EXHIBIT 99.2

  

BREITBURN ENERGY PARTNERS L.P.

  

	Page
Unaudited Pro Forma Combined Balance Sheet as of June 30, 2013	1
Unaudited Pro Forma Combined Statement of Operations for the six months ended June 30, 2013	2
Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 2012	3
Notes to Unaudited Pro Forma Combined Financial Statements	4

  

 

BreitBurn Energy Partners L.P. and Subsidiaries

Unaudited Pro Forma Combined Balance Sheet

As of June 30, 2013

 

		BreitBurn								BreitBurn
		Energy								Energy
		Partners L.P.				Pro Forma				Partners L.P.
Thousands of dollars		Historical				Adjustments				Pro Forma
ASSETS
Current assets
Cash		$	2,136			$	-			$	2,136
Accounts and other receivables, net			82,604				-				82,604
Derivative instruments			33,056				15	(a)			33,071
Related party receivables			764				-				764
Inventory			4,887				-				4,887
Prepaid expenses			728				-				728
Total current assets			124,175				15				124,190
Equity investments			7,003				-				7,003
Property, plant and equipment
Oil and gas properties			3,474,922				807,144	(a)			4,282,435
Non-oil and gas assets			15,384				-				15,384
Property, plant and equipment			3,490,306				807,513				4,297,819
Accumulated depletion and depreciation			(757,241	)			-				(757,241	)
Net property, plant and equipment			2,733,065				807,513				3,540,578
Other long-term assets
Intangibles			-				13,774	(a)			13,405
Derivative instruments			82,707				16,183	(a)			98,890
Deposit for oil and gas properties			85,980				(85,980	)(b)			-
Other long-term assets			25,817				7,700	(c)			33,517
Total assets		$	3,058,747			$	758,836			$	3,817,583
LIABILITIES AND EQUITY
Current liabilities
Accounts payable		$	44,941			$	-			$	44,941
Derivative instruments			2,900				6,347	(a)			9,247
Revenue and royalties payable			26,063				-				26,063
Wages and salaries payable			8,926				-				8,926
Accrued interest payable			13,014				-				13,014
Accrued liabilities			27,549				3,031	(a)			30,580
Total current liabilities			123,393				9,378				132,771
Credit facility			235,000				746,423	(b)(c)			981,423
Senior notes, net			755,698				-				755,698
Deferred income taxes			2,784				-				2,784
Asset retirement obligation			101,487				3,035	(a)			104,522
Derivative instruments			792				-				792
Other long-term liabilities			4,503				-				4,503
Total liabilities			1,223,657				758,836				1,982,493
Commitments and contingencies
Equity
Partners' equity			1,835,090				-				1,835,090
Total equity			1,835,090				-				1,835,090
Total liabilities and equity		$	3,058,747			$	758,836			$	3,817,583

 

See the accompanying notes to the unaudited pro forma combined financial statements.

  

  

BreitBurn Energy Partners L.P. and Subsidiaries

Unaudited Pro Forma Combined Statement of Operations

For the Six Months Ended June 30, 2013

  

		BreitBurn												BreitBurn
		Energy				Whiting Assets				Pro Forma				Energy
		Partners L.P.				Historical				Adjustments				Partners L.P.
Thousands of dollars, except per unit amounts		Historical				(Note 4)				(Note 4)				Pro Forma
Revenues and other income items
Oil, natural gas and natural gas liquid sales		$	269,648			$	111,152	(a)		$	-			$	380,800
Gain on commodity derivative instruments, net			42,817				-				-				42,817
Other revenue, net			1,460				-			$	-				1,460
Total revenues and other income items			313,925				111,152				-				425,077
Operating costs and expenses
Operating costs			113,387				30,600	(a)		$	-				143,987
Depletion, depreciation and amortization			94,331				-				27,210	(b)			121,541
General and administrative expenses			28,579				-				300	(c)			28,879
Loss on sale of assets			62				-				-				62
Total operating costs and expenses			236,359				30,600				27,510				294,469
Operating income (loss)			77,566				80,552				(27,510	)			130,608
Interest expense, net of capitalized interest			36,839				-				12,822	(d)			49,661
Other income, net			(9	)			-				-				(9	)
Total other expense			36,830				-				12,822				49,652
Income (loss) before taxes			40,736				80,552				(40,332	)			80,959
Income tax expense			604				-				-				604
Net income (loss) attributable to the partnership		$	40,132			$	80,552			$	(40,332	)		$	80,352
Basic net income per unit		$	0.41											$	0.81
Diluted net income per unit		$	0.41											$	0.81
Weighted average number of units used to calculate
Basic net income per unit			98,732												98,732
Diluted net income per unit			99,072												99,072

