I like the prospects for natural gas from here forward. There may be a little more downside but not much. Long term there is a lot of upside because 1) LNG exports start from Sabine Pass in late 2015 2) a 24 inch natural gas pipeline from the Eagle Ford to Mexico will be completed in 2016. Opening new markets via export should do much to prop up the price.
Thus, I like Linn Energy at today’s price. They got beat up quite a bit after reducing their generous distribution and now yield about 10.5%. A raptor can do even better by writing at the money puts. On Friday, I wrote LINE150417P00012000 for 1.05 a contract. This is very attractive. My “downside” of getting assigned means I get LINE at a discount price of 10.95 which would yield 11.41% with monthly distributions. Downside (break even) protection is likewise about 8.25% below Friday’s closing price.
I also like anything picks and shovels on the transportation and storage side of domestic oil and gas. A lot of infrastructure has to be built over the next decade and there is a huge profit opportunity here. Be sure to check back on Monday when the Lizard King outlines the next set of puts he is writing on Chicago Bridge and Iron (CBI).
Devour your prey, raptors!