BreitBurn Energy Partners, L.P. Q2 2010 Earnings Call Transcript

BreitBurn Energy Partners, L.P. Q2 2010 Earnings Call Transcript
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BreitBurn Energy Partners, L.P. (BBEP)

Q2 2010 Earnings Call

August 4, 2010 01:00 pm ET

Executives

Greg Brown - EVP of Land, Legal and Government Affairs & General Counsel

Hal Washburn - CEO

Randy Breitenbach - President

Mark Pease - EVP & COO

Jim Jackson - EVP & CFO

Analysts

Michael Blum - Wells Fargo

Richard Roy - Citigroup

David Newhouser - Livermore Partners

Chad Potter - RBC Capital Markets

Presentation

Operator

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Ladies and gentlemen, thank you for standing by. Welcome to the BreitBurn Energy Partners Investors Conference Call. The partnership’s news release made earlier today is available from its website at www.breitburn.com. During the presentation, our participants will be in a listen-only mode. Afterwards, securities analysts and institutional portfolio managers will be invited to participate in a question-and-answer session. (Operator Instructions)

As a reminder, this call is being recorded Thursday, August 4, 2010. A replay of the call will be accessible until midnight Thursday, August 18 by dialing 877-870-5176, and entering conference ID 9833247. International callers should dial 858-384-5517. An archive of this call will also be available on the BreitBurn website at www.breitburn.com.

I would now like to turn the call over to Greg Brown, General Counsel of BreitBurn. Please go ahead, sir.

Greg Brown

Thank you, and good morning, everyone. Presenting this morning are Hal Washburn, BreitBurn’s CEO; Randy Breitenbach, BreitBurn’s President; Mark Pease, BreitBurn’s Chief Operating Officer; and Jim Jackson, BreitBurn’s Chief Financial Officer. After their formal remarks, the call will be open for questions for security analysts and institutional investors.

Let me remind you that today’s conference call contains projections, guidance and other forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical facts that address future activities and outcomes are forward-looking statements. These statements are subject to known and unknown risks and uncertainties which may cause actual results to differ materially from those expressed or implied in such statements. These forward-looking statements are our best estimates today, and are based upon our current expectations and assumptions about future developments, many of which are beyond our control. Actual conditions and those assumptions may and probably will change from those we projected over the course of the year.

A detailed discussion of many of these uncertainties is set forth in the cautionary statement relative to forward-looking information section of today’s press release and under the heading, risk factors incorporated by reference, from our annual report on Form 10-K for the year ended December 31, 2009, our quarterly reports on Form 10-Q, our current reports on Form 8-K and our other filings with the Securities and Exchange Commission.

Unpredictable or unknown factors not discussed in those documents also could have material adverse effects on forward-looking statements. The partnership undertakes no obligation to update publicly any forward-looking statements to reflect new information or events.

Additionally, during the course of today’s discussion, management will refer to adjusted EBITDA, which is a non-GAAP financial measure when discussing the partnership’s financial results. Adjusted EBITDA is reconciled to its most directly comparable GAAP measure in the earnings press release made earlier this morning and posted on the partnership’s website.

This non-GAAP financial measure should not be considered as and alternative to GAAP measures such as net income, operating income, cash flow from operating activities or any other GAAP measure of liquidity or financial performance.

Adjusted EBITDA is presented, as management believes it provides additional information relative to the performance of the partnership’s business, such as our ability to meet our debt covenant compliance test. This non-GAAP financial measure may not be comparable to similarly titled measures of other publicly traded partnerships or limited liability companies, because all companies may not calculate adjusted EBITDA in the same manner.

With that introduction, let me turn the call over to Hal.

Hal Washburn

Thank you, Greg. Welcome, everyone, and thank you for joining us today to discuss our second quarter 2010 results. I am pleased to announce another very strong quarter for the partnership. With the consistent execution of our business strategy, we continue to meet or exceed 2010 guidance on all of our key metrics.

Let me start with a few of our key accomplishments. During the second quarter, we produced 1.663 million barrels of oil and natural gas or 18,270 Boe per day which trends towards the high end of our guidance ranges. These operating expenses, excluding transportation fees and property taxes came in below our guidance range of $17.82 per Boe, due to increased production, continued efforts by our team to reduce costs and normal variability and quarterly results.

We expect lease operating expenses will be consistent with guidance during the second half of the year. In early June, we announced initial production results of and an in-field development well in one of our selling on trend properties. The well was completed in early May at more than twice the expected production used in economics and produced approximately 1,100 barrels of oil per day during June. This increased production contributed to a higher than forecast second quarter adjusted EBITDA of $56.7 million, which is above our guidance range. We started drilling a second horizontal well in Raccoon Point in May, and expect initial results within the next 60 days.

On July 29, we held our first annual meeting of limited partners here in Los Angeles. All proposals were passed and I’m very pleased to announce though in the same day, our board of directors announced an increased distribution for the second quarter, which we announced on July 30. The new distribution of $0.3825 per unit, or $1.53 per unit on an annualized basis, will be paid on August 13, 2010 to the record holders of common units of the close of business on August 9, 2010.

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