"As the global economy rebounds late this year or next year, demand for energy will rise again, sending prices of crude and natural gas higher," says growth and income expert Bryan Perry.
In his top-notch The Cash Machine, he explains, "With energy assets cheap by historical standards right now, I want to increase our exposure to LINN Energy LLC (NASDAQ: LINE), a best-in-class inflation hedge."
"Founded in 2003, LINN is an independent oil and gas Master Limited Partnership (MLP) that completed its initial public offering (IPO) in January 2006.
"The company focuses on the development and acquisition of long life properties, with its properties currently located in California and in the Mid West.
"At the end of 2008, the company reported that its proven reserves stand at 1,660 Bcfe, which is comprised of 51% natural gas, 31% oil and 18% natural gas liquids (NGL).
"And LINN Energy noted that it 66% of its 6,716 productive wells were in operation. Average proven reserve life of each well is approximately 21 years.
"In addition, the company has a superior record of more than replacing production as evidenced in their fourth-quarter financial results.
"LINE replaced 282% of production at a cost of $1.44 Mcfe, increased proved reserves by 17%, increased daily production by 144%, increased EBITDA by 92% and hedged 100% of production for 2009, 2010 and 2011.
"This is the most attractive aspect to the LINN Energy story -- their hedging strategy. As per 2009 guidance, the company is 100% hedged at weighted average prices of $102.21 per Bbl and $8.32 per MMBtu for oil and gas, respectively.
"By locking in prices that are more than twice the current price of oil and gas for the next three years, the company can comfortably pay out the stated $2.52 annual distribution, equating to a 15.10% yield.
"Knowing that the dividend is secure for at least the next 36 months is very reassuring to those seeking that kind of income visibility.
"I think once investors realize how insulated LINE is with its hedging program, the stock will make its way higher. We are adding LINN Energy to our Aggressive High-Yield Portfolio."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
Closing Bell: Dubai sends jitters throughout the market (S, BBY)
Heinz looking good after the second quarter?
Why isn't Bank of America updating its shareholders on CEO situation?
Reader Comments (Page 1 of 1)
5-19-2009 @ 10:08PM
Iridium said...
Energy prices cheap by historical standards!!!!! Is this guy insane.
Fine cheap compared to last year but not by historical standards. Energy prices are way overinflated by historical standards.They want to profit off of the misery of others. A few billion here and there, who cares. This guy won't ever have to worry about $5 a gallon gasoline and a $20k heating bill.