QR Energy, with significant oil positions in Texas and other states, has been purchased by BreitBurn Energy Partners for $3 billion. The acquisition will provide additional oil resources to BreitBurn's existing portfolio, making it one of the largest oil-weighted master limited partnerships in the U.S. The newly acquired assets, which include several premiere oilfields, will allow BreitBurn to continue its pattern of growth, which lately has been focused more on oil than other energy sources.
For the second quarter of 2014, BreitBurn experienced an overall growth in production of 4 percent. However, its growth in oil production was almost 6 percent. Moving forward, the acquisition will allow BreitBurn to take advantage of properties in Oklahoma, Texas and California as well as acreage in the Permian Basin that contains high-quality assets, two-thirds of which are liquids with a shallow rate of decline and a 15-year reserve life. Prior to the acquisition, QR was in a high-growth mode, showing a significant increase in production and cash flow for the second quarter and bringing in a higher 2013 per-barrel revenue than BreitBurn.
BreitBurn management believes that consolidation of the two companies will lower its operating costs and improve its cash flow. The company should also benefit from a reduced cost of capital, which could help facilitate additional acquisitions. Additionally, acquiring new upstream oil and gas resources will help finance the company's distributions, which are up 3 percent from previous levels. This will help alleviate concerns that some of BreitBurn's assets may become depleted.
Mergers and acquisitions represent some of the most complex business transactions that a company might face. Business law attorneys are often recruited to help negotiate the details and draft the appropriate contracts and agreements.
Source: The Motley Fool, "Why BreitBurn Energy Partners' Acquisition of QR Energy Is a Great Move", Bob Ciura, July 25, 2014