12 | $ | 82.52 | $ | 77.46 | $ | 91.94 | |||||||
(a) A participating swap combines a swap and a call option with the same strike price.
Interest rate hedge portfolio
We had the following interest rate swaps in place at December 31, 2008, to fix a portion of floating LIBOR-base debt on our credit facility:
| Notional amounts in thousands of dollars | Notional Amount | Fixed Rate | ||||
| Period Covered | ||||||
| January 1, 2009 to January 8, 2009 | $ | 50,000 | 3.6200 | % | ||
| January 1, 2009 to January 20, 2009 | 200,000 | 3.6825 | % | |||
| January 1, 2009 to July 8, 2009 | 50,000 | 3.0450 | % | |||
| January 1, 2009 to January 8, 2010 | 100,000 | 3.3873 | % | |||
| January 20, 2009 to July 20, 2009 | 250,000 | 3.6825 | % | |||
| July 20, 2009 to December 20, 2010 | 300,000 | 3.6825 | % | |||
| December 20, 2010 to October 20, 2011 | 200,000 | 2.9900 | % | |||
Conference Call
The Partnership will host an investor conference call to discuss its results today at 2:00 p.m. (Pacific Time). Investors may access the conference call over the Internet via the Investor Relations tab of the Partnership's website (www.breitburn.com), or via telephone by dialing 888-670-2244(international callers dial +1-913-312-1278) a few minutes prior to register. Those listening via the Internet should go to the site 15 minutes early to register, download and install any necessary audio software. In addition, a replay of the call will be available through March 9, 2009 by dialing 888-203-1112 (international callers dial +1-719-457-0820) and entering replay PIN 7668834, or by going to the Investor Relations tab of the Partnership's website (www.breitburn.com). The Partnership will take live questions from securities analysts and institutional portfolio managers; the complete call is open to all other interested parties on a listen-only basis.
About BreitBurn Energy Partners L.P.
BreitBurn Energy Partners L.P. is a publicly traded independent oil and gas limited partnership focused on the acquisition, exploitation, development and production of oil and gas properties. These producing and non-producing crude oil and natural gas reserves are located in the Antrim Shale in Michigan, the Los Angeles Basin in California, the Wind River and Big Horn Basins in central Wyoming, the Sunniland Trend in Florida, the Permian Basin in West Texas, and the New Albany Shale in Indiana and Kentucky. See www.BreitBurn.com for more information.
BBEP-IR
Cautionary Statement Relevant to 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 "anticipates," "expects," "believes," "estimates," "recommends," “future,” “impact,” “guidance,” “will look to,” “refocus” 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. 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.
Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: inaccuracies in the estimated timing and amount of future production of oil and natural gas due to numerous factors including permit delays or restrictions, weather, equipment failures, delays or lack of availability, unexpected subsurface or geologic conditions, lack of capital, increases in the costs of rented or contracted equipment, increases in labor costs, volumes of oil or gas greater or lesser than anticipated, and changes in applicable regulations and laws; unexpected problems with wells or other equipment, particularly in our Florida properties where production is concentrated in relatively few wells; unexpected changes in operating costs and other expenses, including utilities, labor, transportation, well and oil field services, taxes, permit fees, regulatory compliance and other costs of operation; further decreases in oil and natural gas prices, including price discounts and basis differentials; difficulties in accurately estimating the discovery, volumes, development potential and replacement of oil and natural gas reserves; the impact of the current financial crisis on our business operations, financial condition and ability to raise capital; variances in cash flow, liquidity and financial position; a significant reduction in our credit facility’s borrowing base; availability of funds from the capital markets and under our credit facility; our level of indebtedness; the ability of financial counterparties to perform or fulfill their obligations under existing agreements; a further write down of our asset carrying values and field impairment; the discovery of previously unknown environmental issues; changes in business and financial strategy; inaccuracies in estimating the amount, nature and timing of capital expenditures, including future development costs; the inability to predict the availability and terms of capital; issues with marketing of oil and natural gas including lack of access to markets, changes in pipeline and transportation tariffs and costs, increases in minimum sales quality standards for oil or natural gas, changes in the supply-demand status of oil or gas in a given market area, and the introduction of increased quantities of oil or natural gas into a given area due to new discoveries or new delivery systems; the impact of weather limiting or damaging operations and the occurrence of natural disasters such as fires, floods, hurricanes, earthquakes and other catastrophic events and natural disasters; the competitiveness of alternate energy sources or product substitutes; technological developments; the uncertainty related to the litigation instituted by Quicksilver against us; changes in governmental regulation of the oil and natural gas industry potentially leading to increased costs and limited development opportunities; developments in oil-producing and natural gas-producing countries potentially having significant effects on the price of oil and gas; the effects of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies; inability to execute strategic plans, expectations and objectives for future operations; and the factors set forth under the heading "Risk Factors" incorporated by reference from our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K. Unpredictable or unknown factors not discussed herein also could have material adverse effects on forward-looking statements.
