UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 Form
10-Q/A
 Amendment No.
1
 
 R    Quarterly Report Pursuant To Section
13 or 15(d) of the Securities Exchange Act Of 1934
 For
the quarterly period ended March 31, 2009
 
 or
 
 £    Transition Report Pursuant To Section
13 or 15(d) of the Securities Exchange Act Of 1934
 For
the transition period from ___ to ___
  
 Commission
File Number 001-33055
 
 BreitBurn
Energy Partners L.P.
 (Exact
name of registrant as specified in its charter)
 
 Delaware
              74-3169953(State
      or other jurisdiction of
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      Number)515
      South Flower Street, Suite 4800Los
      Angeles, California
              90071(Address
      of principal executive offices)
              (Zip
      Code)
 
 Registrant’s
telephone number, including area code: (213) 225-5900
 
 Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.  Yes þ   No
£
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes £   No
£ (not yet
applicable to registrant)
 
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.  (Check one):
 
 Large
accelerated filer þ   Accelerated
filer o
 Non-accelerated
filer o 
 (Do not check if a smaller reporting company)   Smaller
reporting company o
 
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 Yes £     No
R
 
 As of May
8, 2009, the registrant had 52,770,011 Common Units
outstanding.
 
 
 
 
 EXPLANATORY
NOTE
  BreitBurn
Energy Partners L.P. (the “Partnership,” “we,” “us” or “our”) is filing this
Amendment No. 1 on Form 10-Q/A (this “Amendment”) to amend its Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 2009, filed with the
Securities and Exchange Commission (the “SEC”) on May 8, 2009 (the “Original
10-Q”).
  This Amendment is being filed to amend
the Original 10-Q to include additional information to the following Notes to
Consolidated Financial Statements in Item 1 of Part I:
 
 ·
                    Note
      1 – additional description of BreitBurn GP, LLC (the “General
      Partner”) as a result of the Purchase, Contribution and Partnership
      Transactions (as defined below).
 ·
                    Note
      11 – impact of the January 1, 2009 adoption of FSP EITF 03-6-1 on 2008 and
      2007 earnings per unit and additional information regarding our
      consolidated subsidiaries.
  ·
                    Note
      15 – a description of our subsidiaries that may guarantee our debt
      securities.
 ·
                    Note
      16 – a description of a newly incorporated subsidiary, BreitBurn Finance
      Corporation.
 
 We are also updating the list of
exhibits in Item 6 of Part II of this report to include the certifications
specified in Rule 13a-14(a) under the Securities Exchange Act of 1934 required
to be filed with this Amendment.  Except for the additions to the
Notes to Consolidated Financial Statements in Item 1 of Part I and the filing of
related certifications, no other changes have been made to the Original
10-Q.  Other than as described above, this Amendment does not reflect
events occurring after the filing of the Original 10-Q or modify or update those
disclosures affected by subsequent events.
 
  
 INDEXPageNo.PART
      IFINANCIAL
      INFORMATIONItem
      1.
                        Financial
      Statements-
      Unaudited Consolidated Statements of Operations for the Three Months Ended
      March 31, 2009 and 2008
                        
                        
                        1-
      Unaudited Consolidated Balance Sheets at March 31, 2009 and December 31,
      2008
                        
                        
                        2-
      Unaudited Consolidated Statements of Cash Flows for the Three Months Ended
      March 31, 2009 and 2008
                        
                        
                        3-
      Notes to Consolidated Financial Statements
                        
                        
                        4-21PART
      IIOTHER
      INFORMATIONItem
      6.
                        Exhibits
                        
                        
                        22Signatures
                        
                        
                        
                        23
  PART I.  FINANCIAL INFORMATION
  Item 1.Financial
Statements
 
 BreitBurn Energy Partners L.P. and
SubsidiariesUnaudited
      Consolidated Statements of OperationsThree
      Months EndedMarch
      31,Thousands
      of dollars, except unit amounts
                                      
                                      2009
                                      
                                      
                                      2008Revenues
      and other income items:Oil,
      natural gas and natural gas liquid sales
                                      
                                      $
                                      57,643
                                      
                                      
                                      $
                                      115,849Gains
      (losses) on commodity derivative instruments, net (note
13)
                                      
                                      
                                      70,020
                                      
                                      
                                      
                                      (83,387
                                      )Other
      revenue, net (note 8)
                                      
                                      
                                      276
                                      
                                      
                                      
                                      875Total
      revenues and other income items
                                      
                                      
                                      127,939
                                      
                                      
                                      
                                      33,337Operating
      costs and expenses:Operating
      costs
                                      
                                      
                                      34,381
                                      
                                      
                                      
                                      38,173Depletion,
      depreciation and amortization
                                      
                                      
                                      30,301
                                      
                                      
                                      
                                      20,861General
      and administrative expenses
                                      
                                      
                                      9,561
                                      
                                      
                                      
                                      8,758Total
      operating costs and expenses
                                      
                                      
                                      74,243
                                      
                                      
                                      
                                      67,792Operating
      income (loss)
                                      
                                      
                                      53,696
                                      
                                      
                                      
                                      (34,455
                                      )Interest
      and other financing costs, net
                                      
                                      
                                      4,773
                                      
                                      
                                      
                                      5,424Loss
      on interest rate swaps (note 13)
                                      
                                      
                                      2,102
                                      
                                      
                                      
                                      1,115Other
      (income) expenses, net
                                      
                                      
                                      (4
                                      )
                                      
                                      
                                      338Income
      (loss) before taxes
                                      
                                      
                                      46,825
                                      
                                      
                                      
                                      (41,332
                                      )Income
      tax expense (benefit) (note 4)
                                      
                                      
                                      468
                                      
                                      
                                      
                                      (246
                                      )Net
      income (loss)
                                      
                                      
                                      46,357
                                      
                                      
                                      
                                      (41,086
                                      )Less:
      Net income attributable to noncontrolling interest (note
    12)
                                      
                                      
                                      (7
                                      )
                                      
                                      
                                      (54
                                      )Net
      income (loss) attributable to the partnership
                                      
                                      
                                      46,350
                                      
                                      
                                      
                                      (41,140
                                      )General
      partner loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (273
                                      )Net
      income (loss) attributable to limited partners
                                      
                                      $
                                      46,350
                                      
                                      
                                      $
                                      (40,867
                                      )Basic
      net income (loss) per unit
                                      
                                      $
                                      0.85
                                      
                                      
                                      $
                                      (0.61
                                      )Diluted
      net income (loss) per unit
                                      
                                      $
                                      0.84
                                      
                                      
                                      $
                                      (0.61
                                      )Weighted
      average number of units used to calculateBasic
      net income (loss) per unit
                                      
                                      
                                      54,822,024
                                      
                                      
                                      
                                      67,020,641Diluted
      net income (loss) per unit
                                      
                                      
                                      54,925,817
                                      
                                      
                                      
                                      67,020,641
  See
accompanying notes to consolidated financial statements.
 1
 
 BreitBurn Energy Partners L.P. and
SubsidiariesUnaudited
      Consolidated Balance SheetsMarch
      31,
                                        
                                        
                                        December
      31,Thousands
      of dollars, except unit amounts
                                        
                                        2009
                                        
                                        
                                        2008ASSETSCurrent
      assets:Cash
                                        
                                        $
                                        1,001
                                        
                                        
                                        $
                                        2,546Accounts
      receivable, net
                                        
                                        
                                        43,248
                                        
                                        
                                        
                                        47,221Derivative
      instruments (note 13)
                                        
                                        
                                        100,982
                                        
                                        
                                        
                                        76,224Related
      party receivables (note 5)
                                        
                                        
                                        3,827
                                        
                                        
                                        
                                        5,084Inventory
      (note 6)
                                        
                                        
                                        2,310
                                        
                                        
                                        
                                        1,250Prepaid
      expenses
                                        
                                        
                                        3,915
                                        
                                        
                                        
                                        5,300Intangibles
      (note 7)
                                        
                                        
                                        2,115
                                        
                                        
                                        
                                        2,771Other
      current assets
                                        
                                        
                                        170
                                        
                                        
                                        
                                        170Total
      current assets
                                        
                                        
                                        157,568
                                        
                                        
                                        
                                        140,566Equity
      investments (note 8)
                                        
                                        
                                        9,170
                                        
                                        
                                        
                                        9,452Property,
      plant and equipmentOil
      and gas properties
                                        
                                        
                                        2,068,833
                                        
                                        
                                        
                                        2,057,531Non-oil
      and gas assets
                                        
                                        
                                        8,019
                                        
                                        
                                        
                                        7,8062,076,852
                                        
                                        
                                        
                                        2,065,337Accumulated
      depletion and depreciation
                                        
                                        
                                        (254,708
                                        )
                                        
                                        
                                        (224,996
                                        )Net property, plant and equipment
                                        
                                        
                                        1,822,144
                                        
                                        
                                        
                                        1,840,341Other
      long-term assetsIntangibles
      (note 7)
                                        
                                        
                                        371
                                        
                                        
                                        
                                        495Derivative
      instruments (note 13)
                                        
                                        
                                        193,839
                                        
                                        
                                        
                                        219,003Other
      long-term assets
                                        
                                        
                                        9,047
                                        
                                        
                                        
                                        6,977Total
      assets
                                        
                                        $
                                        2,192,139
                                        
                                        
                                        $
                                        2,216,834LIABILITIES
      AND EQUITYCurrent
      liabilities:Accounts
      payable
                                        
                                        $
                                        16,040
                                        
                                        
                                        $
                                        28,302Book
      overdraft
                                        
                                        
                                        3,783
                                        
                                        
                                        
