Breitburn Energy Partners LP Reaches Agreement in Principle Regarding Amended Plan of Reorganization

November 28, 2017

LOS ANGELES–(BUSINESS WIRE)–Breitburn Energy Partners LP (“Breitburn”) and its affiliates, as
debtors and debtors in possession (collectively, the “Debtors”), today
announced that they have reached an agreement in principle (the
“Agreement in Principle”) with their key creditor constituencies with
respect to an amended plan of reorganization and restructuring. The
Agreement in Principle has the support of certain lenders under the
Debtors’ prepetition revolving credit facility (the “RBL Lenders”),
certain holders of the Debtors’ 9.25% Senior Secured Second Lien Notes
(the “Second Lien Group”), certain holders of the Debtors’ 7.785% Senior
Notes due 2022 and 8.625% Senior Notes due 2020 (the “Senior Unsecured
Notes”) that collectively hold approximately 68% of the outstanding
principal amount of the Senior Unsecured Notes (the “Ad Hoc Senior Notes
Groups”), and the Official Committee of Unsecured Creditors (the
“Creditors’ Committee”) appointed in the Debtors’ chapter 11 cases
pending in the United States Bankruptcy Court for the Southern District
of New York (the “Bankruptcy Court”). As a result of the Agreement in
Principle, the Creditors’ Committee has agreed to withdraw its
opposition to the plan of reorganization previously filed by the Debtors
and to support an amended plan of reorganization to be filed that will
incorporate the terms and provisions of the Agreement in Principle (the
“Amended Plan”).

The Amended Plan is premised on the division of the Debtors’ assets and
existing businesses into two separate entities upon the occurrence of
the effective date of the Amended Plan (the “Plan Effective Date”): (a)
a newly-formed limited liability company (“LegacyCo”) that will own all
of the Debtors’ assets other than certain assets located in the Permian
Basin (such assets, the “Permian Assets”); and (b) a newly-formed
corporation (“New Permian Corp.”) that will acquire all of the equity of
a newly-formed limited liability company that will own the Permian
Assets. New Permian Corp. will also own 7.5% of the equity of LegacyCo.

Certain principal terms of the Agreement in Principle are outlined below:

