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Breitburn Energy Partners LP Message Board

  • rrb1981 rrb1981 Apr 25, 2012 9:54 PM Flag

    Acquisition Thoughts

    Looking at this deal, it is hard not to like it.

    They didn't get a steal, but they also didn't overpay. They appear to have paid around $163,000 per flowing bbl. If BBEP is smart, they will hedge out 4 or 5 yrs and lock in $100 oil as far out as they can. Even if LOE/lifting costs/transporation are $30/bbl, BBEP is netting $70/bbl ($15 million a year).

    Assuming it is financed 100% equity, this provides accretive cash flow of $5 million annually or around $.07/unit. Clearly not a bad deal, especially considering that BBEP's wacc is lower than 10%.

    What isn't apparant is what kind of rates of return BBEP can expect to achieve on future wells. If the rates are strong, it appears that not only has BBEP landed a nice acquisition of oily production, but also purchased some high return future well sites.

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    • also i forgot to highlight on slide 10 you will see of $98 mm they paid, they only paid (at 10% discount rate) for proved developed and around 20% of proved undeveloped reserves. the drilling program can pick up, at 10% again, $208 mm of additional npv or 10.5 mmboe upside based on nimin estimates

    • rrb good overview. only thing missing is if you look at the nimin presentation thread you will see the significant downsizing opportunity that exits compared to what others have already done such as marathon and vnr/encore wells

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