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Breitburn Energy Partners LP Message Board

  • alvinsch00 alvinsch00 Jun 17, 2008 10:02 AM Flag

    BreitBurn Acquires Provident Energy Trust's Master Limited Partnership Interests

    Breitburn has acquired all of the limited partnership and indirect general partnership interests of BreitBurn previously owned by Provident Energy Trust.

    Highlights of the transaction include:

    * The Partnership paid $345 million for the limited partnership and general partnership interests acquired from Provident.
    * The Partnership acquired 14,404,962 limited partnership units owned by Provident. These units have been retired and are no longer outstanding.
    * The Partnership acquired Provident’s 95.55% interest in BreitBurn GP, representing the economic equivalent of 428,530 limited partnership units. The Partnership also exchanged 19,955 limited partnership units for the remaining 4.45% of BreitBurn GP owned by BreitBurn Energy Corporation, which is wholly owned by BreitBurn’s Co-Chief Executive Officers. These two transactions reduce BreitBurn GP’s economic interest in the Partnership to zero.
    * The acquisition is immediately accretive to BreitBurn on a distributable cash flow per unit basis.
    * The acquisition was funded with borrowings under the Partnership’s amended and restated bank credit facility.
    * The Conflicts Committee of BreitBurn GP unanimously approved the terms of the transaction. The Conflicts Committee is composed of three independent directors.
    * Unitholders will be given the right to elect the directors of BreitBurn GP, commencing with an annual meeting in July 2009 on a date to be announced.
    * Provident’s indirect ownership of a 96.017% interest in BreitBurn Energy Company LP, a separate U.S. subsidiary of Provident unaffiliated with BreitBurn Energy Partners, whose assets consist primarily of producing and non-producing crude oil reserves located in Los Angeles, Orange and Santa Barbara counties in California, is not included in this transaction.

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    • So did the transaction just value BBEP shares at $23.90/share?

    • Here's what a Morningstar analyst had to say about the deal.

      "On the BreitBurn side, the deal is accretive because of the additional leverage being taken on and the relatively attractive valuation metrics for the deal. The transaction also cleans up the governance structure of the limited partnership, as the general partner has essentially been internalized. The board of the general partner will still influence the limited partnership, but will be elected by unitholders, which is more similar to traditional corporate structures. The additional leverage is not insignificant, but we think BreitBurn is well protected by hedges. Excess cash flow from commodity prices above hedge floors could also be used to bring leverage back into line with historical levels. The deal has no impact on our Provident fair value estimate and a positive impact on our BreitBurn fair value estimate of less than 10%, so we are leaving our fair value estimates unchanged at this time."

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