 

See the accompanying notes to the unaudited pro forma combined financial statements.

 

 

BreitBurn Energy Partners L.P. and Subsidiaries

Unaudited Pro Forma Combined Statement of Operations

For the Year Ended December 31, 2012

                                

		BreitBurn Energy Partners L.P.				AEO Assets Historical				Whiting Assets Historical				Pro Forma Adjustments				BreitBurn Energy Partners L.P.
Thousands of dollars, except per unit amounts		Historical				(Note 4)				(Note 4)				(Note 4)				Pro Forma
Revenues and other income items
Oil, natural gas and natural gas liquid sales		$	413,867			$	27,468	(a)		$	239,528	(a)		$	-			$	680,863
Gain on commodity derivative instruments, net			5,580				-				-				-				5,580
Other revenue, net			3,548				-				-				-				3,548
Total revenues and other income items			422,995				27,468				239,528				-				689,991
Operating costs and expenses
Operating costs			195,779				5,868	(a)			62,166	(a)			-				263,813
Depletion, depreciation and amortization			149,565				-				-				63,594	(b)			213,159
General and administrative expenses			55,465				-				-				600	(c)			56,065
Loss on sale of assets			486				-				-				-				486
Total operating costs and expenses			401,295				5,868				62,166				64,194				533,523
Operating income (loss)			21,700				21,600				177,362				(64,194	)			156,468
Interest expense, net of capitalized interest			61,206				-				-				26,154	(d)			87,360
Loss on interest rate swaps			1,101				-				-				-				1,101
Other expense, net			48				-				-				-				48
Total other expense			62,355				-				-				26,154				88,509
Income (loss) before taxes			(40,655	)			21,600				177,362				(90,348	)			67,959
Income tax expense			84				-				-				-				84
Net income (loss) attributable to the partnership		$	(40,801	)		$	21,600			$	177,362			$	(90,348	)		$	67,813
Basic net income (loss) per unit		$	(0.56	)														$	0.87
Diluted net income (loss) per unit		$	(0.56	)														$	0.87
Weighted average number of units used to calculate
Basic net income (loss) per unit			72,745												4,963	(e)			77,708
Diluted net income (loss) per unit			72,745												5,018	(e)			77,763

 

See the accompanying notes to the unaudited pro forma combined financial statements.

 

  

Notes to the Unaudited Pro Forma Combined Financial Statements

 

1. General

 

BreitBurn Energy Partners L.P. is a Delaware limited partnership formed on March 23, 2006. BreitBurn Energy Partners L.P. completed its initial public offering in October 2006. References in this filing to “the Partnership,” “we,” “our,” “us” or like terms refer to BreitBurn Energy Partners L.P. and its subsidiaries.

 

We are an independent oil and gas partnership focused on the acquisition, exploitation and development of oil and gas properties in the United States.

 

On July 15, 2013, the Partnership and BreitBurn Operating L.P. (“BreitBurn Operating”), our wholly owned subsidiary, completed the acquisition of certain assets from Whiting Oil and Gas Corporation (“Whiting”), a wholly owned subsidiary of Whiting Petroleum Corporation (the “Whiting Acquisition”). The Partnership paid approximately $846 million in cash, before deducting approximately $21 million in anticipated purchase price adjustments, to Whiting. The purchase price is subject to customary purchase price adjustments. The assets acquired consist of oil and gas producing properties located in the Postle and Northeast Hardesty fields in Texas County, Oklahoma, including the related gathering and processing facilities, Hough crude oil pipeline, a 60% interest in the 120-mile Transpetco-operated CO2 transportation pipeline and other assets as further defined in the Purchase and Sale Agreement (the “Whiting Assets”).

