The Rise and Fall of Breitburn Energy Partners LP(OTCMKTS:BBEPQ)

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Breitburn Energy Partners LP(OTCMKTS:BBEPQ) has seen a reversal since trading as low as $0.105 on Friday on a surge of volume. The stock saw a big move up in October from pennies to over $0.50 a share but has come back to where it started since.

BBEPQ is another victim of falling oil prices which are now recovering; the Company filed for Chapter on May 16 at which time they said they expect to continue operations without interruption, and cash from its operations, cash on hand, and a $75 million debtor-in-possession financing facility (DIP Financing Facility) will provide Breitburn with more than adequate liquidity to fund its operations during the restructuring process.

Breitburn Energy Partners LP(OTCMKTS:BBEPQ) 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.

Breitburn holds oil and gas properties that are characterized by stable, long-lived production with proved reserve life indexes averaging greater than 15 years. BBEP fields generally have long production histories, with some fields dating back to the 1800s. Breitburn produces oil and gas from 7 different areas throughout the United States*

BBEPQ producing assets are located in Midwest (Michigan, Indiana, Kentucky) Ark-La-Tex (Arkansas, Louisiana and East Texas) Permian Basin in Texas and New Mexico Mid-Continent (Oklahoma, Kansas and the Texas Panhandle) Rockies (Wyoming and Colorado) Southeast (Florida and Alabama) California

In all, BBEP estimated proved reserves are 239.3 MMBoe.  The Company owns working interests in 12,414 gross producing wells and have 1.2 million gross (705,597 net) acres of leasehold acreage.

Breitburn’s DIP Financing Facility lenders have offered to arrange an additional $75 million of DIP financing at Breitburn’s request. The Chapter 11 Cases will facilitate the restructuring of Breitburn’s balance sheet.

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According to the Chapter 11 filing BBEPQ has been engaged in constructive discussions with its second lien note holders and the advisors to its unsecured note holders regarding the need for, sponsorship of, and terms of a balance sheet restructuring. Simultaneously, Breitburn has been engaged in constructive discussions with its revolving lenders regarding their support for emergence financing, as well as the treatment of Breitburn’s valuable hedging assets in conjunction with its emergence from the Chapter 11 Cases. Breitburn plans to utilize the Chapter 11 Cases to continue and complete these discussions with key stakeholders and evaluate other value-maximizing opportunities to facilitate an expedited balance sheet restructuring that will leave Breitburn as a stronger, deleveraged, and recapitalized enterprise.

Breitburn has filed a variety of “first-day” motions with the court seeking, among other things, authority to maintain its existing cash management system, approval of the DIP Financing Facility, authority to make payments to royalty interest holders and with respect to its lease operating expenses, drilling and production costs, and other related operating costs, and other customary relief. When granted, such motions will assure Breitburn’s ability to maintain business-as-usual operations throughout the restructuring process.

BBEPQ CEO Hal Washburn said “The prolonged decline in commodity prices that began in 2014 has placed significant financial stress on today’s oil and gas industry. Our long-lived, low-decline portfolio of diverse assets continues performing in line with our expectations, but the current outlook for commodity prices makes our existing debt burden unsustainable. Taking this action now gives us flexibility in maximizing the value of the ongoing business. By continuing the proactive approach we started 15 months ago and restructuring our balance sheet now, we expect to create a stronger and more financially sound company for the benefit of all our stakeholders. During the restructuring process, we will continue managing our business and operating our assets as we do today. Cash from our operations, cash on hand and cash available under the DIP Financing Facility will provide us with more than sufficient fundsto operate our business during the restructuring process.”

Also of interest The Mark A. Tepper securities law firm recently announced that it is investigating alleged claims against Merrill Lynch and other brokerage firms for recommending BreitBurn Energy Partners LP and/or LINN Energy LLC, LinnCo LLC.

On March 8 BBEPQ announced it began mailing Breitburn’s 2016 Individual Tax Reporting Packages, including Schedule K-1s, and it expects to complete mailing the Tax Reporting Packages by March 13, 2017. Unitholders who choose electronic (paperless) delivery of their Individual Tax Reporting Packages should visit Breitburn’s website and log-on to download their Tax Reporting Packages. Tax Reporting Packages are available for Breitburn’s Common Units BBEPQ, +2.31% and Breitburn’s Series A Cumulative Redeemable Perpetual Preferred Units BBPPQ, -6.18%

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Currently trading at a $26.4 million market valuation BBEPQ continues to fall lower since the big run-up it made in October of last year to highs over $0.50 a share after the EC was approved by the judge setting the stage to remove CODI and let equity fight for what is theirs. CODI is applied at the bankruptcy EXIT and only at the exit. IF and only IF, there is a cancellation and not an exchange. If the creditors received anything, regardless of how little, that is an exchanged. So, if the creditors exchange $1B of debt for 50 barrels of oil that is their problem, not a cancellation causing CODI for the equity holders.  Technically, management doesn’t assign CODI; the IRS does. But, they have made their rules quite clear and management can use those rules to avoid CODI. BBEPQ has ready liquidity, a significant short position that is covering right now and if it trades anything like some of the recent Q stock predecessors the next few weeks could be really wild. We will be updating on BBEPQ when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with BBEPQ .

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Disclosure: we hold no position in BBEPQ  either long or short and we have not been compensated for this article

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