Malandrino asked him why Breitburn Energy would be a good pick for income-oriented investors searching for yield. Washburn said Breitburn is a wise choice because of its large exposure to Brent crude thanks to where the oil is drilled.
"California is our largest oil-producing state and all of our California crude is priced against Brent," Washburn said. The oil is world-priced in Brent because California doesn't have many railways or piping that connects it with the rest of the U.S., meaning it has to be shipped via tanker" the way foreign oil has to be shipped.
However, Malandrino is concerned about the hedging process of a company that has such high exposure to commodity prices. Washburn told her, "We hedge a great deal of our productions." With 80% of 2013 hedged, 75%-80% of 2014 hedged and more than 70% of 2015 hedged, investors can relax knowing a sudden drop in oil prices will not crush the company's portfolio.Breitburn does have other business avenues, but it remains largely in oil and liquids. In fact, only about 1% of its capital will go towards natural gas in 2013. "To be clear, we don't explore," he added, referring to oil exploration and drilling. When searching for MLPs, one of the biggest questions is the distribution, or dividend. Breitburn has increased its distribution for the last 12 quarters and hopes to continue doing so. "We're looking for continued 5% distribution growth," Washburn concluded. --Written by Bret Kenwell in New York. Follow Jill Malandrino on Twitter: Follow @optionsprofits
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