  

On November 30, 2012, the Partnership and BreitBurn Operating completed the acquisition of certain assets (the “AEO Assets”), effective November 1, 2012, from American Energy Operations, Inc. (“AEO”). The Partnership paid approximately $38 million in cash and issued 3 million common units representing limited partner interests in the Partnership (“Common Units”) to AEO (the “AEO Acquisition”). The AEO Assets consist principally of oil properties located in the Belridge Field in Kern County, California.

 

2. Basis of Presentation

 

The Partnership’s unaudited pro forma combined balance sheet has been presented to show the effect as if the Whiting Acquisition had occurred on June 30, 2013.

  

The unaudited pro forma combined statements of operations for the six months ended June 30, 2013 and for the year ended December 31, 2012 have been presented based on the individual statements of operations of the Partnership, and reflect the pro forma operating results attributable to the Whiting Assets and the AEO Assets as if the acquisitions and the related transactions had occurred on January 1, 2012. BreitBurn Energy Partners L.P. historical statements of operations include operating results from the AEO Assets for the six months ended June 30, 2013 and, as such, there are no pro forma adjustments related to the AEO Assets for this period.

  

Pro forma data is based on currently available information and certain estimates and assumptions as explained in the notes to the unaudited pro forma combined financial statements. Pro forma data is not necessarily indicative of the financial results that would have been attained had the Whiting Acquisition and the AEO Acquisition occurred on January 1, 2012. As actual adjustments may differ from the pro forma adjustments, the pro forma amounts presented should not be viewed as indicative of operations in future periods. The accompanying unaudited pro forma combined financial statements of the Partnership should be read in conjunction with our Quarterly Report on Form 10-Q for the six months ended June 30, 2013, our Annual Report on Form 10-K for the year ended December 31, 2012, as amended, the statement of revenues and direct operating expenses for the Whiting Assets and the notes thereto filed as Exhibit 99.1 to this Current Report on Form 8-K and the statement of revenues and direct operating expenses for the AEO Assets and the related notes thereto filed as Exhibit 99.2 to our Current Report on Form 8-K filed on December 6, 2012.

 

 

3. Pro Forma Adjustments to the Unaudited Combined Balance Sheet

  

Pro forma adjustments to the Unaudited Combined Balance Sheet for the period ended June 30, 2013 reflect the acquisition and the preliminary purchase price allocations for the Whiting Assets, assuming borrowings were made under our Second Amended and Restated Credit Agreement.

 

The preliminary purchase price allocations are based on discounted cash flows, quoted market prices and estimates made by management, the most significant assumptions related to the estimated fair values assigned to oil and gas properties. To estimate the fair values of the properties, estimates of oil and gas reserves were prepared by management in consultation with independent engineers. We apply estimated future prices to the estimated reserve quantities acquired, and estimate future operating and development costs to arrive at estimates of future net revenues. For estimated proved reserves, the future net revenues are discounted using a weighted average cost of capital, which approximated 10% at December 31, 2012.

 

The preliminary purchase price allocation is subject to final closing adjustments. We expect to finalize the purchase price allocation within one year of the acquisition date.

 

(a) The preliminary allocation of the purchase price for the Whiting Assets is summarized below:

 

Thousands of dollars
Oil and gas properties - proved		$	751,981
Oil and gas properties - unproved			55,163
Derivative assets - current			15
Intangibles			13,774
Derivative assets - long-term			16,183
Derivative liability - current			(6,347	)
Accrued liabilities			(3,031	)
Asset retirement obligation			(3,035	)
		$	824,703

 

(b)

The purchase price paid was approximately $846 million, including an $86 million deposit paid in June 2013 and the remaining $760 million paid at closing on July 15, 2013. The purchase price paid was made with borrowings under our Second Amended and Restated Credit Agreement and included preliminary purchase price adjustments. There have been additional estimated post-closing adjustments to the purchase price of approximately $21 million, resulting in an estimated adjusted purchase price of approximately $825 million.

