Once touted as a solid investment, Los Angeles-based Breitburn Energy Partners LP (over the counter as BBEPQ) suffered the fate of several oil-and-gas sector securities and Master Limited Partnerships (MLPs), findings itself unable to pay off loans, initiating Chapter 11 bankruptcy protection proceedings, and seeing its share values drop by 99%, from a high of nearly $23 per share in 2014 to a present-day value of just three cents per share in November 2017.
CBS Dallas-Forth Worth in 2015 published a story of a high school teacher from Texas who invested with Ameriprise Financial Services in energy MLPs, losing more than half of her $202,000 investment.
Said this investor, of her Amerprise broker, "He showed me this picture of the United States and said they were getting oil out of shale, and energy was the way to go... I trusted him."
The news story went on to conclude, "If you were trying to preserve your capital, oil and gas producers were not for you. They were always higher risk investments."
Looking at Breitburn's 2012 Form 10-K filing with the SEC, the Risk Factors section states, "oil and natural gas are costly and high-risk activities with many uncertainties that could adversely affect our financial condition," prominently declares, "you could lose part or all of your investment," identifies oil and natural gas prices as "highly volatile," and even forecasts potential future declines in oil prices that could limit the firm's "ability to obtain funding."
Even with these risks on the table and despite brokers', reps' and advisers' duty to disclose risk factors to ascertain suitability, a majority of analysts in 2013 nonetheless classified Breitburn as a "strong buy," with a handful of others reviewing BreitBurn as a buy, but not as enthusiastically, while just one-fifth of followers recommended holding it. Oppenheimer and Co., for instance, wrote of Breitburn (the company eventually did away with the Burn's capital "B"), "long-term growth outlook remains intact."
Morgan Stanley in 2013 listed Breitburn Energy Partners LP (formerly NASDAQ: BBEP), and advertised MLPs as possessing attractive upfront yields, "solid, even if not spectacular total returns," lower risk, and tax advantage properties.
In 2015, Breitburn Energy Partners suspended cash distributions on its Common Units, citing "ongoing weakness in commodity prices, and crude oil prices in particular." Breitburn at the time said this suspension would allow the company to save more money to use to reduce its debt.
In 2016, Breitburn's forewarned risks turned true as the energy company filed for Chapter 11 bankruptcy protection, deeming its existing debt burden unsustainable, attributing lower realized oil and natural gas prices as the culprit behind decreasing sales revenue, though other analysts pointed out that even when oil prices were stable, Breitburn's business operation still took on a significant amount of debt.
Brokers and financial advisers have an obligation to disclose and evaluate risks, ensuring that investments are appropriate for each individual investor's unique investment objectives and risk tolerance preferences. If you have invested with a representative or firm whose failure to disclose these risks or conduct adequate due diligence has produced recommendations and investment in Breitburn Energy Partners or another unsuitably risky MLP that has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.