When we went to press with the latest issue of Canadian Edge, the first oil and gas producer in our coverage universe to cut its dividend was Canadian Oil Sands Ltd (TSX: COS, OTC: COSWF), whose hand was forced in part due to its failure to hedge its production.

On Monday, small-cap Trilogy Energy’s (TSX: TET, OTC: TETZF) dividend was the latest casualty of the bear market in crude prices.

But the most painful cut for us was Baytex Energy Corp’s (TSX: BTE, NYSE: BTE) announcement that it would be cutting its monthly dividend to CAD0.10 per share from CAD0.24 per share, effective with the January payout.

Although that news is certainly disappointing, Baytex has cut its dividend in the past when faced with extreme downward volatility in oil prices, so this wasn’t entirely unexpected. Indeed, in our December issue, we observed that the company was the most vulnerable among our six favorite Canadian energy exploration and production (E&P) companies.

But while this latest move means lower income as a shareholder in the near term, it also helps the company preserve capital for the long term.

Though Baytex had been paying out a large percentage of its earnings to shareholders, in other respects it tends to be somewhat more conservative than its peers when it comes to managing its dividend, with an emphasis on maintaining its payout from current cash flows rather than artificially supporting it via debt or equity issuance like some other high-yield companies do.

Though it could be argued that such conservatism should probably extend to the payout ratio during both good times and bad times, we’d rather the company keep a solid balance sheet than engage in financial engineering to support an unsustainable payout.

The stock actually got a brief bump as a result of this news, so that suggests investors saw this as a step in the right direction, despite the pain of a lower payout.

Like many of its E&P peers, Baytex also announced a reduction in its capital budget for 2015, with plans to pare it by 30% to realign spending with the economics of lower crude prices. About 75% of this spending will be allocated toward the Eagle Ford, which makes sense given the better economics of this play.

Baytex’s Eagle Ford play accounted for 37.6% of third-quarter production, or about 34,000 barrels of oil equivalent per day (BOE/D), with a breakeven threshold of USD49 per BOE/D. The company didn’t offer breakeven analysis of its other plays, though presumably the Eagle Ford offers better economics than its heavy-oil Peace River and Lloydminster plays.

The last time Baytex cut its dividend was during the Great Recession, when its monthly payout bottomed at CAD0.12 per share after briefly reaching a high of CAD0.25 per share in 2008. The company began boosting its dividend again exactly a year following the first cut as oil prices recovered.

Let’s hope the lower level of the payout is similarly short-lived this time around.

The “In Focus” feature in our latest issue focused on the hedging programs of our favorite E&Ps. That will be a major factor in each company’s ability to weather prices in the near term without cutting their dividends.

As noted earlier, companies are also announcing reductions in next year’s capital budgets in order to preserve capital. It’s too soon to tell whether that will translate into lower production overall, which would help bring supply and demand back into balance. It may just mean a lower rate in the growth of production.

Over the medium term, as the current hedges in place roll off the books, the economics of each company’s major plays will be a bigger factor. Not every company offers breakeven thresholds for its major plays. But we’ll review a couple that do.

Investors should also keep in mind that breakeven prices will change over time, particularly as the cost of labor and services will also eventually decline in tandem with commodities prices. Indeed, the high price of energy until recently also served to inflate the prices of everything that helped produce it, making future production from some plays uneconomic even before oil started correcting.

According to Crescent Point Energy’s (TSX: CPG, NYSE: CPG) recent management presentation, the break-even points for operations in its six major plays range between USD40 per barrel of North American benchmark West Texas Intermediate crude (WTI) to just below USD60 per barrel of WTI, with a majority of third-quarter production coming from plays that are toward the lower end of that range.

ARC Resources (TSX: ARX, OTC: AETUF) reports that breakeven thresholds range from CAD40 per barrel of oil to CAD45 per barrel of oil and average CAD1.33 per thousand cubic feet (Mcf) of natural gas in its Montney, Pembina and Southeast Saskatchewan/Manitoba plays, which comprise the vast majority of its production.

Enerplus Corp (TSX: ERF, NYSE: ERF), which mainly produces natural gas, does not appear to offer breakeven analysis, though it did include a sensitivity analysis for 2014 funds flow per share in a recent presentation, which provides at least some inkling of what to expect.