Attached files
| file | filename |
|---|---|
| 8-K - 8-K CURRENT REPORT - Breitburn Energy Partners LP | v236732_8k.htm |
| EX-10.1 - EXHIBIT 10.1 - Breitburn Energy Partners LP | v236732_ex10-1.htm |
| EX-99.1 - EXHIBIT 99.1 - Breitburn Energy Partners LP | v236732_ex99-1.htm |
| EX-23.1 - EXHIBIT 23.1 - Breitburn Energy Partners LP | v236732_ex23-1.htm |
| EX-99.2 - EXHIBIT 99.2 - Breitburn Energy Partners LP | v236732_ex99-2.htm |
EXHIBIT 99.3
BREITBURN ENERGY PARTNERS L.P.
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Page
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Unaudited Pro Forma Combined Balance Sheet as of June 30, 2011
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1
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Unaudited Pro Forma Combined Statement of Operations for the six months ended June 20, 2011
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2
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Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 2010
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3
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Notes to Unaudited Pro Forma Combined Financial Statements
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4
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BreitBurn Energy Partners L.P. and Subsidiaries
Unaudited Pro Forma Combined Balance Sheet
As of June 30, 2011
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BreitBurn
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BreitBurn
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Energy
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Pro Forma
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Energy
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Partners L.P.
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Adjustments
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Partners L.P.
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Thousands of dollars
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Historical
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(Note 3)
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Pro Forma
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ASSETS
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Current assets
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Cash
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$ | 2,747 | $ | 281,392 | (a) | $ | 284,139 | |||||
| (281,392 | )(a) | (281,392 | ) | |||||||||
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Accounts and other receivables, net
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50,450 | - | 50,450 | |||||||||
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Derivative instruments
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51,266 | - | 51,266 | |||||||||
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Related party receivables
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2,632 | - | 2,632 | |||||||||
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Inventory
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7,342 | - | 7,342 | |||||||||
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Prepaid expenses
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6,344 | - | 6,344 | |||||||||
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Total current assets
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120,781 | - | 120,781 | |||||||||
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Equity investments
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7,541 | - | 7,541 | |||||||||
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Property, plant and equipment
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Oil and gas properties
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2,169,988 | 295,088 | (b) | 2,465,076 | ||||||||
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Other assets
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11,702 | - | 11,702 | |||||||||
| 2,181,690 | 295,088 | 2,476,778 | ||||||||||
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Accumulated depletion and depreciation
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(469,594 | ) | - | (469,594 | ) | |||||||
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Net property, plant and equipment
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1,712,096 | 295,088 | 2,007,184 | |||||||||
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Other long-term assets
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Derivative instruments
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19,400 | - | 19,400 | |||||||||
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Other long-term assets
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19,314 | 1,413 | (b) | 20,727 | ||||||||
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Total assets
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$ | 1,879,132 | $ | 296,501 | $ | 2,175,633 | ||||||
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LIABILITIES AND EQUITY
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Current liabilities
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Accounts payable
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$ | 27,924 | $ | - | $ | 27,924 | ||||||
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Derivative instruments
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39,659 | - | 39,659 | |||||||||
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Revenue and royalties payable
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17,534 | 798 | (b) | 18,332 | ||||||||
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Salaries and wages payable
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6,730 | - | 6,730 | |||||||||
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Accrued liabilities
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11,256 | - | 11,256 | |||||||||
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Total current liabilities
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103,103 | 798 | 103,901 | |||||||||
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Credit facility
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127,000 | 281,392 | (a) | 408,392 | ||||||||
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Senior notes, net
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300,364 | - | 300,364 | |||||||||
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Deferred income taxes
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1,571 | - | 1,571 | |||||||||
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Asset retirement obligation
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46,402 | 10,845 | (b) | 57,247 | ||||||||
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Derivative instruments
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66,572 | - | 66,572 | |||||||||
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Other long-term liabilities
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2,055 | 3,466 | (b) | 5,521 | ||||||||
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Total liabilities
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647,067 | 296,501 | 943,568 | |||||||||
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Equity
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Partners’ equity
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1,231,617 | - | 1,231,617 | |||||||||
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Noncontrolling interest
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448 | - | 448 | |||||||||
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Total equity
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1,232,065 | - | 1,232,065 | |||||||||
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Total liabilities and equity
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$ | 1,879,132 | $ | 296,501 | $ | 2,175,633 | ||||||
See the accompanying notes to the unaudited pro forma combined financial statements.
