Should You Include BreitBurn Energy Partners in Your Portfolio?

Analyzing BreitBurn Energy Partners in the Energy Aftermath

(Continued from Prior Part)

Most analysts rate BBEP a “hold”

In this article, we’ll look at what Wall Street analysts recommend for BreitBurn Partners (BBEP). At a broader level, ~61.1% of analysts rate BreitBurn Partners a “hold,” ~16.7% rate it a “buy,” and ~22.2% rate it a “sell.”

The median broker target price of $8 for BBEP, as the chart above shows, implies a mouth-watering ~47.1% price return in the next 12 months. BBEP’s peers Atlas Resource Partners (ARP) and EV Energy Partners (EVEP) have “hold” ratings from 66.7% and 57.1% of Wall Street analysts, respectively. 71.4% of analysts rate Memorial Production Partners (MEMP) a “buy.”

Bleak short-term outlook

However, BreitBurn Partners’ overall short-term outlook looks bleak from an investment standpoint. Before including BBEP in your portfolio, consider the following positives and negatives.

Positives

• Positive production guidance: Despite a decrease in field natural production, BBEP’s production is expected to lie in the range of 19,500 to 20,700 Mboe (or thousand barrels of oil equivalent) in fiscal 2015, up from 14,114 Mboe in fiscal 2014.

• Increase in oil and natural gas properties: The QR Energy acquisition in November 2014 provided a significant boost to BBEP’s crude oil and natural gas assets.

• Hedging activity: BBEP has hedged 74% and 71% of its liquids and natural gas production for the rest of 2015 at a weighted average oil and gas hedge price of $93.46 per barrel and $4.98 per million British thermal units, respectively.

Negatives

• Low crude oil (USO) and natural gas prices (UNG) outweigh some of the positives discussed above. In the midst of low prices, BBEP’s earnings are expected to stay negative for the rest of 2015. BBEP has estimated a net loss between $185 million and $239 million for fiscal 2015.

• All-time high debt levels indicate a potential liquidity crunch if higher prices don’t come to the company’s rescue.

• BBEP expects distributions to stay low for the rest of 2015.

For more analysis on master limited partnerships, you can refer to our Master Limited Partnerships page.

Browse this series on Market Realist:

• Part 1 - Why BreitBurn Has Seen Below-Par Performance in the Last 3 Years

• Part 2 - BreitBurn’s Sales Volumes Are Up, but Revenues Are Down in 1Q15

• Part 3 - BreitBurn’s 1Q15 EBITDA Explains Why Its Units Tanked