Breitburn Energy Partners
Currently, Breitburn Energy Partners is going through a liquidity crisis. In a press release published on April 14, 2016, it announced the suspension of distribution to preferred unitholders and deferral of interest payment on senior notes. It was due on April 15, 2016. Breitburn Energy Partners had a 30-day grace period for interest payments amounting to $46.7 million. The grace period expires in two days.
The partnership is expecting the borrowing base under its credit facility to be redetermined in late May 2016. If the borrowing base, which is currently $1.4 billion, falls below the current $1.2 billion outstanding under its credit facility, then BBEP has to pay “the deficiency in five equal monthly installments.”
If Breitburn Energy Partners defaults its interest payments or the borrowing base falls below the outstanding amount, then it might not continue as a going concern. It would be forced to “seek bankruptcy protection.”
Vanguard Natural Resources
Vanguard Natural Resources’ (VNR) total outstanding debt by the end of the first quarter was $2.2 billion. Its debt increased in recent quarters—driven by the completion of two mergers. The partnership almost exhausted its credit facility as of December 31, 2015. It used $1.7 billion of its $1.8 billion credit facility. This left $100 million in current liquidity. Recently, Vanguard Natural Resources announced a sale of assets in the SCOOP/STACK area in Oklahoma for $280 million to reduce borrowings under the company’s reserve-based credit facility.
Other upstream MLPs
Other upstream MLPs including Memorial Production Partners (MEMP) and EV Energy Partners (EVEP) had a total outstanding debt of $2 billion and $665.8 million, respectively. However, with a decline in the earnings, their leverage is also high. We have to wait and see how these upstream MLPs manage to stay afloat in the current commodity price (USO) environment.