                                        9,871Derivative
      instruments (note 13)
                                        
                                        
                                        10,245
                                        
                                        
                                        
                                        10,192Revenue
      distributions payable
                                        
                                        
                                        12,070
                                        
                                        
                                        
                                        16,162Salaries
      and wages payable
                                        
                                        
                                        3,200
                                        
                                        
                                        
                                        6,249Accrued
      liabilities
                                        
                                        
                                        10,725
                                        
                                        
                                        
                                        9,214Total
      current liabilities
                                        
                                        
                                        56,063
                                        
                                        
                                        
                                        79,990Long-term
      debt (note 9)
                                        
                                        
                                        706,941
                                        
                                        
                                        
                                        736,000Deferred
      income taxes (note 4)
                                        
                                        
                                        4,559
                                        
                                        
                                        
                                        4,282Asset
      retirement obligation (note 10)
                                        
                                        
                                        34,748
                                        
                                        
                                        
                                        30,086Derivative
      instruments (note 13)
                                        
                                        
                                        12,702
                                        
                                        
                                        
                                        10,058Other
      long-term liabilities
                                        
                                        
                                        2,206
                                        
                                        
                                        
                                        2,987Total
      liabilities
                                        
                                        
                                        817,219
                                        
                                        
                                        
                                        863,403Equity:Partners'
      equity (note 11)
                                        
                                        
                                        1,374,396
                                        
                                        
                                        
                                        1,352,892Noncontrolling
      interest (note 12)
                                        
                                        
                                        524
                                        
                                        
                                        
                                        539Total
      equity
                                        
                                        
                                        1,374,920
                                        
                                        
                                        
                                        1,353,431Total
      liabilities and equity
                                        
                                        $
                                        2,192,139
                                        
                                        
                                        $
                                        2,216,834Common
      units outstanding
                                        
                                        
                                        52,770,011
                                        
                                        
                                        
                                        52,635,634
  See
accompanying notes to consolidated financial statements.
 2
  BreitBurn Energy Partners L.P. and
SubsidiariesUnaudited
      Consolidated Statements of Cash FlowsThree
      Months EndedMarch
      31,Thousands
      of dollars
                            
                            2009
                            
                            
                            2008Cash
      flows from operating activitiesNet
      income (loss)
                            
                            $
                            46,357
                            
                            
                            $
                            (41,086
                            )Adjustments
      to reconcile to cash flow from operating activities:Depletion,
      depreciation and amortization
                            
                            
                            30,301
                            
                            
                            
                            20,861Unit
      based compensation expense
                            
                            
                            3,158
                            
                            
                            
                            1,144Unrealized
      loss on derivative instruments
                            
                            
                            3,102
                            
                            
                            
                            71,153Distributions
      greater (less) than income from equity affiliates
                            
                            
                            282
                            
                            
                            
                            (223
                            )Deferred
      income tax
                            
                            
                            277
                            
                            
                            
                            (260
                            )Amortization
      of intangibles
                            
                            
                            780
                            
                            
                            
                            754Other
                            
                            
                            823
                            
                            
                            
                            466Changes
      in net assets and liablities:Accounts
      receivable and other assets
                            
                            
                            2,465
                            
                            
                            
                            (32,992
                            )Inventory
                            
                            
                            (1,060
                            )
                            
                            
                            3,078Net
      change in related party receivables and payables
                            
                            
                            1,257
                            
                            
                            
                            49,394Accounts
      payable and other liabilities
                            
                            
                            (16,995
                            )
                            
                            
                            22,025Net
      cash provided by operating activities
                            
                            
                            70,747
                            
                            
                            
                            94,314Cash
      flows from investing activitiesCapital
      expenditures
                            
                            
                            (9,107
                            )
                            
                            
                            (19,146
                            )Net
      cash used by investing activities
                            
                            
                            (9,107
                            )
                            
                            
                            (19,146
                            )Cash
      flows from financing activitiesDistributions
                            
                            
                            (28,038
                            )
                            
                            
                            (31,007
                            )Proceeds
      from the issuance of long-term debt
                            
                            
                            130,916
                            
                            
                            
                            61,100Repayments
      of long-term debt
                            
                            
                            (159,975
                            )
                            
                            
                            (100,500
                            )Book
      overdraft
                            
                            
                            (6,088
                            )
                            
                            
                            (140
                            )Net
      cash used by financing activities
                            
                            
                            (63,185
                            )
                            
                            
                            (70,547
                            )Increase
      (decrease) in cash
                            
                            
                            (1,545
                            )
                            
                            
                            4,621Cash
      beginning of period
                            
                            
                            2,546
                            
                            
                            
                            5,929Cash
      end of period
                            
                            $
                            1,001
                            
                            
                            $
                            10,550
  See
accompanying notes to consolidated financial statements.
 3
  Notes to Consolidated Financial Statements
 
 1.  Organization
and Description of Operations
 
 We are an
independent oil and gas partnership focused on the exploitation, development and
acquisition of oil and gas properties in the United States.  We are a
Delaware limited partnership formed on March 23, 2006.  Our general
partner is BreitBurn GP, a Delaware limited liability company, also formed on
March 23, 2006, and our wholly-owned subsidiary since June 17,
2008.  The board of directors of our General Partner has sole
responsibility for conducting our business and managing our
operations.  We conduct our operations through a wholly-owned
subsidiary, BOLP and BOLP’s general partner BOGP.  We own all of the
ownership interests in BOLP and BOGP.
 
 Prior to
June 17, 2008, the membership interests in our General Partner were held by
BreitBurn Management.  In addition, prior to that date, 95.55% of the
membership interests in BreitBurn Management were held by Provident and the
remaining 4.45% of the membership interests in BreitBurn Management were held by
BreitBurn Energy Corporation, a California corporation wholly-owned by the
Co-Chief Executive Officers of our General Partner.  On June 17, 2008,
we, BreitBurn Corporation, BreitBurn Management, Provident and certain of its
subsidiaries completed a series of transactions (the “Purchase, Contribution and
Partnership Transactions”), pursuant to which, among other things, our General
Partner and BreitBurn Management became our wholly-owned subsidiaries, the
economic portion of the General Partner’s 0.66473 percent general partner
interest in us was eliminated and our limited partners were given a right to
nominate and vote in the election of directors to the Board of Directors of the
General Partner.  The General Partner has no
other economic interests, does not conduct other operations, and has no assets
or liabilities.  See Part I—Item 1 “—Business
—Ownership and Structure” in our Annual Report for a further discussion of the
Purchase, Contribution and Partnership Transactions.
  BreitBurn Management manages our assets
and performs other administrative services for us such as accounting, corporate
development, finance, land administration, legal and engineering.  See
Note 5 for information regarding our relationship with BreitBurn Management. In
connection with the acquisition of Provident’s ownership in BEC by members of
senior management, Metalmark Capital Partners, Greenhill Capital Partners and a
third party institutional investor, BreitBurn Management entered into the Second
Amended and Restated Administrative Services Agreement to manage BEC's
properties for a term of five years. In addition, we entered into an Omnibus
Agreement with BEC detailing rights with respect to business opportunities and
providing us with a right of first offer with respect to the sale of assets by
BEC.
 4
  The
following diagram depicts our organizational structure as of March 31,
2009:
 
 
 
 2.  Basis
of Presentation
 
 The
accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
(“GAAP”) for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X.  Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements.  In the opinion of management, all adjustments
considered necessary for a fair presentation have been
included.  Operating results for the three month period ended March
31, 2009 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2009.  The consolidated balance sheet at
December 31, 2008 has been derived from the audited consolidated financial
statements at that date but does not include all of the information and
footnotes required by GAAP for complete financial statements.  We
follow the successful efforts method of accounting for oil and gas
activities.  Depletion, depreciation and amortization of proved oil
and gas properties is computed using the units-of-production method net of any
estimated residual salvage values.  For further information, refer to
the consolidated financial statements and footnotes thereto included in our
Annual Report.
 5
  Starting
in the first quarter of 2009, we are classifying regional operation management
expenses as operating costs rather than general and administrative expenses to
better align our operating and management costs with our organization structure
and to be consistent with industry practices.  As such, we have
revised classification of these expenses for the quarter ended March 31,
2008.  The reclassification did not affect previously reported total
revenues, net income or net cash provided by operating
activities.  The comparative classification for the quarter ended
March 31, 2008 is as follows:
  Three
      Months EndedThousands
      of dollars
                        
                        March
      31, 2008Operating
      costsAs
      previously reported
                        
                        $
                        35,973As
      revised
                        
                        
                        38,173Difference
                        
                        $
                        2,200G&A
      expensesAs
      previously reported
                        
                        $
                        10,958As
      revised
                        
                        
                        8,758Difference
                        
                        $
                        (2,200
                        )
 
 3.  Recently
Issued Accounting Standards
 
 SFAS No. 141(revised 2007) “Business
Combinations”(“SFAS No. 141R”).In December 2007, the
FASB issued SFAS No. 141R which replaces SFAS No. 141.  SFAS No. 141R
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any non-controlling interest in the acquiree and the
goodwill acquired.  SFAS No. 141R was issued in an effort to continue
the movement toward the greater use of fair values in financial reporting and
increased transparency through expanded disclosures.  It changes how
business acquisitions are accounted for and will impact financial statements at
the acquisition date and in subsequent periods.  Certain of these
changes will introduce more volatility into earnings.  The acquirer
must now record all assets and liabilities of the acquired business at fair
value, and related transaction and restructuring costs will be expensed rather
than the previous method of being capitalized as part of the
acquisition.  SFAS No. 141R also impacts the goodwill impairment
test associated with acquisitions, including those that close before the
effective date of SFAS No. 141R.  The definitions of a “business”
and a “business combination” have been expanded, resulting in more transactions
qualifying as business combinations.  SFAS No. 141R became effective
for us on January 1, 2009.  We will experience a financial statement
impact depending on the nature and extent of any new business combinations
entered into prospectively.
 
