With the forthcoming Berry acquisition (and the odds are very strong that it'll go through) Linn's future becomes considerably more promising. Enough so, I think, that the low 40's should be a reasonable basing point a bit later in the year with a further climb in 2014. For those who agree, I suggest taking a look at the January 2015 options, strike at 35. Ignore the current asking price and start with a bid halfway between the bid and ask. You could well pick them up for 3.30 (a better price than my average buy-in). Break-even would be, say, 38.30 and there's nearly two years before expiry. Even now it's in the money by 2.20, so the premium for that long-term play is less than a buck and a half. I find these options a compelling buy.
I agree: The BRY acquisition gets them back to a reasonable Equity/debt ration,
it makes them more oily, BRY's gas is mostly used for their EOR steam oil recovery
program as I understand it...they are increasing their oil production while decreasing their
NG production mix as well...also, with the higher gas and oil prices lately, it gives LINN a great opportunity
to hedge out through 2018 at which time there may be several NG export terminals in operation.
Also there will be many opportunities to bolt-on, they are also now trained in Co2 EOR with there
JV with Anadarko, that gives them another tool in their box of optionality growth. They ought to
purchase Triangle petroleum and/or NOG this year to increase the North Dakota and be a real
player up there.
Ah there is the interesting part. Using natural gas to change the viscosity of oil for recovery is way out of date. Ngas price in America are still crashed but that will not last forever. EOR advancement really does not appear to be in LINEs valuation as far as reserves.
I thought that the factors of time to expiration, volume , and volatility were the main drivers of option pricing. BBRY calls and puts for expiration dates (April and March 2013) were almost all down as of 9:40 even though the underlying stock price was UP over 3 percent. (I post this question here due to an inability to access the BBRY message board.) How can option pricing for C&P be both down with a higher stock price?
Marv, I think that the more expensive Jan 2015 30s require someone like me to put up lots more cash on margin, the costs of which wouldn't compensate for the minimal advantage in premium over the Jan 2015 35s. Also, liquidity for the 30s isn't anything like that of the 35s. Try buying 50 or so of the 30s (I've got 55 of the 35s) and you might not even nab the small premium advantage between the two.