1
BreitBurn Energy Partners L.P. and Subsidiaries
Unaudited Pro Forma Combined Statement of Operations
For the Six Months Ended June 30, 2011
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BreitBurn
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BreitBurn
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Energy
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Cabot Assets
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Pro Forma
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Energy
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Partners L.P.
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Historical
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Adjustments
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Partners L.P.
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Thousands of dollars, except per unit amounts
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Historical
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(Note 4)
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(Note 4)
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Pro Forma
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Revenues and other income items
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Oil, natural gas and natural gas liquid sales
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$ | 187,317 | $ | 27,391 | (a) | $ | 225 | (b) | $ | 214,933 | ||||||
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Gain (loss) on commodity derivative instruments, net
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(59,694 | ) | - | - | (59,694 | ) | ||||||||||
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Other revenue, net
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2,041 | - | - | 2,041 | ||||||||||||
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Total revenues and other income items
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129,664 | 27,391 | 225 | 157,280 | ||||||||||||
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Operating costs and expenses
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Operating costs
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73,019 | 7,753 | (a) | 648 | (c) | 81,420 | ||||||||||
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Depletion, depreciation and amortization
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49,666 | - | 7,538 | (d) | 57,204 | |||||||||||
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General and administrative expenses
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24,127 | - | 1,455 | (c) | 25,582 | |||||||||||
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Loss on sale of assets
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54 | - | - | 54 | ||||||||||||
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Total operating costs and expenses
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146,866 | 7,753 | 9,641 | 164,260 | ||||||||||||
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Operating income (loss)
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(17,202 | ) | 19,638 | (9,416 | ) | (6,980 | ) | |||||||||
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Interest expense, net of capitalized interest
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18,500 | - | 3,186 | (e) | 21,686 | |||||||||||
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Loss on interest rate swaps
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1,877 | - | - | 1,877 | ||||||||||||
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Other (income) expense, net
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(3 | ) | - | - | (3 | ) | ||||||||||
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Income (loss) before taxes
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(37,576 | ) | 19,638 | (12,602 | ) | (30,540 | ) | |||||||||
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Income tax expense (benefit)
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(386 | ) | - | - | (386 | ) | ||||||||||
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Net income (loss)
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(37,190 | ) | 19,638 | (12,602 | ) | (30,154 | ) | |||||||||
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Less: Net income attributable to noncontrolling interest
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(102 | ) | - | - | (102 | ) | ||||||||||
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Net income (loss) attributable to the partnership
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$ | (37,292 | ) | $ | 19,638 | $ | (12,602 | ) | $ | (30,256 | ) | |||||
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Basic net income (loss) per unit
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$ | (0.64 | ) | $ | (0.52 | ) | ||||||||||
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Diluted net income (loss) per unit
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$ | (0.64 | ) | $ | (0.52 | ) | ||||||||||
See the accompanying notes to the unaudited pro forma combined financial statements.
2
BreitBurn Energy Partners L.P. and Subsidiaries
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended December 31, 2010
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BreitBurn
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BreitBurn
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Energy
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Cabot Assets
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Pro Forma
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Energy
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Partners L.P.
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Historical
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Adjustments
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Partners L.P.
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Thousands of dollars, except per unit amounts
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Historical
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(Note 4)
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(Note 4)
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Pro Forma
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Revenues and other income items:
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Oil, natural gas and natural gas liquid sales
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$ | 317,738 | $ | 54,138 | (a) | $ | 411 | (b) | $ | 372,287 | ||||||
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Gain (loss) on commodity derivative instruments, net
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35,112 | - | - | 35,112 | ||||||||||||
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Other revenue, net
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2,498 | - | - | 2,498 | ||||||||||||
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Total revenues and other income items
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355,348 | 54,138 | 411 | 409,897 | ||||||||||||
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Operating costs and expenses:
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Operating costs
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142,525 | 17,928 | (a) | 1,297 | (c) | 161,750 | ||||||||||
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Depletion, depreciation and amortization
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102,758 | - | 16,995 | (d) | 119,753 | |||||||||||
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General and administrative expenses
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44,907 | - | 2,910 | (c) | 47,817 | |||||||||||
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Loss on sale of assets
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14 | - | - | 14 | ||||||||||||
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Unreimbursed litigation costs
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1,401 | - | - | 1,401 | ||||||||||||
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Total operating costs and expenses
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291,605 | 17,928 | 21,202 | 330,735 | ||||||||||||
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Operating income (loss)
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63,743 | 36,210 | (20,791 | ) | 79,162 | |||||||||||
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Interest expense, net of capitalized interest
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24,552 | - | 7,058 | (e) | 31,610 | |||||||||||
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Loss on interest rate swaps
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4,490 | - | - | 4,490 | ||||||||||||
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Other income, net
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(8 | ) | - | - | (8 | ) | ||||||||||
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Income (loss) before taxes
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34,709 | 36,210 | (27,849 | ) | 43,070 | |||||||||||
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Income tax expense (benefit)
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(204 | ) | - | - | (204 | ) | ||||||||||
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Net income (loss)
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34,913 | 36,210 | (27,849 | ) | 43,274 | |||||||||||
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Less: Net income attributable to noncontrolling interest
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(162 | ) | - | - | (162 | ) | ||||||||||
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Net income (loss) attributable to the partnership
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$ | 34,751 | $ | 36,210 | $ | (27,849 | ) | $ | 43,112 | |||||||
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Basic net income (loss) per unit
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$ | 0.61 | $ | 0.76 | ||||||||||||
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Diluted net income (loss) per unit
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$ | 0.61 | $ | 0.76 | ||||||||||||
See the accompanying notes to the unaudited pro forma combined financial statements.
