Tags: Linn | oil | gas | energy

Linn Energy Cuts Investor Payout and 2015 Oil, Gas Budget

Saturday, 03 Jan 2015 08:13 AM

Linn Energy LLC, the oil and natural gas partnership that’s lost almost 70 percent of its value in six months, cut its investor payout and production budget by more than half amid a rout in crude prices.

The company and its affiliate LinnCo. LLC will lower the annual payout by 57 percent to $1.25 a share or unit, Houston- based Linn said in a statement. Production spending will drop 53 percent from last year, to $730 million. Internal cash is expected to cover both, Linn said.

Linn, a master-limited partnership, is the latest producer to cut spending on expectations of lower oil and gas prices. Crude fell 46 percent in 2014 to close the year at $53.27 a barrel in New York. Linn said it expects oil to average $60 a barrel in 2015, although it has hedged about 70 percent of its expected output at higher prices.

“The majority of MLP upstream distributions are not sustainable,” Ethan Bellamy, an analyst at Robert W. Baird & Co., said. Bellamy rates Linn at hold and owns none. “This is a prudent move by Linn that will encourage other upstream MLPs to follow course,” he added.

Linn’s yield, the amount of its share price paid back in a year, is about 12 percent.

Linn “contemplates a significantly lower current crude oil price than in 2014,” Chief Executive Officer Mark Ellis said. “In order to solidify the company’s financial position and regain a useful cost of capital, we have reduced the oil and natural gas capital budget and distribution while balancing cash flow and spending.”

Development Funding

Linn partnership units rose 12 percent to close at $11.38 in New York. The units dropped 67 percent last year. LinnCo shares were 10.9 percent higher at $11.50 after declining 66 percent in 2014.

The company also signed a non-binding letter of intent for as much as $500 million over five years with GSO Capital Partners LP, the credit arm of Blackstone Group LP, to fund oil and gas development. Under the agreement, GSO would fund some new wells for an initial working interest of 85 percent.

Linn is also in talks with private equity sources to fund acquisitions on similar terms, according to the statement.

The company’s $5 billion spending spree since early 2013 made it the most indebted U.S. explorer of its size. It delayed announcement of the 2015 budget from last month.

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Linn Energy, the oil and natural gas partnership that's lost almost 70 percent of its value in six months, cut its investor payout and production budget by more than half amid a rout in crude prices.
Linn, oil, gas, energy
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2015-13-03
Saturday, 03 Jan 2015 08:13 AM
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