Quick Win by the Algorithm: Legacy Reserves LP (LGCY)

Quick Win by the Algorithm

Legacy Reserves LP (LGCY)

Legacy Reserves LP acquires and develops oil and natural gas properties primarily in the Permian Basin, East Texas, Rocky Mountain, and Mid-Continent regions of the United States.  The Company’s proved reserves to production ratio were approximately 11.6 years based on the annualized production volumes. The Company completed 136 acquisitions of oil and natural gas properties for a total of approximately $2.1 billion.

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The recent rise in commodity prices has certainly been helpful to Legacy and the energy industry as a whole. However, given the gravity of the price depression, they are still operating in a very challenging environment. Despite its high volatility, LGCY is still a stock to watch. 

On May 4, 2016, Legacy Reserves (NASDAQ:LGCY) reported its quarterly results. We could all have expected revenue to be terrible due to extremely low oil and natural gas prices. However, some of Legacy, metrics were very good. Here are some of them: Legacy was targeting $50 million in asset sales in Q1, increasing that to (a total of) $100 million in Q2. Legacy reached a beautiful $69 million in sales in Q1. 

Also, even with a lack of spare cash due to a low oil price, Legacy’s management succeeded in purchasing an additional $65 million of their outstanding senior notes for a total of $169 million repurchased in 2016. Other fundamentals of the LGCY business were quite strong, reflecting the strong management of Legacy.

Their focus for at the remainder of the year will be to continue to maintain liquidity and reduce their debt outstanding.