Value Play: BreitBurn Energy Partners

Looking for income? BreitBurn Energy Partners (BBEP) is paying a distribution with a 7.9% yield. Who can you go wrong with that? It is also trading at just 14.9x forward earnings making it a value stock. Big yield and a value stock: that’s a powerful combination.

BreitBurn Energy is one of those master limited partnerships you may have been hearing about. MLP’s are required to pay out earnings in distributions to unit holders every quarter. Basically, investors are buying an MLP for the quarterly distribution.

Because of the big distribution, the MLPs have been hot. BreitBurn is trading at 2 year highs.

Still a Value Stock

Despite the surge in the stock price, BreitBurn, which is an oil and gas explorer, is still trading at attractive valuations.

In addition to its P/E ratio of 14.9, which is under its peers average at 17.1x, the partnership’s price-to-book ratio is just 0.8 which puts it well within the value territory.

2010 Earnings Expected to Jump

Analysts have been bullish on 2010. After earnings just 79 cents in 2009, BreitBurn is expected to grow earnings 69% in 2010.

The 2010 Zacks Consensus has risen by 5 cents in the last 7 days to $1.32 per unit.

However, analysts are looking for a slowdown in 2011 with earnings expected to decline by 13.6%. Even still, one estimate has risen in the last 30 days pushing the 2011 estimate up to $1.14 from $1.06.

Production Increased in the Second Quarter

On Aug 4, BreitBurn reported its second quarter results which saw it surprise on the Zacks Consensus by 17.2%. Earnings per unit were 34 cents compared to the consensus of 29 cents.

The quarter was boosted by a 3% increase in daily production and declining operating expenses compared to the first quarter.

The company has oil and natural gas reserves in diverse areas of the country including in the Los Angeles Basin in California, the Wind River and Big Horn Basins in central Wyoming, the Sunniland Trend in Florida, the Antrim Shale in Michigan and the New Albany Shale in Indiana and Kentucky.

“We are actively drilling in each of our core areas and will remain active in Florida where the drilling of our second well continues, with initial results expected in the near future,” said Hal Washburn, CEO.

“In Michigan, we have completed a full review of our ownership in the deep rights and have determined that we hold more than 120,000 net acres in the prospective Collingwood-Utica area. We continue to evaluate the potential of these deeper shale assets,” he added.

Distribution Increased

Also in August, BreitBurn announced it was increasing its cash distribution by $0.3825 for the August distribution. The increase pushed the annualized rate to $1.53 per unit from $1.50.

The partnership is expected to report third quarter earnings on Nov 5.

BreitBurn Energy is a Zacks #1 Rank (strong buy) stock.

BREITBURN EGY (BBEP): Free Stock Analysis Report

About Tracey Ryniec 60 Articles

Affiliation: Zacks Investment Research

Tracey Ryniec is the Value Stock Strategist for She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at

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