| BreitBurn Energy Partners L.P. and Subsidiaries | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| Thousands of dollars, except per unit amounts | 2008 | 2007 | 2008 | 2007 | ||||||||||||
| Revenues and other income items: | ||||||||||||||||
| Oil, natural gas and natural gas liquid sales | $ | 81,321 | $ | 81,042 | $ | 467,381 | $ | 184,372 | ||||||||
| Gains (losses) on commodity derivative instruments, net | 361,330 | (71,432 | ) | 332,102 | (110,418 | ) | ||||||||||
| Other revenue, net | 596 | 429 | 2,920 | 1,037 | ||||||||||||
| Total revenues and other income items | 443,247 | 10,039 | 802,403 | 74,991 | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Operating costs | 39,471 | 26,258 | 149,681 | 70,329 | ||||||||||||
| Depletion, depreciation and amortization | 115,705 | 15,678 | 179,933 | 29,422 | ||||||||||||
| General and administrative expenses | 10,620 | 11,051 | 43,435 | 30,244 | ||||||||||||
| Total operating costs and expenses | 165,796 | 52,987 | 373,049 | 129,995 | ||||||||||||
| Operating income (loss) | 277,451 | (42,948 | ) | 429,354 | (55,004 | ) | ||||||||||
| Interest and other financing costs, net | 9,578 | 4,635 | 29,147 | 6,258 | ||||||||||||
| Loss on interest rate swaps | 16,098 | - | 20,035 | - | ||||||||||||
| Other (income) expenses, net | (77 | ) | 106 | (191 | ) | 233 | ||||||||||
| Income (loss) before taxes and minority interest | 251,852 | (47,689 | ) | 380,363 | (61,495 | ) | ||||||||||
| Income tax expense (benefit) | 677 | (667 | ) | 1,939 | (1,229 | ) | ||||||||||
| Minority interest | 13 | 44 | 188 | 91 | ||||||||||||
| Net income (loss) | 251,162 | (47,066 | ) | 378,236 | (60,357 | ) | ||||||||||
| General Partner's interest in net income (loss) | - | (447 | ) | (2,019 | ) | (672 | ) | |||||||||
| Limited Partners' interest in net income (loss) | $ | 251,162 | $ | (46,619 | ) | $ | 380,255 | $ | (59,685 | ) | ||||||
| Basic net income (loss) per unit | $ | 4.77 | $ | (0.86 | ) | $ | 6.42 | $ | (1.83 | ) | ||||||
| Diluted net income (loss) per unit | $ | 4.65 | $ | (0.86 | ) | $ | 6.28 | $ | (1.83 | ) | ||||||
| Weighted average number of units used to calculate: | ||||||||||||||||
| Basic net income (loss) per unit | 52,635,634 | 54,349,093 | 59,238,588 | 32,577,429 | ||||||||||||
| Diluted net income (loss) per unit | 54,019,830 | 54,349,093 | 60,560,695 | 32,577,429 | ||||||||||||
| BreitBurn Energy Partners L.P. and Subsidiaries | ||||||||
| Consolidated Balance Sheets | ||||||||
| December 31, | December 31, | |||||||
| Thousands of dollars | 2008 | 2007 | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 2,546 | $ | 5,929 | ||||
| Accounts receivable, net | 47,221 | 44,202 | ||||||
| Derivative instruments | 76,224 | 948 | ||||||
| Related party receivables | 5,084 | 35,568 | ||||||
| Inventory | 1,250 | 5,704 | ||||||
| Prepaid expenses | 5,300 | 2,083 | ||||||
| Intangibles | 2,771 | 3,169 | ||||||
| Other current assets | 170 | 160 | ||||||
| Total current assets | 140,566 | 97,763 | ||||||
| Equity investments | 9,452 | 15,645 | ||||||
| Property, plant and equipment | ||||||||
| Oil and gas properties | 2,057,531 | 1,910,941 | ||||||
| Non-oil and gas assets | 7,806 | 568 | ||||||
| 2,065,337 | 1,911,509 | |||||||
| Accumulated depletion and depreciation | (224,996 | ) | (47,022 | ) | ||||
| Net property, plant and equipment | 1,840,341 | 1,864,487 | ||||||
| Other long-term assets | ||||||||
| Intangibles | 495 | 3,228 | ||||||
| Derivative instruments | 219,003 | - | ||||||
| Other long-term assets | 6,977 | 5,433 | ||||||
| Total assets | $ | 2,216,834 | $ | 1,986,556 | ||||
