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Legacy Reserves Has Risen Over 140% in 2018: Can It Rise Further?

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Legacy Reserves’ recent performance

Legacy Reserves (LGCY), an upstream MLP involved in natural gas, crude oil, and NGLs (natural gas liquids) production, has risen 144.0% since the start of 2018. 

At the same time, Legacy’s MLP peer EV Energy Partners (EVEP) has fallen 62.9%, while its peer Mid-Con Energy Partners (MCEP) has risen 37.1%. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has fallen 8.4% YTD (year-to-date).

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Legacy’s strong YTD gains have come amid weakness in natural gas prices and strong volatility in crude oil prices. Natural gas has fallen ~10% since the start of 2018, while crude oil has risen 1.3%. Legacy’s strong YTD gains can be attributed to its better-than-expected 4Q17 earnings, its strong 2018 earnings guidance, and the improvement in its financial position.

Legacy reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $82.9 million in 4Q17 compared to $46.2 million in the same quarter of the previous year. This change represents a 79.6% YoY increase.

Despite its recent gains, Legacy is still trading significantly lower than its levels prior to the rout in energy prices.

Series overview

In this series, we’ll try to find out whether Legacy can gain upward momentum going forward. We’ll look into the partnership’s guidance and leverage position. Following this, we’ll look into its technical indicators and institutional activity.

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