3
Notes to the Unaudited Pro Forma Combined Financial Statements
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1.
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General
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BreitBurn Energy Partners L.P. is a Delaware limited partnership formed on March 23, 2006. BreitBurn Energy Partners L.P. completed its initial public offering in October 2006. References in this filing to “the Partnership,” “we,” “our,” “us” or like terms refer to BreitBurn Energy Partners L.P. and its subsidiaries.
We are an independent oil and gas partnership focused on the acquisition, exploitation and development of oil and gas properties in the United States.
On October 6, 2011, BreitBurn Operating L.P. (“BreitBurn Operating”), our wholly owned subsidiary, completed the acquisition of certain assets (the “Cabot Assets”), effective September 1, 2011, from Cabot Oil & Gas Corporation (“Cabot”) for $285 million less $2 million in adjustments, subject to further ordinary adjustments, resulting in a net cash exchange of $283 million (the “Cabot Acquisition”). The Cabot Assets consist of oil and natural gas properties which are approximately 95% natural gas reserves and are located primarily in the Evanston and Green River Basins of Southwest Wyoming. The Cabot Assets also include limited acreage and non-operated oil and natural gas interests in Colorado and Utah.
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2.
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Basis of Presentation
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The Partnership’s unaudited pro forma combined balance sheet has been presented to show the effect as if the Cabot Acquisition had occurred on June 30, 2011.
The unaudited pro forma combined statements of operations for the six months ending June 30, 2011 and the year ended December 31, 2010 have been presented based on the individual statements of operations of the Partnership, and reflect the pro forma operating results attributable to the Cabot Assets as if the acquisition and the related transactions had occurred on January 1, 2010.
Pro forma data is based on currently available information and certain estimates and assumptions as explained in the notes to the unaudited pro forma combined financial statements. Pro forma data is not necessarily indicative of the financial results that would have been attained had the acquisition occurred on January 1, 2010. As actual adjustments may differ from the pro forma adjustments, the pro forma amounts presented should not be viewed as indicative of operations in future periods. The accompanying unaudited pro forma combined financial statement of the Partnership should be read in conjunction with our Quarterly Report on Form 10-Q for the six months ended June 30, 2010 and our Annual Report on Form 10-K for the year ended December 31, 2010.
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3.
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Pro Forma Adjustments to the Unaudited Combined Balance Sheet
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Pro forma adjustments to the Unaudited Combined Balance Sheet for the period ending June 30, 2011 reflect the acquisition and the preliminary purchase price allocations for the Cabot Assets, assuming borrowings were made under our Second Amended and Restated Credit Agreement.
The preliminary purchase price allocations are based on preliminary reserve reports, quoted market prices and estimates by management. To estimate the fair values of acquired oil and gas reserves, we utilized our reserve engineers’ estimates of oil and natural gas proved reserves to arrive at estimates of future cash flows net of operating and development costs. The estimated future net cash flows were discounted at a weighted average cost of capital.
The preliminary purchase price allocation is subject to final closing adjustments. We expect to finalize the purchase price allocation within one year of the acquisition date.
4
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(a)
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The preliminary purchase price of $281 million was made with borrowings under our Second Amended and Restated Credit Agreement.
