You are still getting paid a return which should equal around $.30-.40 over the course of the next 12 months.
This is a decent return for holding a position that is highly leveraged to the gas price. Unlike many energy investments, there is no risk associated with debt or finance and no big employee costs and bonuses to pay.
Gas production is sinking except in the Marcellus, which could top out very soon. Borrowing money to drill wells is pretty much over in this industry. Associated Gas production will be declining quite rapidly as oil drilling continues to decline. I like the risk reward here in all perpetual R/Ts but this one looks especially promising.
They aren't shorts, I think it is one of the larger holders, probably sellling to raise cash. Or it could be Calpers, liquidating fossil fuel investments for which they have been getting a lot of pressure to do, although mostly coal.
I picked up quite a bit day before yesterday, but it won't drop back to the $4.80's. I not selling the calls, very happy to just hold it. The distribution will still land up at just under 5% at this price. I have quite a bit to buy, but I am trying to be patient.
Bought 15000 share yesterday at $4.80-81. I will be there to buy a lot more if we return to that level. So, happy to buy what you have to sell.
They have a very small amount of net debt. They hold a lot of Regency units which gives cash flow until they sell them. They have a lot of acreage in the SCOOP which they will eventually monetize to acquire producing assets. I think they are head and shoulders over this and less than half the price. Doesn't make any sense.
For example, you can buy EROC for $2.48, it pays $.28 a year...over a 11% yield. Hardly any debt and well hedged. Ridicules that this trades at over twice the price. Do some research if you doubt my post.
go to the RT website and there is information that will answer you questions. Also you can Google O&G Royalty Trusts and it will address tax treatment.
13% of of total revenue ALL of which would have gone to the distribution since all deductions were already taken out. That is substantial. Amazing how stupid some questions are, should not have been necessary to explain this.
No, prices were about the same in January and February, look at the NG Chart. Also, HGT lost revenue on 5000 MCF which will return about NOW. Read the last NR.
The simple fact is, the price of oil is very difficult to predict. In the first half of 2014, the IEA was calling for OPEC to increase production because they thought oil stocks were heading for a substantial drawdown. That turned out to be incorrect. Now everyone has totally flipped their thesis to the thinking prices will struggle to climb much above $70 for the next couple of years. In fact, Saudi is producing about as much as they are capable of over an extended period. They will have to spend a lot to raise production and we don't know much about their intentions to do this. The operations in Yemen are costing them a lot because they are funding most of it and that will mean a drawdown of even more foreign reserves. Their exports will be falling for the next 4 months as they divert crude to burning for internal power demand. Their is no large storage reserve of crude in storage outside North America, since the Brent spreads don't support floating storage economics and most excess has been taken into Chinese and Indian Strategic reserves. I understand your concern over what could happen worst case, but the well hedged MLPs may lag markedly if the commodity prices move higher in the last half of 2015. I expect this current crude rally to have trouble at the $59-60 level and back off for several months BUT, I think will will stay above $50. The last quarter should see a move above $60. We get over $70, those MLPs you say are less hedged may see tremendous outperformance. I actually like EVEP because of the asset sale and the likelihood they will put the money to good use. I don't fault your approach because it will give you what you are looking for but I am more of a trader than a long term holder at the current time.
Actually, some pundits have expressed the idea oil could get back to $70 THIS year(not average). We will see Saudi cutting back exports(not production) soon as they use substantially more crude for internal power generation. So the Brent/offshore market will tighten until late Fall. We don't really know how the decline will play out in the U.S. even with the overhang in uncompleted wells as many companies just don't have the capital available to aggressively bring them on stream. The inventory overhang remains the only real obstacle to higher prices, but they could be absorbed quickly IF imports are scaled back as refinery runs are stout.. A lot of moving parts to this puzzel.
The fact is, they are hedged and the market doesn't like hedges when the commodity is rising. They shun hedged companies for less hedged because they presume the full benefit of rising prices will be captured. Rising prices from here would produce losses on the derivative position, the degree of which would vary depending on the specifics of the position. This company is effectively 100% hedged at this point and rising prices produce no incremental benefit to the company over the period those hedges exist. They will see some benefits on their financing arrangements and in reserves calculations depending on where prices land up over this year. On a relative basis, rising prices will help less hedged companies from where they were earlier this year and going forward particularly if investors think oil has bottomed. I think they could penalize this short term because of the recent hedging at $50 even though their average is still higher than the present price of crude.
See the SEEKING ALPHA article for the reasons why hedges can work against the stock price. As I posted previously, this could explain why some of these well hedged MLPs may have underperformed yesterday. The hedges help in a falling commodity environment but work against the company when the commodity is in an uptend.
Welcome to the World of COMPUTER driven hedge fund trading. Sometimes these markets don't have any liquidity except Computers, that is how you get flash crashes/rallies. Computers don't have emotions, they will buy or sell based on trading parameters in their software.
I think this has poor prospects for capital appreciation for this year. I know you prefer the hedged upstream MLPs which is perfectly understandable in the context of uncertainty over prices. HOWEVER, I think many people in this market are actually looking for exposure to low prices in hopes of realizing gains, so their attention may be on some of the other MLPs, that have some hedges but not of long duration, more risky, but more likely to appreciate faster IF oil bottoms out this year. Today's action in the markets seems to support this idea, most of the well hedged MLPs lagged quick remarkably.
I was able to sell the May $5Puts for 20 cents last week, can't do that now but if we drop some you might be able to collect 15 cents. I would actually like to be long this below $5. Once hot weather licks in the large short position in Natural Gas should see some good short covering, Seasonally, May -June is a good time to position long at least for a trade. The shoulder season is a time shorts can take advantage of slack demand and lack of a weather driver, but going into Summer is usually supportive for prices. I used 2 cents a month as an assumed distribution, which at $4.80 is a decent yield for this and no debt issues to contend with.