 FSP FAS 157-2, “Effective date of
FASB Statement No. 157”(“FSP FAS 157-2”).  In February
2008, the FASB issued staff position (“FSP”) SFAS No. 157-2 which delayed
the effective date of SFAS No. 157 for all non-financial assets and
non-financial liabilities except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). This
deferral of SFAS No. 157 primarily applied to our asset retirement
obligation (“ARO”), which uses fair value measures at the date incurred to
determine our liability and any property impairments that may
occur.  We adopted FSP FAS 157-2 effective January 1, 2009 and
the adoption did not have a material effect on our consolidated results of
operations.
 
 SFAS No. 160, “Noncontrolling
Interests in Consolidated Financial Statements — an amendment of ARB
No. 51.” (“SFAS No. 160”).  In December 2007, the FASB
issued SFAS No. 160 which requires that accounting and reporting for minority
interests be recharacterized as noncontrolling interests and classified as a
component of equity.  SFAS No. 160 also establishes reporting
requirements that provide sufficient disclosures that clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners.  SFAS No. 160 applies to all entities that
prepare consolidated financial statements, except not-for-profit organizations,
but will affect only those entities that have an outstanding noncontrolling
interest in one or more subsidiaries or that deconsolidate a
subsidiary.  This statement became effective for us on January 1,
2009.  We applied the presentation and disclosure requirements
retrospectively to all periods presented.  The adoption of SFAS No.
160 required the changes, described above, to the presentation of noncontrolling
interest, previously referred to as minority interest, on the consolidated
statements of operations,
the consolidated balance sheets and the consolidated statements of cash
flows.  See Note 12 for a discussion of our noncontrolling
interest.
 6
 
 SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities – an amendment of FASB Statement
No. 133(“SFAS No. 161”).  In March 2008, the FASB issued SFAS
No. 161 which requires enhanced disclosures about how and why an entity uses
derivative instruments, how derivative instruments and related hedge items are
accounted for under SFAS No. 133 (“SFAS No. 133”) and its related
interpretations, and how derivative instruments and related hedged items affect
an entity’s financial position, financial performance, and cash
flows.  SFAS No. 161 has the same scope as SFAS No. 133, and,
accordingly, applies to all entities.  SFAS No. 161 became effective
for us on January 1, 2009.  See Note 13 for the additional disclosures
required by SFAS No. 161.
 
 FSP FAS 142-3, “Determination of the
Useful Life of Intangible Assets”(“FSP FAS 142-3”).  In April
2008, the FASB issued FSP FAS 142-3, which amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets.”  The intent of this FSP is to improve consistency
between the useful life of a recognized intangible asset under SFAS No. 142 and
the period of expected cash flows used to measure the fair value of the asset
under SFAS No. 141 (revised 2007), “Business Combination” and
other U.S. generally accepted accounting principles.  FSP FAS 142-3
became effective for us on January 1, 2009.  The adoption of FSP FAS
142-3 did not have a material impact on our financial position, results of
operations or cash flows.
 
 FSP EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities”(“FSP EITF 03-6-1”).  In June 2008,
the FASB issued FSP EITF 03-6-1.  Under this FSP, unvested share-based
payment awards that contain non-forfeitable rights to dividends or dividend
equivalents, whether they are paid or unpaid, are considered participating
securities and should be included in the computation of earnings per share
pursuant to the two-class method.  FSP EITF 03-6-1 is effective for
financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those years.  In addition, all prior
period earnings per unit data presented should be adjusted retrospectively and
early application is not permitted.  We adopted FSP EITF 03-6-1 on
January 1, 2009.  See Note 11 for the impact FSP EITF 03-6-1 had
on our reported earnings per unit.
 
 FSP FAS 107-1, “Interim Disclosures about Fair
Value of Financial Instrument”(“FSP FAS
107-1”).  In April 2009, the FASB issued FSP FAS 107-1 and Accounting
Principles Board (“APB”) Opinion No. 28-1 (collectively, “FSP FAS
107-1”).  FSP FAS 107-1 amends SFAS No. 107, “Disclosures about Fair Value of
Financial Instruments,” to require an entity to provide disclosures about
fair value of financial instruments in interim financial information.  FSP
FAS 107-1 also amends APB Opinion No. 28, “Interim Financial
Reporting,” to require those disclosures about the fair value of
financial instruments in summarized financial information at interim reporting
periods.  Under FSP FAS 107-1, we are required to include disclosures
about the fair value of our financial instruments whenever we issue
financials.  This statement is effective for interim periods ending
after June 15, 2009 with early adoption permitted for periods ending after March
15, 2009.  We have not elected early adoption.  This
statement, while it will require additional disclosures as detailed above, is
not expected to have a material impact on our financial position, results of
operations or cash flows.
 
 4.  Income
Taxes
 
 During
the first quarter of 2009, we recorded a current federal tax expense of less
than $0.1 million and a deferred federal tax expense of $0.3 million for our
wholly-owned subsidiary, Phoenix Production Company, a tax-paying
corporation.  For the same period in 2008, the current federal tax
expense was less than $0.1 million and the deferred tax was a benefit of $0.3
million.  At March 31, 2009 and December 31, 2008, net deferred tax
liabilities of $4.6 million and $4.3 million, respectively, were included in our
consolidated balance sheets for Phoenix Production Company.  In the
first quarter of 2009, we recorded a total state income tax expense of $0.2
million and the amount for the same period in 2008 was
insignificant.
 7
 
 5.  Related
Party Transactions
 BreitBurn
Management operates our assets and performs other administrative services for us
such as accounting, corporate development, finance, land administration, legal
and engineering.  All of our employees, including our executives, are
employees of BreitBurn Management.  Prior to June 17, 2008, BreitBurn
Management provided services to us and to BEC, and allocated its expenses
between the two entities.  On June 17, 2008, in connection with the
Purchase, Contribution and Partnership Transactions, BreitBurn Management became
our wholly-owned subsidiary and entered into an Amended and Restated
Administrative Services Agreement with BEC, pursuant to which BreitBurn
Management agreed to continue to provide administrative services to BEC, in
exchange for a monthly fee of approximately $775,000 for indirect
expenses.  Beginning on June 17, 2008, all of the costs charged to
BOLP are consolidated with our results.  On August 26, 2008, BreitBurn
Management entered into the Second Amended and Restated Administrative Services
Agreement (the “Administrative Services Agreement”) to manage BEC's properties
for a term of five years. In addition to the monthly fee, BreitBurn Management
charges BEC for all direct expenses including incentive plan costs and direct
payroll and administrative costs related to BEC properties and
operations.  The monthly fee is contractually based on an annual
projection of anticipated time spent by each employee who provides services to
both us and BEC during the ensuing year and is subject to renegotiation annually
by the parties during the term of the agreement. For 2009, each BreitBurn
Management employee estimated his or her time allocation
independently.  These estimates then were reviewed and approved by
each employee’s manager or supervisor.  The results of this process
were provided to both the audit committee of the board of directors of our
General Partner (composed entirely of independent directors) (the “audit
committee”) and the board of representatives of BEC’s parent (the “BEC
board”).  The audit committee and the non-management members of the
BEC board agreed on the 2009 monthly fee as provided in the Administrative
Services Agreement.  Effective January 1, 2009, the monthly fee was
renegotiated to $500,000.  The reduction in the monthly fee is
attributable to the overall reduction in general and administrative expenses for
BreitBurn Management for 2009, the new time allocation study described above and
the fact that additional costs are being charged separately to us and BEC
compared to prior years.
 
 At March
31, 2009 and December 31, 2008, we had current receivables of $3.5 million and
$4.4 million, respectively, due from BEC related to the Administrative Services
Agreement, outstanding liabilities for employee related costs and oil and gas
sales made by BEC on our behalf from certain properties.  During the
first quarter of 2009, the monthly charges to BEC for indirect expenses totaled
$1.5 million and charges for direct expenses including incentive plan costs,
direct payroll and administrative costs totaled $0.3 million.  During
the first quarter of 2009 and 2008, total oil and gas sales made by BEC on
our behalf were approximately $0.2 million and $0.5 million,
respectively.
 
 During
the first quarter of 2008, we incurred approximately $11.0 million in direct and
indirect general and administrative expenses from BreitBurn Management,
including accruals related to incentive compensation.  We reimbursed
BreitBurn Management $17.0 million under the Administrative Services Agreement
during the quarter ended March 31, 2008.
 
 Mr. Greg
L. Armstrong is the Chairman of the Board and Chief Executive Officer of Plains
All American GP LLC (“PAA”).  Mr. Armstrong was a director of our
General Partner until March 26, 2008 when his resignation became
effective.  We sell all of the crude oil produced from our Florida
properties to Plains Marketing, L.P., a wholly-owned subsidiary of
PAA.  In 2008, prior to Mr. Armstrong’s resignation on March 26, 2008,
we sold $19.3 million of our crude oil to Plains Marketing, L.P.
 