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Thousands of dollars
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Initial purchase price
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$ | 283,092 | ||
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Estimated pending closing adjustments
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(1,700 | ) | ||
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Total purchase price
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$ | 281,392 | ||
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(b)
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The preliminary allocation of the purchase price for the Cabot Assets is summarized below:
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Thousands of dollars
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Oil and gas properties
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$ | 295,088 | ||
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Other long-term assets
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1,413 | |||
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Revenue and royalties payable
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(798 | ) | ||
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Asset retirement obligation
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(10,845 | ) | ||
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Other long-term liabilities
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(3,466 | ) | ||
| $ | 281,392 | |||
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4.
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Pro Forma Adjustments to the Unaudited Combined Statement of Operations
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Pro forma adjustments to the Consolidated Statement of Operations for the six months ended June 30, 2011 and the year ended December 31, 2010 assume the acquisition was consummated on January 1, 2010.
The unaudited pro forma combined statements of operations have been adjusted as follows:
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(a)
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Record revenue and direct operating expenses for the Cabot Assets derived from Cabot’s historical financial records.
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For the six months ended June 30, 2011, $27.4 million of revenue and $7.8 million of direct operating expenses.
For the year ended December 31, 2010, $54.1 million of revenue and $17.9 million of direct operating expenses.
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(b)
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Cabot applies the sales method of accounting for natural gas revenues while we apply the entitlement method. Under the sales method, revenues are recognized based on the actual volume of natural gas sold to purchasers. Natural gas production operations may include joint owners who take more or less than the production volumes entitled to them on certain properties. Production volume is monitored to minimize these natural gas imbalances. A natural gas imbalance liability is recorded at the actual price realized upon the gas sale if it is determined that the excess taken of natural gas exceeds the estimated remaining proved developed reserves for the properties. Under the entitlement method of accounting, we pay joint owners for their working interest shares of natural gas sold. As a result, we do not have natural gas producer imbalance positions.
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Record adjustment to reflect natural gas sales revenue for the Cabot Assets under the entitlement method:
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For the six months ended June 30, 2011, $0.2 million increase in revenue.
For the year ended December 31, 2010, $0.4 million increase in revenue.
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(c)
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Record estimated incremental G&A expense and regional operation management costs which the Partnership expects to incur for the newly acquired assets based on our evaluation of the number of employees needed to support and manage the properties.
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For the six months ended June 30, 2011, $1.5 million of G&A expense and $0.6 million of regional operation management costs (reflected on the operating costs row of the Statement of Operations).
5
For the year ended December 31, 2010, $2.9 million of G&A expense and $1.3 million of regional operation management costs (reflected on the operating costs row of the Statement of Operations).
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(d)
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Record incremental depletion, depreciation and accretion expense related to the acquired depletable and depreciable assets.
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For the six months ended June 30, 2011, $7.5 million.
For the year ended December 31, 2010, $17.0 million.
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(e)
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Add interest expense associated with bank debt of approximately $281 million incurred to fund the Cabot Acquisition; the assumed variable interest rate was 2.283% and 2.508% for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively. If the variable interest rate increased or decreased by 0.125% in the future, the annual pro forma interest expense would increase or decrease by approximately $0.4 million.
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For the six months ended June 30, 2011, $3.2 million.
For the year ended December 31, 2010, $7.1 million.
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5.
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Supplemental Oil and Gas Information (Unaudited)
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The following table sets forth certain unaudited pro forma information regarding estimates of the Partnership’s proved crude oil and natural gas reserves for the year ended December 31, 2010, giving effect to the Cabot Acquisition as if it had occurred on January 1, 2010. Because oil reserve estimates are inherently imprecise and require extensive judgments of reservoir engineering data, they are generally less precise than estimates made in conjunction with financial disclosures.
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BreitBurn Energy Partners L.P.
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Cabot Assets
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BreitBurn Energy Partners L.P.
