Dan Notestein

Oil Income Stocks Decline to New Price Lows

In general, Wulf makes good points, but he's clearly wrong in this case about the amount of hedging from LINE versus PWE and others. LINE is considerably more hedged, and their plan to swap their current 5 year hedging position for a shorter 2 year term, higher valued one looks like a great plan.

NOWHEREMAN claims LINE management 'screwed up" in 08, but in hindsight, clearly they didn't. They hedged their risk well, it's not really subject to argument now.

Despite Wulf's mistake here, his general analysis of O&G stocks is solid. In particular, he's right on the money about the MLP's with 50% IDRs such as KMP. That scams like this are so easily perpetuated in the face of direct warnings is a clear sign that we're doomed to repeat stock market disasters for many years to come.

Oil and Natural Gas Will Decouple - Big Time

I believe the market's negative take on LINE is because of it's long term hedges of around 85% of it's oil (6 years) and nat gas (5 years) production. These long term hedges look even worse on their books, because the 5 years of losses due to increasing prices show up immediately on their books all at once, whereas their presumed profit from the increased prices doesn't get accounted for until they actually produce it.