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Breitburn Energy Partners L.P. Message Board

  • kvseeker kvseeker Dec 9, 2011 4:40 PM Flag

    Book Value

    Just starting my DD on BBEP. I'm a little puzzled why its book value is $23.52 but its current share price is much lower. Can anyone shed some light on this? Thanks.

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    • jrad yes an I also own bbep. oil and gas industry is complex but there is a lot of supplementary data available due to fasb 19 and fasb 69, etc for other industries; so if you are going to be invested in oil and gas would be glad to share my knowledge with you, if you want to learn more

    • Other posters have told you why the price is low, or why you should ignore the price. I'll tell you why book value is artifically high.

      In 2007, BBEP acquired oil fields from Quicksilver Resources. In that deal, BBEP issued 21 million units to Quicksilver, valued at $ 31.57 each, and also sold another 16.7 million units to private investors at $ 27 in order to come up with the cash portion of the payment to Quicksilver. As a result of that transaction, partners equity rose by more than $ 1 billion, and book value rose from about $ 3 to more than $ 20. Unfortunately, BBEP seems to have overpaid a lot for the property. It stopped paying a distribution in 2009 for a while in order to pay down debt, which caused its stock price to plummet (along with the 2008/2009 market in general). Quicksilver sued BBEP and eventually settled, but with bad feelings. Quicksilver has been dumping its BBEP units periodically over the past year or 2, which has pressured the stock price. Quicksilver just finished dumping last month - it sold the last of its BBEP.

      So the book value got inflated by the acquisition, which was mostly funded by issuing common units, and the stock price has been hammered by less-than-stellar results and Quicksilver dumping shares.

      People now think that with Quicksilver gone, and BBEP again paying a distribution (it started again in 2010) the price will have a chance to recover.

      Hope this helps. Don't get too comfortable with the book value, though. As I said, it's inflated.

      • 3 Replies to jrad52
      • jrad I have to disagree with your view that the carrying value of the assets (net book value) on the BBEP is inflated. There are two tests that you or anyone else can make and that I present below to prove my point


        1-You may not be aware; but each year end "all" E&P companies are required by FASB/SEC to perform a cash flow/npv calculation on the carrying value of each of their properties.

        The calculation uses year end prices and projected production/decline curves and inflated operating costs to arrive at net cash flow. If on an undiscounted bases the projected net future cash flows exceed then carrying value of each property/lease then nothing further is done. If the projected undiscounted future net cash flows are less then the carrying value; then a npv of the cash flows is ran and the property/lease is written down its NPV. If have not seen any disclosures by BBEP that they have made an material year end write downs which implies to me the carrying value of the properties on the books is not over inflated


        2- You may be aware but in addition to the carrying value test of their assets; each E&P company is required to present the (after tax for c-corps) future NPV of reserves on proved properties, discounted at 10%, using constant yearend prices and operating and development costs. It is called Standardized Measure and is part of the supplemental information at the end of the financial statements. At year end 2010 the SM value of BBEP's proved properties was $1.064 billion dollars. This value does not include value for undeveloped properties and other assets. So even the SM of $1.064 billion on only proved properties at a 10% discount exceed the market cap of $1.04 billion

        Hope this provides more background on why BBEP's net book value is not inflated

      • should have said "jrad I have to disagree with you that the carrying value of the assets (net book value) on the BBEP is inflated. There are two tests that you or anyone else can make and that I present to prove my point

      • jrad I have to disagree with you that the carrying value of the assets (net book value) on the BBEP is not inflated. There are two tests that you or anyone else can make and that I present to prove my point


        1-You may not be aware; but each year end "all" E&P companies are required by FASB/SEC to perform a cash flow/npv calculation on the carrying value of each of their properties.

        The calculation uses year end prices and projected production/decline curves and inflated operating costs to arrive at net cash flow. If on an undiscounted bases the projected net future cash flows exceed then carrying value of each property/lease then nothing further is done. If the projected undiscounted future net cash flows are less then the carrying value; then a npv of the cash flows is ran and the property/lease is written down its NPV. If have not seen any disclosures by BBEP that they have made an material year end write downs which implies to me the carrying value of the properties on the books is not over inflated


        2- You may be aware but in addition to the carrying value test of their assets; each E&P company is required to present the (after tax for c-corps) future NPV of reserves on proved properties, discounted at 10%, using constant yearend prices and operating and development costs. It is called Standardized Measure and is part of the supplemental information at the end of the financial statements. At year end 2010 the SM value of BBEP's proved properties was $1.064 billion dollars. This value does not include value for undeveloped properties and other assets. So even the SM of $1.064 billion on only proved properties at a 10% discount exceed the market cap of $1.04 billion

        Hope this provides more background on why BBEP's net book value is inflated as you indicated

    • Read the thread 2012 gross sales 520,000,000'.Go to the web site for the national association of MLP's and read the Wells Fargo primer. If you still have ?'s post them.I expect the distribution per unit to rise to$1.85 by the end of 2012.Compare the hedges that VNR has to BBEP's.Start a spread sheet comparing BBEP to other upstream MLP's like LGCY and VNR. Go to each companies web site and study their latest event and presentation.Investing in MLP's is not for everyone .Special care should be taken if you are buying MLP,s for IRA's. You will get a K-1 at the start of the following tax year.

    • Up until a week ago there were two very large holders of BBEP stock that were trying to unload their shares before the end of the year....this overhang is now gone and was the sole reason for this last offering and subsequent run down of pps.
      That is my take GLTA

    • It's an MLP. Any DD you did would point you to this. The can have secondary offerings at any time. Buy it for the dividends and not the share price.

 
BBEP
22.23-0.58(-2.54%)Jul 24 4:00 PMEDT

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