 

Thousands of dollars
Purchase price paid		$	845,543
Estimated pending post-closing adjustments			(20,840	)
Total purchase price		$	824,703

 

(c)

Record $7.7 million in debt issuance costs incurred in connection with an amendment to the Second Amended and Restated Credit Agreement, which provided for an increased borrowing base of $1.5 billion with a total lender commitment of $1.4 billion; an increase in the Aggregate Maximum Credit Amount (as defined in the credit agreement) from $1.5 billion to $3 billion; increased flexibility for the Total Leverage Ratio (as defined in the credit agreement) for the next five quarters and a new Senior Secured Leverage Ratio (as defined in the credit agreement) that will be applied through the second quarter of 2014, absent any refinancing. The amendment provided the increased borrowing capacity needed to fund the Whiting Acquisition.

 

 

 

4. Pro Forma Adjustments to the Unaudited Combined Statement of Operations

  

Pro forma adjustments to the Consolidated Statement of Operations for the six months ended June 30, 2013 and for the year ended December 31, 2012 assume the Whiting and AEO acquisitions were consummated on January 1, 2012.

 

 

The unaudited pro forma combined statements of operations have been adjusted as follows:

 

(a)

Record revenue and direct operating expenses for the acquired assets derived from historical financial records.

 

Whiting

- for the six months ended June 30, 2013, $111.2 million of revenue and $30.6 million of direct operating expenses.

Whiting

- for the year ended December 31, 2012, $239.5 million of revenue and $62.2 million of direct operating expenses.

AEO

- for the eleven months ended November 30, 2012, $27.5 million of revenue and $5.9 million of direct operating expenses.

 

(b)

Record incremental depletion, depreciation and accretion expense related to the acquired depletable and depreciable assets.

 

	Whiting	- for the six months ended June 30, 2013, $27.2 million.
	Whiting	- for the year ended December 31, 2012, $56.7 million.
	AEO	- for the year ended December 31, 2012, $6.9 million.

 

(c)

Record general and administrative expenses related to the Whiting Acquisition as defined in the Transition Service Agreement.

 

		- for the six months ended June 30, 2013, $0.3 million.
		- for the year ended December 31, 2012, $0.6 million.

 

(d)

Record incremental interest expense associated with bank debt of approximately $884 million incurred to fund the Whiting and AEO acquisitions; the assumed variable rate was 2.893% and 2.960% for the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. If the variable interest rate increased or decreased by 0.125% in the future, the annual pro forma interest expense would increase or decrease by $1.3 million.

 

		- for the six months ended June 30, 2013, $11.9 million.
		- for the year ended December 31, 2012, $24.4 million.

 

Record amortization of debt issuance costs incurred in connection with an amendment to the Second Amended and Restated Credit Agreement.

 

		- for the six months ended June 30, 2013, $0.9 million.
		- for the year ended December 31, 2012, $1.8 million.

 

(e)

For the year ended December 31, 2012, give effect, as of January 1, 2012, of the 3 million Common Units issued to AEO as partial consideration for the AEO Assets to the denominator for calculating net income (loss) per unit. Also, include weighted average participating securities and dilutive units (previously not included in the denominator of net income (loss) per unit) as the pro forma combined statement of operations is in an income position compared to a loss position for the Partnership’s historical statement of operations for the year ended December 31, 2012.

 

 

5. Supplemental Oil and Gas Information (Unaudited)

 

The following table sets forth certain unaudited pro forma information regarding estimates of the Partnership’s proved crude oil and natural gas reserves for the year ended December 31, 2012, giving effect to the Whiting Acquisition as if it had occurred on January 1, 2012. Because oil reserve estimates are inherently imprecise and require extensive judgments of reservoir engineering data, they are generally less precise than estimates made in conjunction with financial disclosures.

