Find Out Why BreitBurn Energy Can Pay You 10% Per Year

BreitBurn Energy's aggressive oil and gas investments across the U.S. should provide it years of profits.

Feb 5, 2014 at 9:42AM

Upstream Master Limited Partnership, BreitBurn Energy Partners (NASDAQ:BBEP), has big plans for future production growth. It's investing very aggressively in properties across the United States to fully take advantage of the modern-day oil boom here. As oil and gas production soars, BreitBurn is committed to get its share of the action.

BreitBurn's wise asset acquisitions in the Permian Basin, one of the highest-producing areas of the country, put the company in a great strategic position. Furthermore, since BreitBurn is required to distribute a huge majority of its cash flows, investors have the opportunity to receive a hefty income. If growth and a sizable yield are what you're after, look no further than BreitBurn Energy.

BreitBurn's land grab
The Permian Basin, located in Texas and New Mexico, represents one of the biggest sources of oil and gas production in the United States. Production there has exploded in recent years. The region reached 1 million barrels in average daily oil production in 2011, and the active rig count has grown from 100 in mid-2009 to more than 500 rigs today.

Since then, the trend has only continued, and will remain so for some time. The U.S. Energy Information Administration reports average daily oil production hit 1.32 million barrels per day at the Permian Basin last year. And, through 2015, the EIA expects the Permian Basin to grow production faster than any other region in the United States.

This is why BreitBurn and other exploration and production MLPs have plowed money into the Permian Basin. BreitBurn recently closed $300 million worth of acquisitions in the region. This was a very similar transaction as LINN Energy's (NASDAQ:LINE) $525 million acquisition in the Permian Basin last year. This deal was in addition to approximately $834 million in acquisitions last year located across Oklahoma and New Mexico.

It's clear why LINN and BreitBurn are focused so intently on the Permian Basin. The region's oil and gas reserves are not only abundant, they're high-quality as well. LINN's acquired assets there hold more than 300 proved low-risk drilling opportunities that are expected to last 17 years.

BreitBurn's Permian acquisition strongly complements its existing operations, which are spread across the United States. In addition to Texas and New Mexico, BreitBurn holds sizable assets in California, Wyoming, and Michigan. In all, the company's U.S. assets contain 190 million barrels of oil equivalents in proved reserves, which hold a reserve-to-production ratio of approximately 15 years.

Committed to distribution growth
Of BreitBurn Energy's many stated goals, providing a large and growing distribution is one of the most important. BreitBurn's distribution has increased for 14 consecutive quarters. Since the first quarter of 2010, its payout has grown by 30%.

This consistent growth has led to a massive yield. The company's currently payout approaches 10% annualized. Plus, investors have the opportunity to compound their wealth even faster, since BreitBurn recently announced it would move toward a monthly payout. This is right on par with LINN Energy and LINN's financial holding entity LinnCo (NASDAQ:LNCO). Both LINN and LinnCo pay a monthly distribution with yields near 10%.

Fortunately, BreitBurn is growing quickly enough to support its massive distribution. Between its 2006 initial public offering and 2012, BreitBurn's production grew at a 31% rate compounded annually. Moreover, its adjusted earnings before interest, taxes, depreciation, amortization increased by 29% compounded annually over the same period.

Disciplined strategy is key for future returns
Future growth is extremely likely, thanks to BreitBurn's strategic acquisitions. Going forward, BreitBurn fully intends to pursue any and all opportunities that have the potential to provide proven, low-risk oil and gas reserves. Pursuing both organic growth and growth through acquisitions is key to BreitBurn energy supporting its huge yield. As long as its management team keeps pursuing regions with large amounts of proven reserves, BreitBurn's growth should remain on track.

These 9 yields might not be 10%, but they are quite secure

Dividend stocks, as a group, have historically outperform their non-dividend paying brethren. Unfortunately, understanding this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that could form the foundation for any income investor’s portfolio. We invite you to learn the identity of these stocks instantly and for free by simply clicking here now.

Bob Ciura owns shares of Linn Co, LLC. The Motley Fool recommends BreitBurn Energy Partners L.P.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers