BreitBurn Energy's Growth Strategy Bodes Well for Shares

Tickers in this article: BBEP

NEW YORK (TheStreet) -- BreitBurn Energy Partners is very effective at making acquisitions. That and its strong focus on oil production should prove to be solid catalysts for its shares.

In 2013, the company completed $1.2 billion in acquisitions, resulting in significant organic growth with increased liquid production.

This year the company plans to spend at least $600 million in new acquisitions. The total estimated proven reserves as of December were 214.3 million barrels of oil equivalent (mmboe) with around 53% oil, 40% natural gas, and 7% natural gas liquids with long-term production life of more than 15 years.

BreitBurn has a major presence in most of the U.S. oil-producing shales including Texas, Wyoming, California and Oklahoma, and the acreages held by the company in these fields are matured. Thus, BreitBurn will generate long-term production stability from these fields, which in turn will help it to offer a sustainable cash flow distribution.

In December it completed an acquisition agreement with CrownRock LP to acquire some of its additional oil and gas acreage in the Permian. Through this acquisition, the company successfully added 16.6 mmboe as estimated total reserve with a 15-year reserve life.

Last year, the company estimated that the 60% of the total production from this field would be oil. During its fourth quarter, it produced 1.7 million barrels of oil, an increase from 1.6 million barrels in its third quarter. BreitBurn will increase oil production going forward with the acquisition of matured oil fields and will sustain its long-term performance to meet guidance of total production of 7.9 million to 8.4 million barrels of oil this year.

More Opportunity in California

BreitBurn's California asset is largely concentrated in the Los Angeles and San Joaquin basin, with total net acreage of 3,128. To focus on increasing oil production, this asset could be beneficial in the longer term. The total acreage hold a huge estimated reserve base of oil (97%) and a small amount of gas (3%), and 11% of the company's total reserve is located here. It has 424 gross producing wells that produce medium-gravity crude. These wells are matured and require less maintenance, which helped the company to reduce its total operating cost.