Breitburn Energy Partners LP (OTCMKTS:BBEPQ) a low-cost play on the oil and gas industry is showing signs of life again. BBEPQ shares are currently trading in a wide range of $0.11-$0.22. At a current share price of $0.19, the company has a market capitalization of $40 million. Based on growing optimism about the company’s ability to emerge stronger from bankruptcy protection, shares of BBEPQ could be headed higher in the near term.
The news that has weighed on the company’s stock, of course, was the Chapter 11 bankruptcy filing in May. At that time, the company cited plunging oil prices, a staggering debt burden and the need to restructure the balance sheet in order to meet all its obligations to creditors. In May, investors had serious questions about what was going to happen to the company’s stock, despite all comments from the company’s management that BBEPQ would continue operations without interruption.
Breitburn Energy Partners LP (OTCMKTS:BBEPQ) shareholders noticed in early August, the picture around BBEPQ was starting to clarify. The company appeared to have plenty of liquidity to fund operations and was cutting costs aggressively. BBEPQ was significantly reducing operating costs, and with Chapter 11 protection, was able to save significantly on interest costs and capital expenditures. Plus, the company had a $75 million debtor-in-possession financing facility as a further source of backup liquidity and had a strong oil hedges in place in case the price of oil headed lower. According to Breitburn Energy Partners’ management, the company could achieve break-even cash flow at an oil price of $45.
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Savvy investors appear to be paying attention. On August 22, legendary investor Wilbur Ross announced that he was buying up debt, with the intention of swapping debt for ownership in the company.
And, indeed, if oil prices tick up further, BBEPQ could be well positioned, with a strong cash position and a much stronger balance sheet. The company operates producing and non-producing oil, liquefied natural gas (LNG) and natural gas reserves in 7 different geographic areas around the United States: the Midwest; Arkansas-Louisiana-East Texas; the Permian Basin in Texas; Oklahoma and the Texas Panhandle; the Rockies; Florida and Alabama; and California. Best of all, many of these oil and gas properties have long production histories, with some of the fields dating back to the 1800s.
In addition, the company operates a number of midstream assets, including transmission and gathering pipelines, gas processing plants, LNG recovery plants, a saltwater disposal company and the 120-miles Transpetco Pipeline.
For traders, the question is whether or not BBEPQ is going to emerge stronger from bankruptcy. Back during the peak oil years in the mid-2000s, the company’s stock price traded in the mid-30s. But with plunging oil prices, the stock price fell off a cliff from the low-20s in September 2014 and never recovered. Which brings us to today, where shares of the company are trading for less $0.20 – just a tiny fraction of what they traded for just two years ago.
BBEPQ stock is on our radar, and we will continue to update any catalysts that could trigger a break-out. As the company continues to restructure its balance sheet, it’s likely that much of the cloud of risk that has hung over the company since the beginning of the year will begin to dissipate. And when that happens, shares of BBEPQ stock could be headed significantly higher as other traders try to pick up this oil and gas stock on the cheap. For continuing coverage on $BBEPQ and our other fast moving picks, sign up for our free newsletter today and get our next hot stock pick!