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Will BreitBurn Ever Recover?

Summary

BreitBurn is now a penny stock.

Investors sold shares after the company eliminated its distribution.

Its recovery depends on energy prices. Investors speculating by holding BBEP evaluated.

Before cutting its distribution of common units on December 1, BreitBurn Energy (NASDAQ:BBEP) was trading at $2. Since then, the stock dropped every trading session, closing recently at $0.65. What went wrong? The last time I analyzed this company was this past January. It was assessed as a stock not to buy, but this review on BBEP is not a "told you so" moment. Chesapeake Energy (NYSE:CHK) and Linn Energy (NASDAQ:LINE) also looked like stocks that would bottom this year. Instead, energy prices turned lower, and now investors want all heavily indebted MLPs and energy stocks to lower their debt. Without a distribution to dangle to investors, will BreitBurn get delisted?

At the Jefferies 2015 Energy Conference, BreitBurn said its distribution of $0.50 per common unit had a coverage ratio (for Q315) of 1.90 times. It holds valuable hedges for the next three years for oil at ~$85 per barrel and natural gas at $3.95 per MMBtu. Unfortunately, oil is...


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