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Breitburn Energy Follows Linn Energy’s Lead, Declares Bankruptcy

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Breitburn Energy files for bankruptcy protection

Breitburn Energy Partners (BBEP), an upstream MLP experiencing a liquidity crisis and high leverage, filed for Chapter 11 bankruptcy protection on Monday, May 16. This is the second big bankruptcy filing by an upstream MLP (master limited partnership) in the past seven days. Linn Energy (LINE) declared bankruptcy on May 11.

Breitburn Energy joined dozens of upstream producers that have filed for bankruptcy since the rout in energy prices (USO). We’ll look at the reasons for Breitburn Energy’s failure in the next article.

Market reaction

By market close on Friday, Breitburn Energy had lost 96.9% of its market value in the past year and was trading close to $0.19 per unit. Peers Memorial Production Partners (MEMP), Vanguard Natural Resources (VNR), and EV Energy Partners (EVEP) lost 86.2%, 90.9%, and 86.7%, respectively, during the same timeframe.

Management commentary

BBEP expects its operations to continue without interruption during the Chapter 11 bankruptcy proceedings. The partnership has secured $75 million under the DIP (debtor in possession) financing facility. According to Hal Washburn, BBEP’s CEO, “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 funds to operate our business during the restructuring process. We look forward to working with our service providers, suppliers, customers, vendors, and partners to ensure that Breitburn emerges from the restructuring process a stronger company.”

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