UPDATE: Citigroup Cuts PT to $32 on Legacy Reserves LP On Lower Realized Prices

Citigroup reiterated its Buy rating on Legacy Reserves LP

but lowers its price target from $34 to $32 following a challenging quarter. Citigroup commented, "LGCY reported second quarter adjusted EBITDA of $40.8 million, compared to $53.7 million in 2Q11 and our estimate of $52.0 million for 2Q12. The year-over-year decrease in adjusted EBITDA (i.e. 24% decrease) primarily reflects lower average realized prices, partially offset by production volumes that were 7% higher than the year ago period. The variance between our forecast and the 2Q12 results can be attributed to: 1) unusually large negative oil hedge lag effect (i.e. $5.2 million), 2) lower than forecast realized prices primarily due to high Midland-to-Cushing differential, and 3) lower than forecast production volumes." Legacy Reserves LP closed at $26.24 on Friday.