Oil and Analysts Push BreitBurn Energy Partners L.P. Down 10% in June

Sliding oil prices and tepid analyst outlooks weights on BreitBurn Energy Partners L.P.

Matthew DiLallo
Matthew DiLallo
Jul 8, 2015 at 11:02AM
Energy, Materials, and Utilities

What: After being relatively stable for most of June, toward the end of the month oil prices slid, taking oil stocks with them. BreitBurn Energy Partners L.P. (OTC:BBEPQ) was among those hit by weaker prices as its stock slid 10% for the month. To make matters worse, BreitBurn's cause wasn't helped by analysts, who issued tepid ratings for the company in June. 

So what: The price of crude oil in the U.S. fell 3% in June, sliding late in the month as the crisis in Greece made headlines. Adding to the bearishness in crude was a surprising build in crude oil inventories. Given that crude oil is what fuels a bulk of BreitBurn Energy's cash flow, the weakness in the oil prices is weighing on the company's unit price.

In addition to that, analysts covering the company issued lukewarm ratings on the company. Barclays, for example, maintained its "equal weight" rating, but cut its price target from $7 per unit down to $5. Meanwhile, an analyst from Wunderlich initiated a "hold" rating on the company while giving it a price target of $6. These weak ratings are being fueled by the fact that neither analyst sees any positive catalysts on the horizon for the company.  

Now what: With oil prices starting to weaken, it's putting additional downward pressure on BreitBurn Energy Partners' unit price. That's not what the company needs right now as it could really use meaningfully higher oil to bolster its cash flow so it can pare down some of its excess debt. That's not a near-term future that analysts see, which is why they don't see a reason to be bullish on the company at the moment.