EIG Global Energy Partners agreed to invest $1 billion in Breitburn Energy Partners LP, a publicly traded oil and gas exploration and production company, as energy producers turn to alternative capital sources in an effort to bolster their balance sheets amid slumping oil prices.

EIG, a Washington, D.C., firm that specializes in energy-related debt and equity investments, is purchasing $350 million of convertible preferred equity and $650 million of senior secured notes issued by Breitburn.

The preferred equity pays monthly dividends that equal 8% annually and will give EIG a roughly 18% voting interest in Breitburn. The firm also gets to appoint one director to Breitburn's board.

The secured notes, meanwhile, are structured much like second-lien loans, said a person familiar with the matter. The new notes, which mature in 2020 and pay a 9.25% annual interest rate, will rank senior to Breitburn's existing debt and any future unsecured debt, according to Breitburn.

Energy bankers and analysts say other private-equity firms are working on new second-lien loan deals that would rank the new loans above the prospective borrowers" existing debt--a potential risk for current note holders. The deals are possible partly because many companies negotiated flexible terms to their existing debt facilities, which don't limit the amount of new debt that the company can issue.

The capital infusion gives Breitburn additional liquidity and allows it to "opportunistically pursue strategic acquisitions" made possible by depressed commodity prices, Breitburn said in a statement.

The Los Angeles company said it plans to use about $938 million in net proceeds from the offerings to pay down borrowings under its credit facility to around $1.24 billion.

Meanwhile, Breitburn added that it is revising its borrowing base under the credit facility to $1.8 billion through April 2016.

Breitburn is structured as a master limited partnership, a tax-friendly investment vehicle that typically issues regular cash distributions to its unit holders, making it popular with public investors.

The company said it intends to reduce its cash distribution to 50 cents per unit on an annualized basis, as part of its overall plan to increase its liquidity and flexibility for a "potentially prolonged market downturn," according to the statement.

Across the U.S., oil and gas producers are meeting their senior lenders as part of a borrowing base redetermination process, in which lenders reassess the value of the borrowers" oil and gas reserves to determine how much those companies can continue to borrow. Declines by more than 50% in oil prices since last summer have caused many companies" reserve values to drop, which will force some companies to restructure their balance sheets.

Sabine Oil & Gas Corp., backed by First Reserve Corp., has said it has hired restructuring advisers to assist with strategic options as the company faces fully drawn credit facilities, demands by certain noteholders to repay bonds, and downgrades of its credit ratings.

The Breitburn transaction caps two busy months of deal making for EIG, which closed a $6 billion fund in late 2013 for energy deals globally. Like many of its private-equity peers, EIG seeks to capitalize on opportunities brought by lower oil prices.

Over the last 60 days or so, EIG has struck some $3.6 billion of deals. Earlier this month, EIG bought a 55% interest in certain power generation and transmission assets in Mexico, Brazil and Chile from Spanish energy company Abengoa for $1.1 billion. In January, the firm purchased $1.5 billion of convertible notes issued by publicly traded Houston company Cheniere Energy Inc., which will use the proceeds to fund a portion of the costs associated with a liquefied natural gas project in Corpus Christi, Texas.

Write to Shasha Dai at shasha.dai@wsj.com

(Corrections & Amplifications--This article was corrected March 30, 2015 at 12:40 EST to show that Sabine Oil & Gas Corp., backed by First Reserve Corp., has said it has hired restructuring advisers to assist with strategic options. The original version of this article incorrectly stated that First Reserve is backed by Sabine and hired restructuring advisers in the 12th paragraph.)

Access Investor Kit for BreitBurn Energy Partners LP

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US1067761072

Access Investor Kit for Cheniere Energy, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US16411R2085

Subscribe to WSJ: http://online.wsj.com?mod=djnwires