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LINN Energy CEO, chairman and president Mark E. Ellis. Image courtesy of Texas Independent Producers & Royalty Owners Association.

LINN Energy announced Monday that it will slash oil and natural gas capital expenditures in 2015 by 53 percent and cut dividends as crude prices hit five and a half year lows.

The company set its 2015 annual capital expenditure budget at $730 million, down from $1.55 billion in 2014.

LINN will also reduce its annual dividend to $1.25 per unit or share in 2015, down from $2.90 per share.

The Houston-based producer said it expects to fund its total 2015 oil and natural gas capital program, including distribution, with 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,” LINN CEO, chairman and president Mark E. Ellis said.

The company’s 2015 budget assumes an unhedged oil price of $60 per barrel with projected annual production of between 1.11 to 1.235 billion cubic feet equivalent per day.

LINN also signed a non-binding letter of intent Monday with private capital investor GSO Capital Partners, the credit platform of the Blackstone Group, to fund oil and natural gas development.

GSO and its affiliates agreed to commit up to $500 million with a five year availability to fund drilling programs at LINN sites.

The deal covers 100 percent of the costs associated with new wells drilled under the agreement.

GSO will receive an 85 percent working interest in the wells until it achieves a 15 percent internal rate of return on annual groupings of wells.

LINN will carry the remaining 15 percent working interest in the wells.

Upon reaching the internal rate of return target, GSO’s interest will be reduced to 5 percent and LINN’s share will increase to 95 percent.