Breitburn Energy Partners LP (OTCMKTS:BBEPQ) is a stock that’s been involved in a highly contentious Chapter 11 process. The stock is an archetypal example of an upstream MLP that got way over its head with debtors after poor extrapolation of supply and demand in the oil and gas markets in 2014. However, last week closed with a pop higher on potential, but unconfirmed indications that U.S. Trustee William K. Harrington had appointed seven Breitburn shareholders to a so-called official committee of equity security holders. We see one piece out there on this, but no confirmation from any other sources.
An equity committee would be big news. It suggests the shares that represent legacy common interest in the company – the shares that are usually worthless by the time the new company emerges from BK protection – may actually hold value in the emergent entity. The stock has been a roller-coaster ride in recent weeks as signals have come back and forth about this possibility, as well as about the likelihood of a “sticky” commodity market recovery process.
Breitburn Energy Partners LP (OTCMKTS:BBEPQ) bills itself as an independent oil and gas partnership, acquires, exploits, and develops oil, natural gas liquids (NGLs), and natural gas properties in the United States.
The company’s oil, NGL, and natural gas reserves are primarily located in seven producing areas comprising the Arkansas, Louisiana, and East Texas; Michigan, Indiana, and Kentucky; Permian Basin in Texas and New Mexico; the Mid-Continent covering Oklahoma, Kansas, and the Texas Panhandle; Rockies in Wyoming and Colorado; Florida and Alabama; and California.
As of December 31, 2015, it had estimated proved reserves of 239.3 million barrels of oil equivalent.
Breitburn GP LLC serves as the general partner of the company. Breitburn Energy Partners LP was founded in 2006 and is headquartered in Los Angeles, California.
On May 15, 2016, Breitburn Energy Partners LP, along with its affiliates, filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York.
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Traders will note 45% tacked on to share pricing for the name in the past week, but this action is running counter to the larger trend in the name. The situation may be worth watching. BBEPQ has a track record that includes a number of dramatic bounces. In addition, the listing has registered increased average transaction volume recently, with the past month seeing a bit over 250% above the average volume levels in play in this stock over the longer term.
As noted above, there is an unconfirmed story making the rounds that says that “the U.S. trustee handling the Breitburn Energy Partners LP bankruptcy on Tuesday tapped a group of the upstream oil company’s shareholders to represent investors, adding another layer of complexity to an already contentious Chapter 11 case. U.S. Trustee William K. Harrington appointed seven Breitburn shareholders to a so-called official committee of equity security holders.”
An equity security holders committee would have a fiduciary duty to advocate on Breitburn shareholders’ behalf and has several tools at its disposal, including the opportunity to take depositions and investigate whether any.
Note, an 8K filed back in early October showed that there was an action “filed with the Bankruptcy Court in opposition to an effort to have an official committee of equity security holders appointed in the Chapter 11 Cases.” The filing was likely the creditors trying to avoid such a situation, but the fact that it was made perhaps allows us greater credulity in perceiving rumors of an official version of such an action.
The company also just put out their 10-Q for action closed on September 30. We saw some clear improvement, with revenue growth, earnings growth, and overall improved business. But margins on operational investment suffered badly for reasons that are unclear, though may be related to an inability to conduct typical hedging operations during a quarter that saw some periods of violent weakness in commodity markets related to the core business.
Currently trading at a market capitalization of $79.1M, BBEPQ still has a long road ahead of it as this chapter 11 case follows its course. The news of the establishment of an equity committee is extremely promising for shares and we will be sure to update the story again soon. For continuing coverage on shares of $BBEPQ stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!