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Historical
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Historical
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Pro Forma
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Total
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Oil
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Gas
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Total
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Oil
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Gas
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Total
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Oil
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Gas
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(MBoe)
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(MBbl)
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(MMcf)
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(MBoe)
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(MBbl)
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(MMcf)
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(MBoe)
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(MBbl)
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(MMcf)
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Proved Reserves
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Beginning balance
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111,301 | 38,846 | 434,730 | 34,048 | 1,114 | 197,604 | 145,349 | 39,960 | 632,334 | |||||||||||||||||||||||||||
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Revision of previous estimates
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12,819 | 5,900 | 41,510 | (2,377 | ) | 58 | (14,611 | ) | 10,442 | 5,958 | 26,899 | |||||||||||||||||||||||||
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Purchase of reserves in-place
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1,487 | 70 | 8,502 | - | - | - | 1,487 | 70 | 8,502 | |||||||||||||||||||||||||||
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Sale of reserves in-place
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- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
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Production
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(6,699 | ) | (3,157 | ) | (21,251 | ) | (2,058 | ) | (81 | ) | (11,859 | ) | (8,756 | ) | (3,238 | ) | (33,110 | ) | ||||||||||||||||||
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Ending balance
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118,908 | 41,659 | 463,491 | 29,613 | 1,091 | 171,134 | 148,521 | 42,750 | 634,625 | |||||||||||||||||||||||||||
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Proved Developed Reserves (a)
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||||||||||||||||||||||||||||||||||||
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Beginning balance
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100,968 | 34,436 | 399,190 | 27,001 | 978 | 156,139 | 127,969 | 35,414 | 555,329 | |||||||||||||||||||||||||||
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Ending balance
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108,283 | 38,719 | 417,381 | 26,778 | 1,070 | 154,247 | 135,060 | 39,789 | 571,628 | |||||||||||||||||||||||||||
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Proved Undeveloped Reserves (a) (b)
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||||||||||||||||||||||||||||||||||||
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Beginning balance
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10,333 | 4,410 | 35,540 | 7,047 | 136 | 41,465 | 17,380 | 4,546 | 77,005 | |||||||||||||||||||||||||||
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Ending balance
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10,625 | 2,940 | 46,110 | 2,836 | 21 | 16,887 | 13,461 | 2,961 | 62,997 | |||||||||||||||||||||||||||
Summarized in the following table is information for the Partnership’s unaudited pro forma standardized measure of discounted cash flows relating to estimated proved reserves as of December 31, 2010, giving effect to the Cabot Acquisition. The standardized measure of discounted future net cash flows was determined based on the economic conditions in effect at December 31, 2010. The disclosures below do not purport to present the fair market value of the Partnership’s oil and gas reserves. An estimate of the fair market value would also take into account, among other things, the recovery of reserves in excess of proved reserves, anticipated future changes in prices and costs, a discount factor more representative of the time value of money, and risks inherent in reserve estimates. The pro forma standardized measure of discounted future net cash flows is presented as follows:
6
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BreitBurn
Energy
Partners L.P.
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Cabot Assets
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BreitBurn
Energy
Partners L.P.
|
||||||||||
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Thousands of dollars
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Historical
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Historical
|
Pro Forma
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|||||||||
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Future cash inflows
|
$ | 5,097,644 | $ | 770,573 | $ | 5,868,217 | ||||||
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Future development costs
|
(251,181 | ) | (56,830 | ) | (308,011 | ) | ||||||
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Future production expense
|
(2,618,470 | ) | (314,181 | ) | (2,932,651 | ) | ||||||
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Future income tax expense
|
- | (129,189 | ) | (129,189 | ) | |||||||
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Future net cash flows
|
2,227,993 | 270,373 | 2,498,366 | |||||||||
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Discounted at 10% per year
|
(1,163,069 | ) | (139,647 | ) | (1,302,716 | ) | ||||||
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Standardized measure of discounted future net cash flows
|
$ | 1,064,924 | $ | 130,726 | $ | 1,195,650 | ||||||
The following table sets forth unaudited pro forma information for the principal sources of changes in the standardized measure of discounted future net cash flows for the year ended December 31, 2010, giving effect to the Cabot Acquisition:
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BreitBurn
Energy
Partners L.P.
|
Cabot Assets
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BreitBurn
Energy
Partners L.P.
|
||||||||||
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Thousands of dollars
|
Historical
|
Historical
|
Pro Forma
|
|||||||||
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Beginning balance
|
$ | 759,622 | $ | 96,258 | $ | 855,880 | ||||||
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Sales and transfers, net of production expense
|
(175,213 | ) | (36,210 | ) | (211,423 | ) | ||||||
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Net change in sales and transfer prices, net of production expense
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306,311 | 96,474 | 402,785 | |||||||||
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Previously estimated development costs incurred during year
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47,732 | - | 47,732 | |||||||||
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Changes in estimated future development costs
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(105,207 | ) | - | (105,207 | ) | |||||||
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Purchase of reserves in place
|
1,676 | - | 1,676 | |||||||||
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Revision of quantity estimates and timing of estimated production
|
154,041 | (14,827 | ) | 139,214 | ||||||||
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Accretion of discount
|
75,962 | 12,662 | 88,624 | |||||||||
|
Net change in income taxes
|
- | (23,631 | ) | (23,631 | ) | |||||||
|
Ending balance
|
$ | 1,064,924 | $ | 130,726 | $ | 1,195,650 | ||||||
7