Sold remaining position in Breitburn Energy Partners (BBEP)
I’ve finally sold my remaining 1/2 position in BBEP. The price per unit was below my target of $23-$24, but I’ve been burned before by Breitburn management and their serial secondary offerings. Over the past year and a half each time the unit price exceeded $20 for any length of time the company announced a secondary offering. So even though we are less than a month away from the next ex-dividend date I thought it was time to move on. The original thesis behind the investment, in the depths of the 2008/2009 financial crisis, was that the company had suspended its dividend but would most likely live through the tight money period because a majority of its production was hedged, and thus cash flows were pretty much guaranteed. This came to pass and the dividend was reinstated in 2010. With the thesis played out (and the benefit of hindsight) I should have sold my entire position when I first began reducing my holdings back in May 2011. Since then, the company has done 3 secondary offerings, and with the announcement of each, the unit price has fallen back to the $18-$19 dollar range. It took me three times to catch on… but I finally think I got there. In addition, the company had a favorable mention in Barron’s last week, which I view as the kiss of death (or rather, a sign to unload on the increased demand from Barron’s readers).
Despite the delayed sale, my IRR on this investment was a very a not-too-shoddy 34% over a 4 year holding period. Now we just have to find a home for these new funds that can produce the same kind of showing!