Legacy Reserves LP (Nasdaq: LGCY) has announced a 2015 capital budget of $30 million as compared to approximately $130 million in 2014. Cary D. Brown, chairman, president and CEO of Legacy's general partner, commented: "The dramatic drop in oil and gas prices has directly impacted our asset-level project returns. While we have commodity hedges in place to insulate our near-term cash flow at the partnership level, it simply does not make economic sense to pursue new drilling projects in this market environment as they do not generate a sufficient return for the company. We are encouraged that our third-party service providers have already begun to reduce prices, but we will need to see further reductions prior to reinstating our prior capital spending levels.
"We also realize that if the current price environment is a longer term cycle, we will not be able to continue to distribute to our common unitholders at these levels. We have always taken a long-term view on distributions and we do not believe the current commodity outlook is sustainable. We have a strong balance sheet and near-term hedges to mitigate against this dramatic downturn. With our retail investors in mind, we believe it is best to maintain our distribution level this quarter to give us more time to assess our long-term distribution capabilities in a more stabilized market. We appreciate our retail unitholders and believe this strategy gives them time to plan around any possible reduction in future distributions. We are hopeful that with good acquisitions and some price improvement, a distribution reduction will not be necessary. However, we remain committed to only distributing what the assets allow over a longer-term period."
Legacy is based in Midland, Texas.
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