Interview With The Director And CEO: BreitBurn Energy Partners L.P. - Halbert S. Washburn
April 2, 2012 - The Wall Street Transcript has just published Oil & Gas: Master Limited Partnerships Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
Halbert S. Washburn is Director and Chief Executive Officer at BreitBurn Energy Partners L.P. He was appointed a Member of the board of directors of BreitBurn Energy Partners in December 2011. He has been the CEO of the general partner since April 2010, previously served as Co-CEO and a Director of the general partner from March 2006 to April 2010, and was the Chairman of the board from July 2008 to April 2010. Mr. Washburn is also the Co-Founder and has been the Co-CEO of BreitBurn Energy and its predecessors since 1988. Since December 2005, Mr. Washburn has served as a Member of the board of directors and the audit and compensation committees of Rentech, Inc., a publicly traded alternative fuels company. He has been a Member of the California Independent Petroleum Association since 1995, and served as the Chairman of the executive committee of the board of directors from 2008 to 2010. Mr. Washburn obtained a B.S. in petroleum engineering from Stanford University.
TWST: Would you introduce our readers to BreitBurn with a brief company history?
Mr. Washburn: BreitBurn Energy (BBEP) is an upstream master limited partnership. The predecessor company was founded in 1988, and we've been in the same business, which is acquisition and exploitation of oil and gas fields, since. We acquire fields and then we seek to increase reserves production, cash flow, and value through better operations and better engineering and geoscience. We seek to add reserves by really understanding reservoirs better and using new technologies to get more oil and gas out of the ground. We started the business focused on large California oil fields, and we've since grown to include properties in Michigan, Wyoming, Indiana, Kentucky and Florida.
We have large businesses in many of those states. We're the largest or second-largest gas producer in Michigan; we're a top 10 oil and gas producer in Wyoming; a top seven or eight producer in California; and one of the larger two producers in Florida. We're focused on long-lived oil and gas fields, large accumulations of oil and gas, and look for large fields that have very low decline, very stable production, and we look to add cash flow and production cash flow from those fields. We currently have about 150 billion barrels equivalent of proved reserves; about 65% of that is natural gas and 35% oil. A very high percentage of our reserves are proved developed, in fact, almost 90% of our reserves are proved developed. We currently produce 43% oil, and the remainder natural gas. The company has an enterprise value of right at $2 billion, with an equity market capital about $1.3 billion.
TWST: I was going to ask about BreitBurn's most productive and profitable properties. Is there anything you'd add in terms of the locations you mentioned?
Mr. Washburn: Today, given the relative valuation difference between oil and gas, our most profitable properties are probably in California. Our California properties are priced against Brent, so we are currently receiving north of $120 per barrel in the field for oil we sell in California. However, we do have a very strong hedge book - that's a critical part of our business strategy, a very important part of our business strategy - so all of our fields are very profitable today, and we have very strong price support on both natural gas and crude oil. But as far as just gross operating margins in the field, the most profitable fields today would be in California, followed pretty closely by Florida, which is priced against WTI.
TWST: To what extent is the company growing today? Does BBEP continue to do so by acquisition?
Mr. Washburn: Yes, we're an acquisition and exploitation company. We have been for 24 years. We don't explore, so our growth is through acquisitions. We've been active in acquisitions for the last two decades. In 2011, we completed about $340 million worth of acquisitions of oil and gas properties in two acquisitions in Wyoming. So we are growing. We've said publicly that we think a good goal for the company this year should be a minimum of $300 million worth of acquisitions, if possible as much $500 million worth of acquisitions. We believe we have the balance sheet, the operating teams and the capacity to do that level of acquisition activity successfully.
TWST: Is BreitBurn targeting any particular areas for that growth?
Mr. Washburn: We really target certain types of properties. As I mentioned earlier, we are looking for properties with relatively low decline, a lot of oil and gas in place where we can add to reserves of production by better operations and engineering. Of course, we are always looking at areas that are strong for us. We really like the Rocky Mountains. We really like Wyoming, California, areas in Michigan, Florida, any areas where we currently have large operations would be areas we will be targeting. But we're not geographically constrained. We have a large enough operating and technical team in place today that there are very few basins where we don't have some in-house expertise.
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