| LIABILITIES AND PARTNERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 28,302 | $ | 13,910 | ||||
| Book overdraft | 9,871 | 1,920 | ||||||
| Derivative instruments | 10,192 | 35,172 | ||||||
| Related party payables | - | 10,137 | ||||||
| Revenue distributions payable | 16,162 | 21,266 | ||||||
| Derivative settlements payable | 50 | 2,775 | ||||||
| Salaries and wages payable | 6,249 | 28 | ||||||
| Accrued liabilities | 9,164 | 5,476 | ||||||
| Total current liabilities | 79,990 | 90,684 | ||||||
| Long-term debt | 736,000 | 370,400 | ||||||
| Long-term related party payables | - | 1,532 | ||||||
| Deferred income taxes | 4,282 | 3,074 | ||||||
| Asset retirement obligation | 30,086 | 27,819 | ||||||
| Derivative instruments | 10,058 | 65,695 | ||||||
| Other long-term liabilities | 2,987 | 2,000 | ||||||
| Total liabilities | 863,403 | 561,204 | ||||||
| Minority interest | 539 | 544 | ||||||
| Partners' equity | ||||||||
| Limited partners' interest (a) | 1,352,892 | 1,423,418 | ||||||
| General partner interest | - | 1,390 | ||||||
| Total liabilities and partners' equity | $ | 2,216,834 | $ | 1,986,556 | ||||
| (a) Limited partner units outstanding | 52,635,634 | 67,020,641 | ||||||
| BreitBurn Energy Partners L.P. and Subsidiaries | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| Year Ended | ||||||||
| December 31, | ||||||||
| Thousands of dollars | 2008 | 2007 | ||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | 378,236 | $ | (60,357 | ) | |||
| Adjustments to reconcile net income (loss) to cash flow from operating activities: | ||||||||
| Depletion, depreciation and amortization | 179,933 | 29,422 | ||||||
| Unit-based compensation expense | 6,907 | 12,999 | ||||||
| Unrealized (gain) loss on derivative instruments | (370,734 | ) | 103,862 | |||||
| Distributions greater (less) than income from equity affiliates | 1,198 | (28 | ) | |||||
| Deferred income tax | 1,207 | (1,229 | ) | |||||
| Minority interests | 188 | 91 | ||||||
| Amortization of intangibles | 3,131 | 2,174 | ||||||
| Other | 2,643 | 2,182 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable and other assets | 258 | (24,713 | ) | |||||
| Inventory | 4,454 | 4,829 | ||||||
| Net change in related party receivables and payables | 32,688 | (39,202 | ) | |||||
| Accounts payable and other liabilities | (13,413 | ) | 30,072 | |||||
| Net cash provided (used) by operating activities | 226,696 | 60,102 | ||||||
| Cash flows from investing activities | ||||||||
| Capital expenditures | (131,082 | ) | (23,549 | ) | ||||
| Property acquisitions | (9,957 | ) | (996,561 | ) | ||||
| Net cash used by investing activities | (141,039 | ) | (1,020,110 | ) | ||||
| Cash flows from financing activities | ||||||||
| Issuance of common units, net of discount | - | 663,338 | ||||||
| Purchase of common units | (336,216 | ) | - | |||||
Distribution to predecessor members concurrent with initial public offering | - | 581 | ||||||
| Distributions | (121,349 | ) | (60,497 | ) | ||||
| Proceeds from the issuance of long-term debt | 803,002 | 574,700 | ||||||
| Repayments of long-term debt | (437,402 | ) | (205,800 | ) | ||||
| Book overdraft | 7,951 | (116 | ) | |||||
| Long-term debt issuance costs | (5,026 | ) | (6,362 | ) | ||||
| Net cash provided (used) by financing activities | (89,040 | ) | 965,844 | |||||
| Increase (decrease) in cash | (3,383 | ) | 5,836 | |||||
| Cash beginning of period | 5,929 | 93 | ||||||
| Cash end of period | $ | 2,546 | $ | 5,929 | ||||
Contacts:
BreitBurn Energy Partners L.P.
James G. Jackson, 213-225-5900 ext.
273
Executive Vice President and Chief Financial Officer
or
Ruder
Finn/West
Pierre Hirsch, 415-692-3060
