Breitburn Energy To Buy QR Energy For $1.46B


Breitburn Energy Partners LP agreed to buy QR Energy LP for $1.46 billion in a deal to create one of the largest U.S. oil producers structured as a master limited partnership. QR Energy’s stock rose as much as 10 percent to $20.85, its highest in nearly two years. Breitburn’s shares fell 3 percent.

U.S. energy companies have created a number of master limited partnerships (MLP) in recent years because they pay no corporate taxes if they distribute most of their profits to investors. Investors also favor MLPs for their high yields. Breitburn’s offer, which represents a 19 percent premium to QR Energy’s Wednesday close, is based on 64.9 million outstanding QR Energy shares, the companies said in a joint statement on Thursday.

QR Energy unit holders will receive 0.9856 of one Breitburn unit for each QR Energy unit they hold. That works out at $22.48 per unit, based on Breitburn’s closing price on Wednesday.

“At first glance, the deal looks expensive for Breitburn,” Raymond James analyst Pavel Molchanov wrote in a note.

Breitburn, headquartered in Los Angeles, has oil and gas assets in several U.S. states, including Michigan, Oklahoma and Texas. Some of its fields date back to the 1800s. Houston-based QR Energy is developing mature onshore fields in several regions, including the Permian basin in Texas.

Breitburn’s senior management will lead the combined company, which expects to produce about 57,300 barrels of oil equivalent per day, around two-thirds of which will be oil and natural gas liquids. The deal, approved by both companies’ boards, is expected to add to Breitburn’s distributable cash flow per unit. The company said it planned to raise its annual distribution to $2.08 per unit from $1.95.

Breitburn said it had agreed with Wells Fargo Bank, N.A. to increase its existing credit facility with the bank to $2.5 billion to help fund the acquisition. Also on Thursday, Breitburn reported a 27 percent rise in second-quarter production. Weak oil prices, however, resulted in the company recording a quarterly loss compared with a profit a year earlier.

The deal is expected to close in late 2014 or early 2015 and is valued at about $3 billion, including QR Energy’s debt and outstanding class C convertible preferred units. UBS Investment Bank advised Breitburn on the deal, while RBC Capital Markets and Greenhill & Co LLC advised QR Energy.  

QR Energy’s shares were up 8.7 percent at $20.52 in afternoon trading on the New York Stock Exchange. Breitburn’s stock was down 3.2 percent at $22.07 on the Nasdaq.



Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.