 Pursuant
to a transition services agreement through March 2008, Quicksilver provided to
us services for accounting, land administration, and marketing and charged us
$0.9 million for the first quarter of 2008.  These charges were
included in general and administrative expenses on the consolidated statements
of operations.  Quicksilver also buys natural gas from us in
Michigan.  During the first quarter of 2009 and 2008, total net gas
sales to Quicksilver were approximately $1.1 million and $0.5 million,
respectively.  The related receivables were $0.3 million at March 31,
2009 and $0.6 million as of December 31, 2008.
 8
  6.  Inventory
 
 Our crude
oil inventory from our Florida operations at March 31, 2009 and December 31,
2008 was $2.3 million and $1.3 million, respectively.  In the first
quarter of 2009, we sold 129 gross MBbls of crude oil and produced 149 gross
MBbls from our Florida operations.  Inventory additions are at cost
and represent our production costs.  We match production expenses with
crude oil sales.  Production expenses associated with unsold crude oil
inventory are recorded to inventory.  Crude oil sales are a function
of the number and size of crude oil shipments in each quarter and thus crude oil
sales do not always coincide with volumes produced in a given
quarter.
 
 For our
properties in Florida, there are a limited number of alternative methods of
transportation for our production.  Substantially all of our oil
production is transported by pipelines, trucks and barges owned by third
parties.  The inability or unwillingness of these parties to provide
transportation services for a reasonable fee could result in our having to find
transportation alternatives, increased transportation costs, or involuntary
curtailment of our oil production in Florida, which could have a negative impact
on our future consolidated financial position, results of operations or cash
flows.
 
 7.  Intangibles
 
 In May
2007, we acquired certain interests in oil leases and related assets through the
acquisition of a limited liability company from Calumet.  As part of
this acquisition we assumed certain crude oil sales contracts for the remainder
of 2007 and for 2008 through 2010.  A $3.4 million intangible asset
was established to value the portion of the crude oil contracts that were above
market at closing in the purchase price allocation.  Realized gains or
losses from these contracts are recognized as part of oil sales and the
intangible asset will be amortized over the life of the contracts.  As
of March 31, 2009, our intangible asset related to the crude oil sales contracts
was $1.3 million, of which $0.4 million is reflected in long-term intangibles on
the consolidated balance sheet.
 
 In
November 2007, we acquired oil and gas properties and facilities from
Quicksilver.  Included in the Quicksilver purchase price was a $5.2
million intangible asset related to retention bonuses.  In connection
with the acquisition, we entered into an agreement with Quicksilver which
provides for Quicksilver to fund retention bonuses payable to 139 former
Quicksilver employees in the event these employees remain continuously employed
by BreitBurn Management from November 1, 2007 through November 1, 2009 or in the
event of termination without cause, disability or death.  Amortization
expense of $0.5 million for the three months ended March 31, 2009 and
2008 is included in the operating costs line on the consolidated statements
of operations.  As of March 31, 2009, our intangible asset related to
Quicksilver retention bonuses was $1.2 million, reflected in current intangibles
on the consolidated balance sheet.
 
 8.  Equity
Investments
 
 We had
equity investments at March 31, 2009 and December 31, 2008 of $9.2 million and
$9.5 million, respectively.  These investments are reported in the
“Equity investments” line on the consolidated balance sheets and primarily
represent investments in natural gas processing facilities.  For the
quarter ended March 31, 2009, we recorded less than $0.1 million in earnings
from equity investments and $0.4 million in dividends.  For the
quarter ended March 31, 2008, we recorded $0.3 million in earnings from equity
investments and $0.1 million in dividends.  Earnings from equity
investments are reported in the “Other revenue, net” line on the consolidated
statements of operations.
 9
 
 9.  Long-Term
Debt
 
 On
November 1, 2007, in connection with the Quicksilver Acquisition, BOLP, as
borrower, and we and our wholly-owned subsidiaries, as guarantors, entered into
a four-year, $1.5 billion amended and restated revolving credit facility with
Wells Fargo Bank, N.A., Credit Suisse Securities (USA) LLC and a syndicate of
banks (the “Amended and Restated Credit Agreement”).  The initial
borrowing base of the Amended and Restated Credit Agreement was $700 million and
was increased to $750 million on April 10, 2008.
  On June
17, 2008, in connection with the Purchase, Contribution and Partnership
Transactions, we and our wholly-owned subsidiaries entered into the First
Amendment to the Amended and Restated Credit Agreement (“Amendment No. 1 to the
Credit Agreement”), with Wells Fargo Bank, National Association, as
administrative agent (the “Agent”).  Amendment No. 1 to the Credit
Agreement increased the borrowing base available under the Amended and Restated
Credit Agreement, from $750 million to $900 million.  In addition,
Amendment No. 1 to the Credit Agreement enacted certain additional amendments,
waivers and consents to the Amended and Restated Credit Agreement and the
related Security Agreement, dated November 1, 2007, among BOLP, certain of its
subsidiaries and the Agent, necessary to permit the Amendment No. 1 to the First
Amended and Restated Limited Partnership Agreement and the transactions
consummated in the Purchase, Contribution and Partnership
Transactions.  Under Amendment No. 1 to the Credit Agreement, the
interest margins applicable to borrowings, the letter of credit fee and the
commitment fee under the Amended and Restated Credit Agreement were increased by
amounts ranging from 12.5 to 25 basis points.  As of March 31, 2009
and December 31, 2008, approximately $706.9 million and $736.0 million,
respectively, in indebtedness were outstanding under the Amended and Restated
Credit Agreement.  The credit facility will mature on November 1,
2011.  At March 31, 2009, the LIBOR interest rate was 2.272 percent on
the LIBOR portion of $705.9 million and the prime rate was 4.000 percent on the
prime debt portion of $1.0 million.
 
 The
credit facility contains customary covenants, including restrictions on our
ability to: incur additional indebtedness; make certain investments, loans or
advances; make distributions to our unitholders (including the restriction in
our ability to make distributions if aggregated letters of credit and
outstanding loan amounts exceed 90 percent of our borrowing base); make
dispositions or enter into sales and leasebacks; or enter into a merger or sale
of our property or assets, including the sale or transfer of interests in our
subsidiaries.
 
 In April
2009, our borrowing base under our Amended and Restated Credit Agreement was
redetermined at $760 million.  This redetermination was completed with
no modifications to the terms of the facility, including no additional fees and
no increase in borrowing rates.
 
 As of
March 31, 2009 and December 31, 2008, we were in compliance with the credit
facility’s covenants.  At March 31, 2009 and December 31, 2008, we had
$0.3 million in letters of credit outstanding.
 
 Our
interest expense is detailed in the following table:
 
 Three
      Months EndedMarch
      31,Thousands
      of dollars
                      
                      2009
                      
                      
                      2008Credit
      agreement (including commitment fees)
                      
                      $
                      3,950
                      
                      
                      $
                      4,957Amortization
      of discount and deferred issuance costs
                      
                      
                      823
                      
                      
                      
                      467Total
                      
                      $
                      4,773
                      
                      
                      $
                      5,424Cash
      paid for interest (including realized losses on interest rate
      swaps)
                      
                      $
                      7,107
                      
                      
                      $
                      5,369
  10
  10.  Asset
Retirement Obligation
 
 Our asset
retirement obligation is based on our net ownership in wells and facilities and
our estimate of the costs to abandon and remediate those wells and facilities as
well as our estimate of the future timing of the costs to be
incurred.  Payments to settle asset retirement obligations occur over
the operating lives of the assets, estimated to be from 7 to 50
years.  Estimated cash flows have been discounted at our credit
adjusted risk free rate of 7 percent and adjusted for inflation using a rate of
2 percent.  Our credit adjusted risk free rate is calculated based on
our cost of borrowing adjusted for the effect of our credit standing and
specific industry and business risk.
 
 SFAS No.
157 establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques into three broad levels based upon how observable those inputs
are.  The highest priority of Level 1 is given to unadjusted quoted prices
in active markets for identical assets or liabilities.  Level 2 includes
inputs other than quoted prices that are included in Level 1 and can be derived
by observable data, including third party data providers.  These inputs may
also include observable transactions in the market place.  Level 3 is given
to unobservable inputs.  We consider the inputs to our asset retirement
obligation valuation to be Level 3 as fair value is determined using
discounted cash flow methodologies based on inputs that are not readily
available in public markets.
 
 Changes
in the asset retirement obligation for the periods ended March 31, 2009 and
December 31, 2008 are presented in the following table:
 
 Three
      Months Ended
                            
                            
                            Year
      EndedMarch
      31,
                            
                            
                            December
      31,Thousands
      of dollars
                            
                            2009
                            
                            
                            2008Carrying
      amount, beginning of period
                            
                            $
                            30,086
                            
                            
                            $
                            27,819Liabilities
      settled in the current period
                            
                            
                            -
                            
                            
                            
                            (1,054
                            )Revisions
      (1)
                            
                            
                            4,073
                            
                            
                            
                            1,363Accretion
      expense
                            
                            
                            589
                            
                            
                            
                            1,958Carrying
      amount, end of period
                            
                            $
                            34,748
                            
                            
                            $
                            30,086(1)
      Increased cost estimates and revisions to reserve life.
 
 
 11.  Partners’
Equity
 
 At March
31, 2009, we had 52,770,011 common units outstanding representing limited
partner interests in us (“Common Units”) and at December 31, 2008 we had
52,635,634 Common Units outstanding.
 
 At March
31, 2009 and December 31, 2008, we had 6,700,000 units authorized for issuance
under our long-term incentive compensation plans.  At March 31, 2009
and December 31, 2008, there were 2,922,470 and 1,422,171, respectively, of
partnership-based units outstanding that are eligible to be paid in Common Units
upon vesting.
 
