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Why Shares of Breitburn Energy Partners L.P. Dropped 10% Today

By Travis Hoium - Mar 10, 2015 at 3:52PM

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Falling oil prices are hitting this oil producer hard.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of oil & gas producer Breitburn Energy Partners L.P. (BBEPQ) fell as much as 10% today as oil prices continued to drop.

So what: Oil dropped to a low of $48.14 per barrel today, the lowest level seen this month. The concern for oil producers is that inventory is rising rapidly and if the U.S. continues to produce and import more oil than it consumes, there may eventually be nowhere for that oil to go. Price declines could continue until some producers capitulate and lower production.  

Now what: The biggest concern for MLPs like Breitburn is that distributions will drop in the future. Earlier this year, the company lowered its monthly distribution to 8.33 cents per share, but that may even be too high if oil continues to fall. It may seem tempting to bet on a rise in oil prices today, but I'm sitting out today's discount and won't jump in until we see a sustainable move higher for the price of oil.

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends BreitBurn Energy Partners. 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.

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