Can Breitburn Really Maintain Its Massive Distribution?

Energy

Published: August 27, 2015 4:10 pm

Last Updated: April 27, 2020 6:23 pm

Breitburn Energy Partners LP (NASDAQ: BBEP) has absolutely underperformed the market with shares down over 60% year to date. However despite this drop the company is continuing to target an annualized distribution yield of roughly 20%. Can Breitburn really afford to keep this up?

On an annualized basis the $0.50 distribution equates to nearly a 20% yield which absolutely blows most other MLPs out of the water. Also Breitburn makes its distributions on a monthly basis.

The company announced Thursday a cash distribution of $0.04166 per common unit for the third month attributable to the second quarter of 2015, payable on September 11, to record holders of its common units at the close of business on September 8. This monthly distribution is equal to a distribution of $0.50 per common unit on an annualized basis.

In the past year, Breitburn has made approximate distributions of $0.083 from January to March, and approximate distributions of $0.042 from April until August.

In its release, the company detailed:

Breitburn also announced today distributions for its 8.25% Series A Cumulative Redeemable Perpetual Preferred Units (BBEPP) and 8.0% Series B Perpetual Convertible Preferred Units. A cash distribution of $0.171875 per Series A Unit is payable on October 15, 2015, to record holders of its Series A Units at the close of business on September 30, 2015. This monthly distribution is equal to an annual distribution of $2.0625 per Series A Unit. Breitburn has elected to pay the distribution on the Series B Units in kind by issuing additional Series B Units instead of paying a cash distribution. A distribution of 0.006666 PIK unit per Series B Unit is payable on September 15, 2015, to record holders of Series B Units at the close of business on August 31, 2015.

Units of Breitburn were up 6% at $2.65 on Thursday afternoon. The units have a consensus analyst price target of $6.52 and a 52-week trading range of $2.02 to $23.06.

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