 Earnings
per unit
 
 As discussed in Note 3, effective
January 1, 2009, we adopted FSP EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities.”We have retrospectively adjusted earnings per common unit for all prior
periods presented. We now use the “two-class” method of computing earnings per
unit. The “two-class” method is an earnings allocation formula that determines
earnings per unit for each class of common unit and participating security as if
all earnings for the period had been distributed. As concluded in FSP EITF
03-6-1, unvested restricted unit awards that earn non-forfeitable dividend
rights qualify as participating securities under SFAS No. 128, “Earnings per Share,” and,
accordingly, are now included in the basic computation as such. Our unvested
restricted phantom units (“RPUs”) and convertible phantom units (“CPUs”)
participate in dividends on an equal basis with Common Units; therefore, there
is no difference in undistributed earnings allocated to each participating
security. Accordingly, the presentation below is prepared on a combined basis
and is presented as earnings per common unit. Previously, such unvested RPUs and
CPUs were not included as outstanding within basic earnings per
common unit and were included in diluted earnings per common unit pursuant to
the treasury stock method.
 11
  The following is a
reconciliation of net earnings and weighted average units for calculating basic
net earnings per common unit and diluted net earnings per common
unit.  For the quarter ended March 31, 2008, RPUs and CPUs were
anti-dilutive, as we were in a net loss position, and as such, have been
excluded from the prior year calculation of basic and diluted earnings per
unit.
 
 Three
      Months EndedMarch
      31,Thousands
      of dollars, except unit amounts
                      
                      2009
                      
                      
                      2008Net
      income (loss) attributable to limited partners
                      
                      $
                      46,350
                      
                      
                      $
                      (40,867
                      )Distributions
      on participating units not expected to vest
                      
                      
                      24
                      
                      
                      
                      -Net
      income (loss) attributable to common unitholders and participating
      securities
                      
                      $
                      46,374
                      
                      
                      $
                      (40,867
                      )Weighted
      average number of units used to calculate basic and diluted net income
      (loss) per unit:Common
      units
                      
                      
                      52,702,823
                      
                      
                      
                      67,020,641Participating
      securities (b)
                      
                      
                      2,119,201
                      
                      
                      
                      -Denominator
      for basic earnings per common unit (a)
                      
                      
                      54,822,024
                      
                      
                      
                      67,020,641Dilutive
      units (b) (c)
                      
                      
                      103,793
                      
                      
                      
                      -Denominator
      for diluted earnings per common unit
                      
                      
                      54,925,817
                      
                      
                      
                      67,020,641Earnings
      per common unitBasic
                      
                      $
                      0.85
                      
                      
                      $
                      (0.61
                      )Diluted
                      
                      $
                      0.84
                      
                      
                      $
                      (0.61
                      )(a)
      Basic earnings per unit is based upon the weighted average number of
      common units outstanding plus the weighted average number of potentially
      issuable RPUs and CPUs.(b)
      The three months ended March 31, 2008 excludes 1,197,163 anti-dilutive
      units potentially issuable under compensation plans, including RPUs and
      CPUs, from the calculation of diluted units.(c)
      The three months ended March 31, 2009 includes dilutive units potentially
      issuable under compensation plans.
  The
following table sets forth our “as reported” basic net earnings per common unit
(“EPU”) and diluted net EPU for  the years
ended December 31, 2008 and 2007 as well as an “as adjusted” basic and
diluted net EPU for the same periods had FSP EITF 03-6-1 been adopted on
January 1, 2007.  Prior to 2007, we had no units that qualify as
participating securities under FSP EITF 03-6-1. For 2007, we had outstanding
RPUs and CPUs that qualify as participating securities under FSP EITF 03-6-1.
However, these participating securities do not have a contractual obligation to
share in our losses in such periods where a net loss was recognized. Therefore,
as we had a net loss in 2007, there is no difference between “as reported” and
“as adjusted” basic and diluted net EPU.
  Year
      EndedDecember
      31,2008
                        
                        
                        2007As
      reportedBasic
      net income (loss) per unit
                        
                        $
                        6.42
                        
                        
                        $
                        (1.83
                        )Diluted
      net income (loss) per unit
                        
                        $
                        6.28
                        
                        
                        $
                        (1.83
                        )As
      adjustedBasic
      net income (loss) per unit
                        
                        $
                        6.29
                        
                        
                        $
                        (1.83
                        )Diluted
      net income (loss) per unit
                        
                        $
                        6.28
                        
                        
                        $
                        (1.83
                        )
  12
  Cash
Distributions
 
 On
February 13, 2009, we paid a cash distribution of approximately $27.4
million to our common unitholders of record as of the close of business on
February 9, 2009.  The distribution that was paid to unitholders was
$0.52 per Common Unit.  During the three months ended March 31, 2009,
we also paid cash equivalent to the distribution paid to our unitholders of $0.7
million to holders of outstanding Restricted Phantom Units and Convertible
Phantom Units issued under our Long-Term Incentive Plans.
 
 Our
credit facility restricts our ability to make distributions to unitholders if
aggregated letters of credit and outstanding loan amounts exceed 90 percent of
our borrowing base.  With the borrowing base redetermination in April
2009 (see Note 9), our borrowings exceed 90 percent of the reset borrowing base
and therefore, we will not be declaring a distribution for the first quarter of
2009, which would have been paid to unitholders in May 2009.  We will
continue to be restricted from making distributions under the terms of our
credit facility until, after giving effect to such distribution, our outstanding
debt is less than 90 percent of the borrowing base, and we have the ability to
borrow at least 10 percent of the borrowing base while remaining in compliance
with all terms and conditions of our credit facility.
  There are
no restrictions on our ability to obtain funds from our consolidated
subsidiaries in the form of cash distributions, loans or
advances.
 12.  Noncontrolling
interest
 
 SFAS No.
160“Noncontrolling Interests in
Consolidated Financial Statements — an amendment of ARB No. 51”
(“SFAS No. 160”)was
issued in December 2007 and became effective for fiscal years beginning after
December 15, 2008.  It requires that accounting and reporting for
minority interests be recharacterized as noncontrolling interests and classified
as a component of equity.  SFAS No. 160 also establishes
reporting requirements that provide sufficient disclosures that clearly identify
and distinguish between the interests of the parent and the interests of the
noncontrolling owners.  The adoption of SFAS No. 160 did not have a
material impact on our results from operations or financial
position.
 
 On May
25, 2007, we acquired the limited partner interest (99 percent) of BEPI from
TIFD.  As such, we are fully consolidating the results of BEPI and
thus are recognizing a noncontrolling interest liability representing the book
value of the general partner’s interests.  At March 31, 2009 and
December 31, 2008, the amount of this noncontrolling interest liability was $0.5
million.
 13
 
 13.  Financial
Instruments
 
 Fair
Value of Financial Instruments
 
 Our risk
management programs are intended to reduce our exposure to commodity prices and
interest rates and to assist with stabilizing cash flow and
distributions.  Routinely, we utilize derivative financial instruments
to reduce this volatility.  To the extent we have hedged a significant
portion of our expected production through commodity derivative instruments and
the cost for goods and services increase, our margins would be adversely
affected.
 
 Credit
and Counterparty Risk
 
 Financial
instruments which potentially subject us to concentrations of credit risk
consist principally of derivatives and accounts receivable.  Our
derivatives expose us to credit risk from counterparties.  As of
March 31, 2009, our derivative counterparties were Barclays Bank PLC, Bank
of Montreal, Citibank, N.A, Credit Suisse International, Credit Suisse Energy
LLC, Union Bank of California, N.A., Wells Fargo Bank N.A., JP Morgan Chase Bank
N.A., Royal Bank of Scotland plc, The Bank of Nova Scotia and Toronto-Dominion
Bank.  We terminated all derivative financial instruments with Lehman
Brothers on September 19, 2008.  Our counterparties are all
lenders under our Amended and Restated
Credit Agreement.  During 2008, there was extreme volatility and
disruption in the capital and credit markets which reached
unprecedented levels and may adversely affect the financial condition
of our derivative counterparties.  On all transactions where we
are exposed to counterparty risk, we analyze the counterparty's financial
condition prior to entering into an agreement, establish limits, and monitor the
appropriateness of these limits on an ongoing basis.  We periodically
obtain credit default swap information on our counterparties.  As
of March 31, 2009, each of these financial institutions carried an S&P
credit rating of A or above.  Although we currently do not believe we have
a specific counterparty risk with any party, our loss could be substantial if
any of these parties were to default.  This risk is managed by
diversifying our derivative portfolio among counterparties meeting certain
financial criteria. As of March 31, 2009, our largest derivative net asset
balances were with JP Morgan Chase Bank N.A., who accounted for
approximately 55 percent of our derivative net asset balances, and Credit
Suisse International and Credit Suisse Energy LLC, who together accounted
for approximately 33 percent of our derivative net asset
balances.
 
 Commodity
Activities
 
 The
derivative instruments we utilize are based on index prices that may and often
do differ from the actual crude oil and natural gas prices realized in our
operations.  These variations often result in a lack of adequate
correlation to enable these derivative instruments to qualify for cash flow
hedges under SFAS No. 133.  Accordingly, we do not attempt to account
for our derivative instruments as cash flow hedges and instead recognize changes
in the fair value immediately in earnings.  We had a realized gain of
$74.1 million and an unrealized loss of $4.1 million for the quarter ended March
31, 2009 relating to our various market-based commodity contracts.  We
had net financial instruments receivable relating to our commodity contracts of
$288.2 million at March 31, 2009.
 
