Linn Energy Cuts 2015 Budget, Slashes Dividend

(RTTNews) - Oil and natural gas development company Linn Energy LLC (LINE) said Friday that its board of directors approved a budget for 2015 that includes a 53 percent reduction in its oil and natural gas capital expenditures, in response to lower commodity prices.

In addition, Linn and its sister company LinnCo LLC (LNCO) slashed their annual dividends. Shares of Linn Energy are down more than 7 percent in pre-market activity.

Further, Linn said it has signed a non-binding letter of intent with private capital investor GSO Capital Partners LP, the credit platform of private equity giant Blackstone Group L.P. (BX), to fund its oil and natural gas development.

Linn Energy's oil and natural gas capital for 2015 has been reduced to $730 million from about $1.55 billion in 2014. Meanwhile, the Linn distribution and LinnCo dividend have been reduced to $1.25 per unit or share, from the previous level of $2.90 per unit or share, on an annualized basis.

Linn Energy noted that the decrease in oil and natural gas capital is also a result of the divestiture of its higher decline Granite Wash assets and the majority of its Midland Basin assets in the Permian Basin, as well as reduced investment in other areas across its portfolio.

Linn Energy expects to fund its total 2015 oil and natural gas capital program as well as the distribution, from internally generated cash flow. The company added that it has current liquidity of about $2.2 billion.

Mark Ellis, Chairman, President and Chief Executive Officer of Linn Energy said, "After careful consideration, LINN's senior management proposed and the Board of Directors approved a 2015 budget that contemplates a significantly lower current crude oil price than in 2014. 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."

Linn Energy's 2015 budget assumptions include average annual production of 1,110 Mmcfe/d to 1,235 Mmcfe/d.

In addition, Linn Energy said it has signed a non-binding letter of intent with private capital investor GSO Capital Partners, the credit platform of Blackstone Group, to fund its oil and natural gas development.

Subject to final documentation, funds managed by GSO Capital and its affiliates have agreed to commit up to $500 million with 5-year availability to fund drilling programs on locations provided by Linn Energy.

Linn Energy noted that the funding from GSO Capital will enable it to develop its assets without increasing capital intensity while mitigating drilling risk, with potential to add a steady and growing cash flow stream with no capital requirement.

Linn Energy said it has declared a monthly cash distribution of $0.1042 per unit, or $1.25 per unit on an annualized basis, for all of its outstanding units. The distribution will be payable on January 15, 2015, to unitholders of record as of the close of business on January 12, 2015.

Meanwhile, LinnCo declared a monthly cash dividend of $0.1042 per common share, or $1.25 per share on an annualized basis, for all of its outstanding common shares. The dividend will be payable January 16, 2015, to shareholders of record as of the close of business on January 12, 2015.

LINE closed Wednesday's trading at $10.13. In Friday's pre-market activity, the stock is down $0.77 or 7.60 percent to $9.36.

LNCO closed Wednesday's trading at $10.37. In pre-market trades, the stock is down $1.07 or 10.32 percent to $9.30.