RBL Lenders holding allowed claims in the aggregate principal amount
of $747,316,435.62 (the “RBL Claims”) will receive a pro rata share of
(a) cash in an amount equal to the RBL Claims minus $400 million and
(b) participation in an amended and restated term loan facility in the
principal amount of $400 million (the “Exit Facility”). Each RBL
Lender will also have the right to convert its entire portion of the
Exit Facility to an equal amount of a revolving credit facility.
Holders of the 9.25% Senior Secured Second Lien Notes (the “Second
Lien Notes”) with allowed claims solely for purposes of the Amended
Plan in the aggregate amount of $793 million, plus accrued unpaid pre-
and post-petition default interest on all outstanding obligations,
costs, fees, indemnities, and all other obligations payable under the
Second Lien Notes, will receive a pro rata share of 92.5% of the
equity of LegacyCo, subject to potential dilution.
Holders of Senior Unsecured Notes that are “eligible offerees” will
receive the right to purchase their pro rata share of an aggregate of
60% of the shares to be issued by New Permian Corp. (the “New Permian
Corp. Shares”), subject to certain dilution, pursuant to a $465
million rights offering (the “Rights Offering”) to be implemented
under the Amended Plan. All holders of Senior Unsecured Notes that are
“eligible offerees” that do not elect to participate in the Rights
Offering will receive no distribution.
Pursuant to a backstop commitment agreement (subject to Bankruptcy
Court approval), the members of the Ad Hoc Senior Notes Groups have
committed to (a) exercise rights (the “Minimum Allocation Rights”) to
purchase the remaining 40% of New Permian Corp. Shares for an
aggregate amount of $310 million payable in cash, subject to certain
dilution, and (b) backstop the Rights Offering.
Both (a) the members of the Ad Hoc Senior Notes Groups, and (b) all
other holders of Senior Unsecured Notes that are “eligible offerees”
as of November 27, 2017 that irrevocably elect to participate in the
Rights Offering by December 13, 2017, will receive on the Plan
Effective Date their pro rata share (based on the respective backstop
commitment amounts of the members of the Ad Hoc Senior Notes Groups
and the respective subscription amounts as to the rights exercised by
“eligible offerees” by December 13, 2017) of 10% of the New Permian
Corp. Shares, which will dilute the New Permian Corp. Shares issued
pursuant to the Rights Offering and pursuant to the Minimum Allocation
Rights.
Holders of Senior Unsecured Notes that are not “eligible offerees”
will receive, through a trust, New Permian Corp. Shares having a value
equal to 4.5% of their claims but have the option to elect to receive
instead cash in the amount of 4.5% of their claims; provided that the
aggregate amount of the value of the New Permian Corp. Shares and cash
distributed to such holders will not exceed $5,422,265. To the extent
that the New Permian Corp. Shares and cash that would otherwise be
issued to such holders exceeds $5,422,265, the distribution of such
New Permian Corp. Shares and cash each will be reduced ratably to
eliminate such excess.
Holders of allowed general unsecured claims will receive their pro
rata share of $1.5 million. Holders of allowed general unsecured
claims exceeding $1 million, however, will have the right to elect to
receive instead, New Permian Corp. Shares having a value equal to 4.5%
of their allowed claims; provided that the aggregate amount of the
distribution to such holders will not exceed New Permian Corp. Shares
having a value equal to $817,240, and to the extent that the New
Permian Corp. Shares that would otherwise be issued to such holders
exceeds $817,240, the distribution of such shares will be reduced
ratably to eliminate such excess.
Holders of allowed general unsecured claims held by claimants that
will provide goods and services necessary to the operation of LegacyCo
or New Permian Corp. or that will benefit their assets, and will
continue to do business with LegacyCo or New Permian Corp., will be
paid in full in cash.
Breitburn’s common and preferred unitholders will receive no
distribution or consideration under the Amended Plan on account of
their equity interests, and all such units will be canceled on the
Plan Effective Date. Nevertheless, the Debtors will incur a
substantial amount of cancellation of debt and other income upon
implementation of the Amended Plan that will be allocable to the
unitholders for income tax purposes. Consistent with the plan of
reorganization previously filed, the Debtors intend to structure the
Amended Plan and the transactions related to its implementation so as
to mitigate the impact of such cancellation of debt and other income.
However, there is still a significant risk that unitholders could
recognize a substantial amount of unsheltered income upon
implementation of the Amended Plan depending, in part, on whether
certain actions are taken by certain creditors beyond the Debtors’
control on or before the Plan Effective Date or certain facts exist as
to which the Debtors may be unaware with respect to related party
ownership of equity of Breitburn by certain creditors on or before the
Plan Effective Date.

Accordingly, upon consummation and implementation of the Amended Plan,
92.5% of the equity of LegacyCo (the post-emergence owner of the
Debtors’ assets other than the Permian Assets) will be distributed to
the holders of the Second Lien Notes, subject to dilution by any
management incentive plan adopted by LegacyCo’s board of directors. In
addition, as stated above, the Permian Assets will be owned by New
Permian Corp., which will also own 7.5% of the equity of LegacyCo,
subject to dilution by any management incentive plan adopted by
LegacyCo’s board of directors.

The Agreement in Principle is subject to the execution and delivery of
definitive documents, and the filing of the Amended Plan. Implementation
of the Amended Plan is subject to confirmation by the Bankruptcy Court
in accordance with the requirements of the United States Bankruptcy Code.

Cautionary Statement Regarding Forward-Looking
Information

This press release contains forward-looking statements that relate to
future results and events that are not facts and constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are
based on Breitburn’s current expectations, estimates and assumptions
and, as such, involve certain risks and uncertainties. The ability of
Breitburn to predict results or the actual effects of its plans and
strategies is subject to inherent uncertainty. Actual results and events
in future periods may differ materially from those expressed or implied
by these forward-looking statements because of a number of risks,
uncertainties and other factors. All statements other than statements of
historical fact, including statements containing the words “intends,”
“believes,” “expects,” “will be,” and similar expressions, are
statements that could be deemed to be forward-looking statements. In
addition, the forward-looking statements represent Breitburn’s views as
of the date as of which they were made. Breitburn anticipates that
subsequent events and developments may cause its views to change.
However, although Breitburn may elect to update these forward-looking
statements at some point in the future, it specifically disclaims any
obligation to do so. These forward-looking statements should not be
relied upon as representing Breitburn’s views as of any date subsequent
to the date hereof.