 On
January 22, 2009, we terminated a portion of our 2011 and 2012 crude oil
derivative contracts and replaced them with new contracts with the same
counterparty for the same volumes at market prices.  We realized $32.3
million from this termination.  On January 26, 2009, we terminated a
portion of our 2011 and 2012 natural gas derivative contracts
and replaced them with new contracts with the same counterparty for the same
volumes at market prices. We realized $13.3 million from this
termination.  Proceeds from these contracts were used to pay down
debt.
 14
 
 Including
the impact of the changes noted above, we had the following contracts in place
at March 31, 2009:
 
 Year2009
                  
                  
                  2010
                  
                  
                  2011
                  
                  
                  2012Gas
      Positions:Fixed
      Price Swaps:Hedged
      Volume (MMBtu/d)
                  
                  
                  45,392
                  
                  
                  
                  43,869
                  
                  
                  
                  25,955
                  
                  
                  
                  19,129Average
      Price ($/MMBtu)
                  
                  $
                  8.13
                  
                  
                  $
                  8.20
                  
                  
                  $
                  8.40
                  
                  
                  $
                  8.85Collars:Hedged
      Volume (MMBtu/d)
                  
                  
                  1,829
                  
                  
                  
                  3,405
                  
                  
                  
                  16,016
                  
                  
                  
                  19,129Average
      Floor Price ($/MMBtu)
                  
                  $
                  9.00
                  
                  
                  $
                  9.00
                  
                  
                  $
                  9.00
                  
                  
                  $
                  9.00Average
      Ceiling Price ($/MMBtu)
                  
                  $
                  14.61
                  
                  
                  $
                  12.79
                  
                  
                  $
                  11.28
                  
                  
                  $
                  11.89Total:Hedged
      Volume (MMMBtu/d)
                  
                  
                  47,221
                  
                  
                  
                  47,275
                  
                  
                  
                  41,971
                  
                  
                  
                  38,257Average
      Price ($/MMBtu)
                  
                  $
                  8.17
                  
                  
                  $
                  8.26
                  
                  
                  $
                  8.63
                  
                  
                  $
                  8.93Oil
      Positions:Fixed
      Price Swaps:Hedged
      Volume (Bbls/d)
                  
                  
                  1,786
                  
                  
                  
                  2,308
                  
                  
                  
                  2,116
                  
                  
                  
                  1,939Average
      Price ($/Bbl)
                  
                  $
                  75.27
                  
                  
                  $
                  83.12
                  
                  
                  $
                  63.79
                  
                  
                  $
                  63.30Participating
      Swaps: (a)Hedged
      Volume (Bbls/d)
                  
                  
                  2,826
                  
                  
                  
                  1,993
                  
                  
                  
                  1,439
                  
                  
                  
                  -Average
      Price ($/Bbl)
                  
                  $
                  63.47
                  
                  
                  $
                  64.40
                  
                  
                  $
                  61.29
                  
                  
                  $
                  -Average
      Part. %
                  
                  
                  60.9
                  %
                  
                  
                  55.5
                  %
                  
                  
                  53.2
                  %
                  
                  
                  -Collars:Hedged
      Volume (Bbls/d)
                  
                  
                  614
                  
                  
                  
                  1,279
                  
                  
                  
                  2,048
                  
                  
                  
                  3,077Average
      Floor Price ($/Bbl)
                  
                  $
                  92.89
                  
                  
                  $
                  102.85
                  
                  
                  $
                  103.42
                  
                  
                  $
                  110.00Average
      Ceiling Price ($/Bbl)
                  
                  $
                  123.56
                  
                  
                  $
                  136.16
                  
                  
                  $
                  152.61
                  
                  
                  $
                  145.39Floors:Hedged
      Volume (Bbls/d)
                  
                  
                  500
                  
                  
                  
                  500
                  
                  
                  
                  -
                  
                  
                  
                  -Average
      Floor Price ($/Bbl)
                  
                  $
                  100.00
                  
                  
                  $
                  100.00
                  
                  
                  $
                  -
                  
                  
                  $
                  -Total:Hedged
      Volume (Bbls/d)
                  
                  
                  5,726
                  
                  
                  
                  6,080
                  
                  
                  
                  5,603
                  
                  
                  
                  5,016Average
      Price ($/Bbl)
                  
                  $
                  73.49
                  
                  
                  $
                  82.52
                  
                  
                  $
                  77.64
                  
                  
                  $
                  91.95
 
 
 (a)  A
participating swap combines a swap and a call option with the same strike
price.
 15
 Interest
Rate Activities
 
 We are
subject to interest rate risk associated with loans under our credit facility
that bear interest based on floating rates.  As of March 31, 2009, our
total debt outstanding was $706.9 million.  In order to mitigate our
interest rate exposure, we had the following interest rate derivative contracts
in place at March 31, 2009, to fix a portion of floating LIBOR-base debt on our
credit facility:
 
 Notional
      amounts in thousands of dollars
                  
                  Notional
      Amount
                  
                  
                  Fixed
      RatePeriod
      CoveredApril
      1, 2009 to July 8, 2009
                  
                  $
                  50,000
                  
                  
                  
                  3.0450
                  %April
      1, 2009 to January 8, 2010
                  
                  
                  100,000
                  
                  
                  
                  3.3873
                  %April
      1, 2009 to July 20, 2009
                  
                  
                  250,000
                  
                  
                  
                  3.6825
                  %July
      20, 2009 to December 20, 2010
                  
                  
                  300,000
                  
                  
                  
                  3.6825
                  %December
      20, 2010 to October 20, 2011
                  
                  
                  200,000
                  
                  
                  
                  2.9900
                  %
  We had a
realized loss of $3.1 million and an unrealized gain of $1.0 million for the
quarter ended March 31, 2009 relating to our interest rate derivative
contracts.  We had net financial instruments payable related to the
interest rate derivative contracts of $16.3 million at March 31,
2009.
 
 SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities – an amendment of FASB Statement
No. 133” became effective for us on January 1, 2009.  It
requires enhanced disclosures about how and why an entity uses derivative
instruments, how derivative instruments and related hedge items are accounted
for under SFAS No. 133 and its related interpretations, and how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows.  SFAS No. 161 has the same
scope as SFAS No. 133, and, accordingly, applies to all
entities.  This statement requires the additional disclosures detailed
below.
 
 Fair
value of derivative instruments not designated as hedging instruments under SFAS
133:
 
 Balance
      sheet location, thousands of dollars
                                  
                                  Oil
      Commodity Derivatives
                                  
                                  
                                  Natural
      Gas Commodity Derivatives
                                  
                                  
                                  Interest
      Rate Derivatives
                                  
                                  
                                  Total
      Financial InstrumentsMarch
      31, 2009AssetsCurrent
      assets - derivative instruments
                                  
                                  $
                                  41,564
                                  
                                  
                                  $
                                  59,418
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  100,982Other
      long-term assets - derivative instruments
                                  
                                  
                                  108,209
                                  
                                  
                                  
                                  85,630
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  193,839Total
      assets
                                  
                                  
                                  149,773
                                  
                                  
                                  
                                  145,048
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  294,821LiabilitiesCurrent
      liabilities - derivative instruments
                                  
                                  
                                  (1,313
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (8,932
                                  )
                                  
                                  
                                  (10,245
                                  )Long-term
      liabilities - derivative instruments
                                  
                                  
                                  (5,286
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (7,416
                                  )
                                  
                                  
                                  (12,702
                                  )Total
      liabilities
                                  
                                  
                                  (6,599
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (16,348
                                  )
                                  
                                  
                                  (22,947
                                  )Net
      assets (liabilities)
                                  
                                  $
                                  143,174
                                  
                                  
                                  $
                                  145,048
                                  
                                  
                                  $
                                  (16,348
                                  )
                                  
                                  $
                                  271,874December
      31, 2008AssetsCurrent
      assets - derivative instruments
                                  
                                  $
                                  44,086
                                  
                                  
                                  $
                                  32,138
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  76,224Other
      long-term assets - derivative instruments
                                  
                                  
                                  145,061
                                  
                                  
                                  
                                  73,942
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  219,003Total
      assets
                                  
                                  
                                  189,147
                                  
                                  
                                  
                                  106,080
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  295,227LiabilitiesCurrent
      liabilities - derivative instruments
                                  
                                  
                                  (1,115
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (9,077
                                  )
                                  
                                  
                                  (10,192
                                  )Long-term
      liabilities - derivative instruments
                                  
                                  
                                  (1,820
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (8,238
                                  )
                                  
                                  
                                  (10,058
                                  )Total
      liabilities
                                  
                                  
                                  (2,935
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (17,315
                                  )
                                  
                                  
                                  (20,250
                                  )Net
      assets (liabilities)
                                  
                                  $
                                  186,212
                                  
                                  
                                  $
                                  106,080
                                  
                                  
                                  $
                                  (17,315
                                  )
                                  
                                  $
                                  274,977
  16
  Gains and
losses on derivative instruments not designated as hedging instruments under
SFAS 133:
 
 Location
      of gain/loss, thousands of dollars
                                  
                                  Oil
      Commodity Derivatives (a)
                                  
                                  
                                  Natural
      Gas Commodity Derivatives (a)
                                  
                                  
                                  Interest
      Rate Derivatives (b)
                                  
                                  
                                  Total
      Financial InstrumentsThree
      Months Ended March 31, 2009Realized
      gains (losses)
                                  
                                  $
                                  47,562
                                  
                                  
                                  $
                                  26,526
                                  
                                  
                                  $
                                  (3,068
                                  )
                                  
                                  $
                                  71,020Unrealized
      gains (losses)
                                  
