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

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Market performance

BreitBurn Energy Partners (BBEP) has generated below-par total returns over a three-year period. BBEP returned negative 61.3% in the last three years, mainly due to the sharp decline in crude oil and natural gas prices since mid-2014.

Over the same time, the United States Oil Fund (USO) and the United States Natural Gas Fund (UNG) have returned negative 50.3% and negative 23.2%, respectively. BBEP is an exploration and production MLP (master limited partnership). USO and UNG track movements in crude oil and natural gas futures prices, respectively.

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Peer comparison

BBEP’s peers Altas Resource Partners (ARP) and EV Energy Partners (EVEP) have returned negative 56.1% and negative 76.1%, respectively, over this three-year period. The Alerian MLP ETF (AMLP), which consists of 25 US energy MLPs, has returned 16.9% during the same period. AMLP’s returns are more stable because the majority of the ETF’s holdings are midstream MLPs whose earnings are tied to stable fee-based cash flows.

Distribution cuts

BBEP decreased its distribution per unit to $0.25 in 4Q14 from $0.51 in 3Q14. A distribution cut by an MLP, which is considered an income-generating security, is negative from an investor’s perspective. The market likely sensed the cuts coming as energy prices slumped, and punished BBEP units.

About BreitBurn Energy Partners

BreitBurn Energy Partners is involved in the acquisition and development of oil, NGL (natural gas liquids), and natural gas properties in the United States. BBEP’s assets consist primarily of producing and non-producing oil, NGL, and natural gas reserves located across seven oil-producing regions.

As of December 31, 2014, BBEP’s total estimated proved reserves were 315.3 MMboe (million barrels of oil equivalent), of which approximately 55% was oil, 8% was NGLs, and 37% was natural gas.

In the next article, we’ll analyze the trend in BBEP’s revenues over the last 13 quarters.

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