 

		BreitBurn Energy Partners L.P.												Whiting Assets												BreitBurn Energy Partners L.P.
		Historical												Historical												Pro Forma
		Total				Oil				Gas				Total				Oil				Gas				Total				Oil				Gas
		(MBoe)				(MBbl)				(MMcf)				(MBoe)				(MBbl)				(MMcf)				(MBoe)				(MBbl)				(MMcf)
Proved Reserves
Beginning balance			151,106				52,682				590,543				36,011				34,406				9,636				187,117				87,088				600,179
Revision of previous estimates			(27,086	)			3,852				(185,627	)			12,020				11,504				3,090				(15,066	)			15,356				(182,537	)
Purchase of reserves in-place			33,696				26,092				45,625				-				-				-				33,696				26,092				45,625
Production			(8,318	)			(3,652	)			(27,997	)			(2,966	)			(2,885	)			(488	)			(11,284	)			(6,537	)			(28,485	)
Ending balance			149,398				78,974				422,544				45,065				43,025				12,238				194,463				121,999				434,782
Proved Developed Reserves
Beginning balance			131,462				47,813				501,891				31,337				29,796				9,243				162,799				77,609				511,134
Ending balance			119,721				59,158				363,378				32,477				30,914				9,372				152,198				90,072				372,750
Proved Undeveloped Reserves
Beginning balance			19,644				4,869				88,652				4,674				4,610				393				24,318				9,479				89,045
Ending balance			29,677				19,816				59,167				12,588				12,111				2,866				42,265				31,927				62,033

 

The unweighted average first-day-of-the-month crude oil and natural gas prices used to determine our historical total estimated proved reserves as of December 31, 2012 were $95.97 per Bbl of oil for Michigan, California, Oklahoma and Florida, $76.79 per Bbl of oil for Wyoming and $4.12 per MMBtu of gas.

 

Summarized in the following table is information for the Partnership’s unaudited pro forma standardized measure of discounted cash flows relating to estimated proved reserves as of December 31, 2012, giving effect to the Whiting Acquisition. The standardized measure of discounted future net cash flows was determined based on the economic conditions in effect at December 31, 2012. The disclosures below do not purport to present the fair market value of the Partnership’s oil and gas reserves. An estimate of the fair market value would also take into account, among other things, the recovery of reserves in excess of proved reserves, anticipated future changes in prices and costs, a discount factor more representative of the time value of money and risks inherent in reserve estimates. The pro forma standardized measure of discounted future net cash flows is presented as follows:

 

		BreitBurn								BreitBurn
		Energy								Energy
		Partners L.P.				Whiting Assets				Partners L.P.
Thousands of dollars		Historical				Historical				Pro Forma
Future cash inflows		$	8,512,018			$	3,697,226			$	12,209,244
Future development costs			(728,577	)			(308,732	)			(1,037,309	)
Future production expense			(3,950,308	)			(1,390,023	)			(5,340,331	)
Future net cash flows			3,833,133				1,998,471				5,831,604
Discounted at 10% per year			(1,843,238	)			(1,013,261	)			(2,856,499	)
Standardized measure of discounted
future net cash flows		$	1,989,895			$	985,210			$	2,975,105

 

 

The following table sets forth unaudited pro forma information for the principal sources of changes in the standardized measure of discounted future net cash flows for the year ended December 31, 2012, giving effect to the Whiting Acquisition:

 

		BreitBurn								BreitBurn
		Energy								Energy
		Partners L.P.				Whiting Assets				Partners L.P.
Thousands of dollars		Historical				Historical				Pro Forma
Beginning balance		$	1,659,301			$	983,002			$	2,642,303
Sales and transfers, net of production expense			(218,088	)			(177,362	)			(395,450	)
Net change in sales and transfer prices, net of production expense			(320,533	)			(166,834	)			(487,367	)
Previously estimated development costs incurred during year			61,767				67,356				129,123
Changes in estimated future development costs			(41,372	)			(215,881	)			(257,253	)
Purchase of reserves in place			530,532				-				530,532
Revision of quantity estimates and timing of estimated production			152,358				396,629				548,987
Accretion of discount			165,930				98,300				264,230
Ending balance		$	1,989,895			$	985,210			$	2,975,105