                                  
                                  (43,036
                                  )
                                  
                                  
                                  38,968
                                  
                                  
                                  
                                  966
                                  
                                  
                                  
                                  (3,102
                                  )Net
      gains (losses)
                                  
                                  $
                                  4,526
                                  
                                  
                                  $
                                  65,494
                                  
                                  
                                  $
                                  (2,102
                                  )
                                  
                                  $
                                  67,918Three
      Months Ended March 31, 2008Realized
      gains (losses)
                                  
                                  $
                                  (12,188
                                  )
                                  
                                  $
                                  (1,250
                                  )
                                  
                                  $
                                  88
                                  
                                  
                                  $
                                  (13,350
                                  )Unrealized
      gains (losses)
                                  
                                  
                                  (8,368
                                  )
                                  
                                  
                                  (61,581
                                  )
                                  
                                  
                                  (1,203
                                  )
                                  
                                  
                                  (71,152
                                  )Net
      gains (losses)
                                  
                                  $
                                  (20,556
                                  )
                                  
                                  $
                                  (62,831
                                  )
                                  
                                  $
                                  (1,115
                                  )
                                  
                                  $
                                  (84,502
                                  )(a)
      Included in gains (losses) on commodity derivative instruments on the
      consolidated statements of operations.(b)
      Included in loss on interest rate swaps on the consolidated statements of
      operations.
  Effective
January 1, 2008, we adopted SFAS No. 157, “Fair Value
Measurements.”  SFAS No. 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements.  Fair value measurement under SFAS No. 157 is based upon
a hypothetical transaction to sell an asset or transfer a liability at the
measurement date, considered from the perspective of a market participant that
holds the asset or owes the liability.  The objective of fair value
measurement as defined in SFAS No. 157 is to determine the price that would be
received in selling the asset or transferring the liability in an orderly
transaction between market participants at the measurement date.  If
there is an active market for the asset or liability, the fair value measurement
shall represent the price in that market whether the price is directly
observable or otherwise obtained using a valuation technique.
 
 SFAS No.
157 requires valuation techniques consistent with the market approach, income
approach or the cost approach to be used to measure fair value.  The
market approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets or
liabilities.  The income approach uses valuation techniques to convert
future cash flows or earnings to a single present value amount and is based upon
current market expectations about those future amounts.  The cost
approach, sometimes referred to as the current replacement cost approach, is
based upon the amount that would currently be required to replace the service
capacity of an asset.
 
 We
principally use the income approach for our recurring fair value measurements
and strive to use the best information available.  We use valuation
techniques that maximize the use of observable inputs and obtain the majority of
our inputs from published objective sources or third party market
participants.  We incorporate the impact of nonperformance risk,
including credit risk, into our fair value measurements.
 
 SFAS No.
157 also establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques into three broad levels based upon how observable those
inputs are.  The highest priority of Level 1 is given to unadjusted
quoted prices in active markets for identical assets or liabilities and the
lowest priority of Level 3 is given to unobservable inputs.  We
categorize our fair value financial instruments based upon the objectivity of
the inputs and how observable those inputs are.  The three levels of
inputs as defined in SFAS No. 157 are described further as follows:
 
 Level 1 –
Unadjusted quoted prices in active markets for identical assets or liabilities
as of the reporting date.  Active markets are markets in which
transactions for the asset or liability occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.  An example
of a Level 1 input would be quoted prices for exchange traded commodity futures
contracts.
 
 Level 2 –
Inputs other than quoted prices that are included in Level 1.  Level 2
includes financial instruments that are actively traded but are valued using
models or other valuation methodologies.  These models include
industry standard models that consider standard assumptions such as quoted
forward prices for commodities, interest rates, volatilities, current market and
contractual prices for underlying assets as well as other relevant
factors.  Substantially all of these inputs are evident in the market
place throughout the terms of the financial instruments and can be derived by
observable data, including third party data providers.  These inputs
may also include observable transactions in the market place.  We
consider the over the counter (“OTC”) commodity and interest rate swaps in our
portfolio to be Level 2.  These are assets and liabilities that can be
bought and sold in active markets and quoted prices are available from multiple
potential counterparties.
 17
 
 Level 3 –
Inputs that are not directly observable for the asset or liability and are
significant to the fair value of the asset or liability.  These inputs
generally reflect management’s estimates of the assumptions market participants
would use when pricing the instruments.  Level 3 includes financial
instruments that are not actively traded and have little or no observable data
for input into industry standard models.  Level 3 instruments
primarily include derivative instruments for which we do not have sufficient
corroborating market evidence, such as binding broker quotes, to support
classifying the asset or liability as Level 2.  Level 3 also
includes complex structured transactions that sometimes require the use of
non-standard models.
 
 Certain
OTC derivatives that trade in less liquid markets or contain limited observable
model inputs are currently included in Level 3.  We include these
assets and liabilities in Level 3 as required by current interpretations of SFAS
157.  As of December 31, 2008 and March 31, 2009, our Level 3 assets
and liabilities consisted entirely of OTC commodity put and call
options.
 
 Financial
assets and liabilities that are categorized in Level 3 may later be
reclassified to the Level 2 category at the point we are able to obtain
sufficient binding market data or the interpretation of Level 2 criteria is
modified in practice to include non-binding market corroborated
data.
 
 As
mentioned in Note 5, our wholly-owned subsidiary BreitBurn Management provides
us with general management services, including risk management
activities.  BreitBurn Management is contracting with Provident on a
month to month basis for certain risk management services provided to
us.
 
 Provident’s
risk management group calculates the fair values of our commodity swaps using
risk management software that marks to market monthly fixed price delivery swap
volumes using forward commodity price curves and market interest
rates.  This pricing approach is commonly used by market participants
to value commodity swap contracts for sale to the market.  Inputs are
obtained from third party data providers and are verified to published data
where available (e.g., NYMEX).
 
 Fair
value measurements for our interest rate swaps are also provided by
Provident.  Monthly outstanding notional amounts are marked to market
for each specific swap using forward interest rate curves.  This
pricing approach is commonly used by market participants to value interest rate
swap contracts for sale to the market.  Inputs are obtained from third
party data providers and are verified to published data where available (e.g.,
LIBOR).
 
 Provident’s
risk management group uses industry standard option pricing models contained in
their risk management software to calculate the fair values associated with our
commodity options.  Inputs to the option pricing models include fixed
monthly commodity strike prices and volumes from each specific contract,
commodity prices from commodity forward price curves, volatility and interest
rate factors and time to expiry.  Model inputs are obtained from third
party data providers and are verified to published data where available (e.g.,
NYMEX).
 
 We review
the fair value calculations for our derivative instruments that we receive from
Provident’s risk management group on a monthly basis.  We also compare
these fair value amounts to the fair value amounts that we receive from the
counterparties to our derivative instruments.  We investigate
differences and resolve and record any required changes prior to the issuance of
our financial statements.
 
 Financial
assets and liabilities carried at fair value on a recurring basis are presented
in the table below.  Our assessment of the significance of an input to
its fair value measurement requires judgment and can affect the valuation of the
assets and liabilities as well as the category within which they are
categorized.
  18
  Recurring
fair value measurements at March 31, 2009 and December 31,
2008:
 
 As
      of March 31, 2009Thousands
      of dollars
                                
                                Level
      1
                                
                                
                                Level
      2
                                
                                
                                Level
      3
                                
                                
                                TotalAssets
      (Liabilities):Commodity
      Derivatives (swaps, put and call options)
                                
                                $
                                -
                                
                                
                                $
                                133,878
                                
                                
                                $
                                154,344
                                
                                
                                $
                                288,222Other
      Dervivatives (interest rate swaps)
                                
                                
                                -
                                
                                
                                
                                (16,348
                                )
                                
                                
                                -
                                
                                
                                
                                (16,348
                                )Total
                                
                                $
                                -
                                
                                
                                $
                                117,530
                                
                                
                                $
                                154,344
                                
                                
                                $
                                271,874As
      of December 31, 2008Thousands
      of dollars
                                
                                Level
      1
                                
                                
                                Level
      2
                                
                                
                                Level
      3
                                
                                
                                TotalAssets
      (Liabilities):Commodity
      Derivatives (swaps, put and call options)
                                
                                $
                                -
                                
                                
                                $
                                139,074
                                
                                
                                $
                                153,218
                                
                                
                                $
                                292,292Other
      Derivatives (interest rate swaps)
                                
                                
                                -
                                
                                
                                
                                (17,315
                                )
                                
                                
                                -
                                
                                
                                
                                (17,315
                                )Total
                                
                                $
                                -
                                
                                
                                $
                                121,759
                                
                                
                                $
                                153,218
                                
                                
                                $
                                274,977
 
 The following table sets forth a
reconciliation primarily of changes in fair value of our derivative instruments
classified as Level 3:
 
 Three
      Months EndedMarch
      31,Thousands
      of dollars
                      
                      2009
                      
                      
                      2008Assets
      (Liabilities):Beginning
      balance
                      
                      $
                      153,218
                      
                      
                      $
                      44,236Realized
      and unrealized gains
                      
                      
                      1,126
                      
                      
                      
                      4,795Ending
      balance
                      
                      $
                      154,344
                      
                      
                      $
                      49,031
  For the
quarter ended March 31, 2009, unrealized losses of $8.8 million and realized
gains of $9.9 million related to our derivative instruments classified as Level
3 are included in Gains (losses) on commodity derivative instruments, net on the
consolidated statements of operations.  For the quarter ended March
31, 2008, unrealized gains of $4.9 million and realized losses of $0.1 million
related to our derivative instruments classified as Level 3 are included in
Gains (losses) on commodity derivative instruments, net on the consolidated
statements of operations.  Determination of fair values incorporates
various factors as required by SFAS No. 157 including, but not limited to, the
credit standing of the counterparties, the impact of guarantees as well as our
own abilities to perform on our liabilities.
 19
  14.  Unit
and Other Valuation-Based Compensation Plans
 
 Unit-based
compensation expense for the quarters ended March 31, 2009 and 2008 was $3.2
million and $1.1 million, respectively, of which $3.1 million and $0.9 million
was included in general and administrative expenses. The remainder was included
in operating costs.
 
