Photo credit: Flickr/Kool Cats Photography 

Last week BreitBurn Energy Partners (OTC:BBEPQ) delivered pretty solid first-quarter results. The oil and gas MLP's distributable cash flow jumped 88% enabling the company to deliver a solid 1.0 times distribution coverage ratio. Let's take a closer look at what the company did right this past quarter.

What went right
The backbone of BreitBurn Energy Partners' strong first-quarter results was the company's liquids production. The company delivered a 4% quarter-over-quarter increase in overall production as liquids production hit a quarterly record.

One asset where the company saw an improvement in liquids production was the Postle Field that BreitBurn Energy Partners acquired from Whiting Petroleum (NYSE:WLL) in a big oil deal last year. This was good news for the company as just last quarter the company pointed to problems in the completion of the Libby Ranch carbon dioxide facility associated with the Whiting Petroleum acquisition as being one of the reasons why it turned in a less than stellar fourth quarter.

This quarter BreitBurn Energy Partners was able to reverse the production decline from the Postle Field thanks to increased carbon dioxide volumes from an amended supply contract it signed with ExxonMobil (NYSE:XOM) last quarter. Thanks to the additional carbon dioxide supplied by ExxonMobil the field's production decline was halted and the company expects to see production start to grow in the future.

Another important contributor to BreitBurn Energy Partners' solid quarter was higher oil and gas prices. The company saw really strong gas prices in Michigan as the state experienced its coldest winter on record. Temperatures from the first of December to the end of February averaged just 10.1 degrees, which led gas prices to surge to a high of $10.50 per Mcf in March.

Together these positives yielded a solid distribution coverage ratio of 1.0 times, which is up from the 0.93 times coverage ratio from last quarter. This actually signals a really strong start for the year as CFO Jim Jackson noted on the company's conference call that the first quarter is typically its weakest quarter for the distribution coverage ratio as production curtailments from the weather usually have a noticeable impact. The fact that the company got through its toughest quarter with a solid coverage ratio puts it on pace to have a strong year.

Photo credit: Flickr/Paul Lowry 

What went wrong
All that being said it wasn't a perfect quarter for BreitBurn Energy Partners. While the company was able to work past its weather issues it did have some problems elsewhere that bear watching. In what seems to be a pattern for BreitBurn Energy Partners, one of its disappointments this quarter was its newly acquired Texas wells.

Toward the end of last year BreitBurn bought 93 producing wells along with 300 potential drilling locations from a company it had purchased assets from in the past. But these assets seem to be giving the company trouble as a number of the wells it bought were offline when it took over operations. It took the company time to find workover rigs to bring the wells back online due to how active the Permian Basin is these days. While the company says these issues are now in the past, investors need to keep an eye on this as integrating acquisitions need to be an area of strength for the company given its model to grow by acquisition.

Further, BreitBurn Energy Partners had trouble getting its production out of the Permian Basin as there neither was enough oil hauling trucks nor pipeline capacity available in the quarter. This caused the company to store 11,000 barrels of oil that weren't included in its production or sales numbers. Infrastructure problems are usually beyond the control of a producer from quarter to quarter, but over the longer term BreitBurn Energy Partners will need to ensure it has enough takeaway capacity for its oil and gas in order to keep its distribution flowing. 

Investor takeaway
Overall, this is really the type of quarter we should expect to see from Breitburn Energy Partners. The company delivered steady production that was fueled by acquisitions, which yielded enough cash flow to completely cover the company's distribution. This puts the company on pace to have a good year, which should keep its distribution to investors flowing, while acquisitions later this year along with its capital program to drill new wells should grow the payout over time.