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Articles Posted in Master Limited Partnerships

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Oil Drilling RigsOn April 2, 2018, EV Energy Partners, L.P. (“EVEP”) filed for Chapter 11 bankruptcy in the District of Delaware (Case No. 18-10814 (CIS)).  While EVEP continues to operate its business, it now seeks to implement a prepackaged plan of reorganization, under which equity investors who purchased EVEP Units will likely sustain significant losses.

Investors who bought into EVEP upon a recommendation by their broker or financial advisor may be able to recover their losses in FINRA arbitration, in the event the recommendation to invest lacked a reasonable basis, or if the investment was solicited through a misleading sales presentation.  EVEP is a publicly traded master limited partnership (“MLP”) specializing in the acquisition and operation and development of onshore oil and gas properties in the continental United States.  EVEP’s holdings include oil and gas properties in the Barnett Shale, the San Juan Basin, the Appalachian Basin, as well as the Permian Basin.

As most recently reported, under the currently proposed plan of reorganization, EVEP Unitholders will receive 5% of the new entity (post-bankruptcy), with 5-year warrants to buy up to 8% of the reorganized company’s new equity.

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Oil Drilling RIgsIf your financial advisor has recommended an unsuitable investment in a Master Limited Partnership (or “MLP”) without a reasonable basis for the recommendation, you may be able to recover losses through arbitration before the Financial Industry Regulatory Authority (“FINRA”).  Recently, a three-member all public FINRA arbitration panel ordered RBC Capital Markets and one of its registered representatives to pay $723,000 to a former client, an elderly customer from Norwell, MA, in connection with losses sustained on an overconcentrated portfolio of oil and gas MLPs (FINRA Case No. 17-0305 – Nourie, et al v. RBC Capital Markets).

The investments at issue before the panel in the Nourie case included the following:

  • Breitburn Energy Partners (OTC MKTS: BBEPQ);
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Breitburn Energy Partners, L.P. (“Breitburn”) is an independent oil and gas exploration company, headquartered in Los Angeles, CA, with a corporate office in Houston, TX.  Structured as a master limited partnership (“MLP”), Breitburn and its subsidiaries are engaged in the acquisition, exploitation, and development of properties in the United States for purposes of oil and gas production, in addition to natural gas and NGL (NGL is a combination of ethane, propane, butane and natural gasoline, which when removed from natural gas becomes liquid under various levels of higher pressure and lower temperature).

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Many investors in Breitburn have suffered extreme losses.  Specifically, Breitburn (OTC: BBEPQ) currently trades at $0.04 per share.  As recently as 2014, when the price of a barrel of crude oil was trading much higher, units of Breitburn were trading in excess of $15 per unit (because Breitburn is structured as an MLP, the investors own units rather than shares, as is the case with an investment in common stock).  By May 2016, Breitburn’s unit price had plunged to $0.31 per unit; shortly thereafter, the company filed for Chapter 11 bankruptcy protection. As it turned out, Breitburn – like many other MLP’s and companies operating in the oil and gas space – had greatly increased risk by borrowing money to conduct operations including oil exploration.  Once the price of oil plummeted, many companies such as Breitburn that had overleveraged their balance sheet with risky borrowing were cast into financial distress.

Brokers and brokerage firms who steered their clients into Breitburn may be liable for investment losses sustained.  For example, with respect to a recent arbitration before the Financial Industry Regulatory Authority (“FINRA”), the arbitration panel ruled in favor of investors Troy and Elizabeth Benitone, awarding the claimants $569,000.  In connection with that FINRA arbitration, the panel determined that the broker and, by extension, the brokerage firm, impermissibly allowed the investors’ account to become overconcentrated in Breitburn.

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