Is Breitburn Energy Partners LP (OTCMKTS:BBEPQ) The Next Ultra Petroleum Corp (OTCMKTS:UPLMQ)?

Breitburn Energy Partners LP (OTCMKTS:BBEPQ) is racing up the charts after Judge Stuart Bernstein of the Southern District of New York granted common shareholders a seat at the table in Breitburn's restructuring. He said:

"(The) court concludes that ... equity has carried its burden that Breitburn does not appear to be hopelessly insolvent."

This is a huge win for common shareholders. Equity committees are rarely approved in Bankruptcy. However, the situation with Breitburn is different. The cause of its Bankruptcy was the drop in oil prices. Now that oil is back above $50 and, in our view, heading higher, the value of Breitburn's assets are worth a whole lot more than even just a few weeks ago. As a result, and rightfully so, BBEPQ has gone on a tear and climbed up the charts. We believe this bull run is just getting started. If you don't believe me, have a look at Ultra Petroleum Corp (OTCMKTS:UPLMQ).First up, a little background on Breitburn. Breitburn Energy Partners LP is an independent oil and gas master limited partnership focused on the acquisition, development, and production of oil and gas properties throughout the United States. Breitburn’s producing and non-producing crude oil and natural gas reserves are located in Ark-La-Tex; the Midwest; the Permian Basin; the Mid-Continent; the Rockies; the Southeast; and California.Breitburn Energy Partners LP and some of its units filed for restructuring under Chapter 11 of the U.S. bankruptcy code in May. The oil and gas master limited partnership said it secured a $75 million debtor-in-possession financing, in addition to cash from its operations and cash on hand, to fund its operations during the bankruptcy process. The company listed assets in the range of $1 billion to $10 billion, and liabilities of $1 billion to $10 billion.The granting of the equity committee is a major win for BBEPQ common shareholders in more ways than one. Besides fighting debt holders, BBEPQ shareholders have gone up against management since the company filed for Bankruptcy. CEO Hal Washburn bailed on his own stake and sold all of his common shares at the end of May. Washburn was obviously hoping that no equity committee would be formed, then Hal would only have to deal with secured creditors with the hope that they’ll keep him on board when the company exits bankruptcy. We're glad Judge Bernstein saw through this and struck a blow for the little guy.What really helped common shareholders is the fact that lawyers and advisors were working on behalf of BBEPQ shareholders for free with the hope of getting a seat at the table. Then they could be compensated as part of Bankruptcy process like the lawyers and advisors representing debt holders. According to Forbes:

As Martin Lewis, the shareholders’ valuation expert and a managing director of the firm M.M. Dillon & Co., alluded to during Tuesday’s trial, Lewis’s firm hopes to represent the equity committee as its financial advisor now that an official committee will be appointed. According to Lewis, his firm has been actively reviewing a number of bankrupt oil and gas companies and believes that shareholders are not being adequately represented in certain cases. That review sparked his firm’s interest in Breitburn. During today’s closing arguments, after counsel for the Breitburn debtors pointed to the large number of lawyers and financial advisors appearing on behalf of the shareholders, comments from the courtroom disclosed that none of the shareholders’ professionals were being paid for their efforts prior to today’s ruling.

The appointment of an equity committee is certainly a first step towards recovery. However, the biggest overhang is Breitburn could wind up owing taxes if its $3.1 billion in debt is restructured, especially since Breitburn is an MLP. The next step for the equity committee will be having the the threat of CODI removed, and once that happens, the stock will really be off and running. Oil and Gas Investor covered this topic in great detail back in February. We suggest you read it here and investors will also want to discuss the issue with their tax advisors.Currently trading with a market cap of $88 million, no doubt some of the recent appreciation has been from the shorts scrambling to cover, but it also comes as Breitburn has seen its core business strengthen. We believe that natural gas and oil prices are going to continue climbing, especially natural gas. With the winter months just around the corner and natural gas exports picking up, we believe there’s the potential for natural gas prices to outperform over the next few months. This will greatly benefit Breitburn and its shareholders as the value of Breitburn's assets will keep increasing, making a greater recovery all the more likely. The best bet for BBEPQ shareholders is time and it's in the best interests of the equity committee to drag the process out further and allow for oil and gas prices to continue recovering. We will be updating our subscribers as soon as we know more. For the latest updates on the BBEPQ bankruptcy process, sign up below!Disclosure: We have no position in BBEPQ and have not been compensated for this article.