(MENAFN- ProactiveInvestors) () the oil and natural gas partnership that’s lost almost 70 percent of its value in six months slashed its dividend and production budget by more than half to weather weak crude prices.
Linn cut its 2015 capital budget by 53 percent to $730 million the Houston Texas-based company said in a statement today.
Linn reduced its distribution per unit and the dividend per share for subsidiary LinnCo to $1.25 each from $2.90 on an annualized basis. The move marks the first time Linn has trimmed its dividend-like payments since going public in 2006.
Linn said it expected to fund its total 2015 oil and natural gas capital program along with the distribution from internally generated cash flow.
“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” Mark Ellis Linn’s chief executive officer said in the statement.
Linn 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 today that it expects oil to average $60 a barrel in 2015 and it has hedges for about 70% of its expected crude output.
Just days ago Denver-based American Eagle Energy (NYSEMKT:AMZG) said it suspended its drilling operations and likely won't resume them until oil prices improve.
Last month () told Canadian regulators that it had "indefinitely" suspended plans to drill for oil in Arctic waters. Energy giants () and (NYSE:) along with a number of smaller companies like (TSE:HSE) and (TSE:HSE) also have said they would pare capital-spending plans while Inc. has said it would shed many of its Canadian oil and gas fields to refocus on the U.S.
Linn is the largest energy producer of its kind set up to distribute available cash flow to shareholders and avoid corporate taxes. Such companies commonly structured as master limited partnerships had been popular with investors until oil prices started to plunge this summer.
Shares were up 16 percent at $11.73 at 2:05 p.m. in New York today.
Linn also said today that it had struck a deal with a unit of the Blackstone Group LP which will provide up to $500 million for the company’s drilling in exchange for an 85% stake in the profits. After Blackstone makes a 15 percent return on the wells its interest will decline to 5 percent and Linn will reap 95 percent of the profits.
Linn touted the deal as an inexpensive way of adding new oil and gas production and said it was looking for another such deal that would help it pay for acquisitions. Oil and gas pumping partnerships favour buying smaller rivals and proven fields in order to grow.
“Despite today’s challenging commodity price environment we believe we are prepared to continue growing throughout 2015 and will look to take advantage of acquisition opportunities” Ellis said.
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