BreitBurn Energy Partners LP had for years been eyeing Oklahoma as the perfect place to make acquisitions. The L.A. company buys mature oil and gas fields and squeezes them for steady cash flow, and Oklahoma is dotted with such fields.

BreitBurn finally entered the state late last month in an $860 million deal with Whiting Petroleum Corp. of Denver. The deal was noteworthy because it smashed through BreitBurn’s target of $500 million in acquisitions for the entire year.

The purchase, which is set to close by the end of this month, gives BreitBurn access to a spread of fields in Oklahoma’s panhandle that generate about 7,000 barrels of oil a day. Thanks to technology that allows extraction of oil from mature fields for years after they would have otherwise run dry, the company hopes the acquisition will generate steady annual revenue for years to come.

BreitBurn, a master limited partnership, is required to make periodic distributions to investors and needs consistent revenue streams.

“Because we’re an MLP, we’re looking for sustained growth of 5 percent per year in distributions from a diverse set of holdings,” said Chief Executive Halbert Washburn. “This deal will add significantly to our distributable cash flow.”

In a development unrelated to the acquisition of the Oklahoma fields, BreitBurn shares fell 14 percent last week to close at $15.47, making it one of the biggest losers on the LABJ Stock Index. (See page 32.) All master limited partnership energy companies were dragged down.

On July 2, Linn Energy LLC of Houston, a BreitBurn competitor, revealed that the Securities and Exchange Commission was investigating its practices. According to various reports, the SEC is looking into whether Linn is investing enough capital to sustain production at its mature oil fields.

This news raised the concern that other master limited partnerships, including BreitBurn, may not be investing enough capital to sustain oil and gas production levels. That in turn prompted a wave of selling of shares in master limited partnership energy companies last week.

Washburn said the Oklahoma deal is part of BreitBurn’s longer-term strategy of diversifying outside of California, where he said permitting and regulatory costs and the constant threat of higher taxes make operations problematic. A decade ago, 80 percent of BreitBurn’s holdings were in California; now that figure is about 20 percent.

“We’re not growing much in California anymore,” he said. “All the growth is now outside the state.”

Washburn said the company will be on the lookout for more deals in the Oklahoma-Kansas region, though not immediately.

One analyst said the Whiting acquisition should make future deals easier.

“A deal this size guarantees that BreitBurn will be a player in this new operating region,” said Michael Peterson, an analyst with MLV & Co. in New York who has a “buy” rating on BreitBurn’s stock. “Because it gives them such a sizable presence and the overhead costs are scalable, they will have the personnel and infrastructure in place to make more deals.”

Peterson said another key advantage of the deal is that it’s mostly oil, with very little natural gas. The fields being acquired produce on average about 87 percent crude oil, 13 percent natural gas.

“Right now, that’s a good thing because oil is now a much more attractive commodity to own than natural gas,” Peterson said. “It should therefore deliver higher margins.”

Gas is less profitable these days as increased production has driven prices down; the price has fallen below $4 per million British thermal units, the standard measure of natural gas, from a peak of $13 per million Btu five years ago.

Washburn said the company is well-positioned should the relative value of the commodities switch and natural gas become more desirable. The company now has about 140 wells drilling for oil and only a couple for natural gas.

“If natural gas goes up to $6 or $7 per million Btu, we have a whole bunch of wells now sitting idle that can be turned on,” he said.

But BreitBurn’s acquisition drew a downgrade from Standard & Poor’s Ratings Services. The debt rating company June 27 downgraded the company’s unsecured debt to B- from B. In its press release explaining the move, Standard & Poor’s cited BreitBurn’s increased borrowing on its revolving credit line to finance the acquisition.

Washburn said the company intends to avoid any problems by converting the debt to a mixture of equity and long-term debt, in effect moving it off its short-term credit card.

Peterson said this kind of debt structure for an acquisition is typical in the energy industry, but S&P doesn’t take that into account.

“It’s a normal part of their business, something they do after most transactions,” he said. “If they had not announced plans to convert the debt, then I would be concerned about the rating downgrade.”

Peterson said he was more concerned about BreitBurn’s ability to integrate the Whiting operations into the company; under the deal, BreitBurn assumes full control of the operations on Oct. 1.

“I would expect most of the Whiting staff to transfer over, but if for some reason they don’t, that could create some problems,” he said.