 In the
first quarter of 2009, the board of directors of the General Partner approved
the grant of 1,743,354 RPUs to employees of BreitBurn Management for 2009, under
our 2006 Long-Term Incentive Plan (“LTIP”).  During the first quarter of
2009 and 2008, our outside directors were granted 56,736 phantom units and
16,280 phantom units, respectively, under our LTIP.  The fair market value
of the RPUs granted during the first quarter of 2009 for computing the
compensation expense under SFAS No. 123(R) was $6.09 per unit for the
non-executive employees’ awards and $9.20 per unit for the officers’ and
directors’ phantom units.
 
 On
February 19, 2009, 134,377 Common Units were issued to employees for RPUs
granted in 2008 and vested on January 1, 2009.
 
 For the
quarters ended March 31, 2009 and 2008, we paid approximately $0.1 million and
$4.6 million, respectively, in cash for various liability based compensation
plans.  For the quarters ended March 31, 2009 and 2008, we also paid cash
equivalent to distributions paid to our unitholders of approximately $0.7
million and $0.5 million, respectively, on RPUs and CPUs issued under our
LTIP.
 
 For
detailed information on our various compensation plans, see our Annual
Report.
 
 15.  Commitments
and Contingencies
 
 Surety
Bonds and Letters of Credit
 
 In the
normal course of business, we have performance obligations that are secured, in
whole or in part, by surety bonds or letters of credit.  These
obligations primarily cover self-insurance and other programs where governmental
organizations require such support.  These surety bonds and letters of
credit are issued by financial institutions and are required to be reimbursed by
us if drawn upon.  At March 31, 2009 and December 31, 2008, we had
various surety bonds for $10.1 million.  At March 31, 2009 and
December 31, 2008 we had $0.3 million in letters of credit
outstanding.
 
 Other
 
 On
October 31, 2008, Quicksilver, an owner of 40.45 percent of our Common Units,
instituted a lawsuit in the District Court of Tarrant County, Texas naming us as
a defendant along with BreitBurn GP, BOLP, BOGP, Randall H. Breitenbach, Halbert
S. Washburn, Gregory J. Moroney, Charles S. Weiss, Randall J. Findlay, Thomas W.
Buchanan, Grant D. Billing and Provident.  On December 12, 2008,
Quicksilver filed an Amended Petition and asserted twelve different counts
against the various defendants.  The primary claims are as follows: 
Quicksilver alleges that BOLP breached the Contribution Agreement with
Quicksilver, dated September 11, 2007, based on allegations that we made false
and misleading statements relating to its relationship with Provident. 
Quicksilver also alleges common law and statutory fraud claims against all of
the defendants by contending that the defendants made false and misleading
statements to induce Quicksilver to acquire Common Units in us.  Finally,
Quicksilver alleges claims for breach of the Partnership’s First Amended and
Restated Agreement of Limited Partnership, dated as of October 10, 2006
(“Partnership Agreement”), and other common law claims relating to certain
transactions and an amendment to the Partnership Agreement that occurred in June
2008.  Quicksilver seeks a permanent injunction, a declaratory judgment
relating primarily to the interpretation of the Partnership Agreement and the
voting rights in that agreement, indemnification, punitive or exemplary damages,
avoidance of BreitBurn GP's assignment to us of all of its economic interest in
us, attorneys’ fees and costs, pre- and post-judgment interest, and monetary
damages.  Pursuant to an agreement among the parties to the lawsuit, a
hearing on Quicksilver’s request for a permanent injunction and declaratory
relief is scheduled to begin on September 21, 2009 and a trial with respect to
the claims alleging damages is scheduled for January, 2010.
  20
  We are
defending ourselves vigorously in connection with the allegations in the
lawsuit.  At this stage, we cannot predict the manner and timing of the
resolution of the lawsuit or its outcome, or estimate a range of possible
losses, if any, that could result in the event of an adverse verdict in the
lawsuit.
 
 Although
we may, from time to time, be involved in litigation and claims arising out of
our operations in the normal course of business, we are not currently a party to
any material legal proceedings other than as mentioned above.  In addition,
we are not aware of any material legal or governmental proceedings against us,
or contemplated to be brought against us, under the various environmental
protection statues to which we are subject.
 We have
no independent assets or operations other than those of our subsidiaries. BOLP
or BOGP may guarantee debt securities that may be issued by us and BreitBurn
Finance Corporation, our wholly owned subsidiary.  See Note 16 for a
description of BreitBurn Finance Corporation.  The guarantees will be
full and unconditional; joint and several; and any non-guarantor
subsidiaries are all considered minor.   As described in
note 16 “Subsequent Events,” in connection with the scheduled borrowing base
redetermination under our existing credit facility in April 2009, we suspended
our quarterly distributions.  We will continue to be restricted from
making distributions under the terms of our credit facility until, after
giving effect to such distributions, our outstanding debt is less than 90
percent of the borrowing base, and we have the ability to borrow at least 10
percent of the borrowing base while remaining in compliance with all terms and
conditions of our credit facility.  In addition, there are no material
consolidated retained earnings representing undistributed earnings of 50 percent
or less owned entities accounted for by the equity
method.
 16.
              Subsequent
      Events
 
 In
connection with the scheduled borrowing base redetermination under our existing
credit facility in April, our borrowing base was reset at $760
million.  See Note 9 for a detailed discussion of redetermination of
the borrowing base.  This redetermination was completed with no
modifications to the terms of the facility, including no additional fees and no
increase in borrowing rates.
 
 Our
credit facility restricts our ability to make distributions to unitholders if
aggregated letters of credit and outstanding loan amounts exceed 90 percent of
our borrowing base.  With the borrowing base redetermination, our
borrowings exceed 90 percent of the reset borrowing base and therefore, we will
not be declaring a distribution for the first quarter of 2009, which would have
been paid in May 2009.  We will continue to be restricted from making
distributions under the terms of our credit facility until, after giving effect
to such distribution, our outstanding debt is less than 90 percent of the
borrowing base, and we have the ability to borrow at least 10 percent of the
borrowing base while remaining in compliance with all terms and conditions of
our credit facility.
  BreitBurn
Finance Corporation was incorporated under the laws of the State of Delaware on
June 1, 2009, is wholly owned by us, and has no assets or
liabilities.  Its activities are limited to co-issuing debt securities
and engaging in other activities incidental thereto.
 21
  PART II.  OTHER INFORMATION
  Item 6.Exhibits
 NUMBER
              
              DOCUMENT3.1
              
              Amendment
      No. 2 to the First Amended and Restated Agreement of Limited Partnership
      of BreitBurn Energy Partners L.P. date April 7, 2009 (incorporated herein
      by reference to Exhibit 3.1to the Current Report on form 8-K filed April
      9, 2009).31.1*
              
              Certification of Registrant’s Co-Chief Executive
      Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
      and Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
              
              Certification of Registrant’s Co-Chief Executive
      Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
      and Section 302 of the Sarbanes-Oxley Act of 2002.31.3*
              
              Certification of Registrant’s Chief Financial
      Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
      and Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
              
              Certification of Registrant’s Co-Chief Executive
      Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934
      and 18 U.S.C. Section 1350, as created by Section 906 of the
      Sarbanes-Oxley Act of 2002.  This certification is being
      furnished solely to accompany this Quarterly Report on Form 10-Q and is
      not being filed for purposes of Section 18 of the Securities Exchange Act
      of 1934, as amended, and is not to be incorporated by reference into any
      filing of the Partnership.32.2*
              
              Certification of Registrant’s Co-Chief Executive
      Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934
      and 18 U.S.C. Section 1350, as created by Section 906 of the
      Sarbanes-Oxley Act of 2002.  This certification is being
      furnished solely to accompany this Quarterly Report on Form 10-Q and is
      not being filed for purposes of Section 18 of the Securities Exchange Act
      of 1934, as amended, and is not to be incorporated by reference into any
      filing of the Partnership.32.3*
              
              Certification of Registrant’s Chief Financial
      Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934
      and 18 U.S.C. Section 1350, as created by Section 906 of the
      Sarbanes-Oxley Act of 2002.  This certification is being
      furnished solely to accompany this Quarterly Report on Form 10-Q and is
      not being filed for purposes of Section 18 of the Securities Exchange Act
      of 1934, as amended, and is not to be incorporated by reference into any
      filing of the Partnership.
 
 * Filed
herewith.
 22
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 BREITBURN
      ENERGY PARTNERS L.P.
 
 By:
              BREITBURN
      GP, LLC,its
      General PartnerDated:  June
      10, 2009
              By:
              /s/ HALBERT S. WASHBURNHalbert
      S. WashburnCo-Chief
      Executive OfficerDated:  June
      10, 2009
              By:
              /s/ RANDALL H.
  BREITENBACHRandall
      H. BreitenbachCo-Chief
      Executive OfficerDated:  June
      10, 2009
              By:
              /s/ JAMES G. JACKSONJames
      G. JacksonChief
      Financial Officer