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Linn Energy CEO Mark Ellis on the company’s investment in natural gas assets and the outlook for natural gas prices and demand.
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Stocks and oil prices roaring ahead so far in 2012 that natural he's not following this party.
-- up more than 10% this year alone.
Yet it is not stopping Linn Energy -- stashing up one point two billion dollars worth of US natural gas assets from BP this week.
Mark Ellis is the chairman president CEO -- Linn Energy joins us now and a Fox Business exclusive.
Thank you so much for coming in -- appreciate it one point two billion in Kansas 600 million in Texas Oklahoma your bottom a lot of property that has gas audit.
The thing I don't understand if natural gas is gonna stay cheap for awhile and I think you agree that it will whereas the incentive.
To -- so deeply into it right now.
Well this -- -- understand our business model are a whole model is about buying mature assets in the US.
Optimizing those in being able to return a tremendous amount of that cash -- unitholders in the form of the distribution.
When we buy those assets will hedges for five years so -- -- -- even in today's price environment capture the cash flow margin that currently exist on those assets.
Lock it in for five years there's no risk over that five years and we have all that option -- future gas prices beyond that -- here.
Beyond the fifty year -- -- can you venture -- guess I know this would be awfully difficult but -- two dollars and 58 cents per per unit million British thermal units for natural gas.
Just in the past couple years we used to be at fourteen dollars we could do you foresee that -- five years could we get back up to that a couple of what would take us there as a catalyst.
-- one thing I'd say we can't do is predict price that's why we hedge for five years we thank.
It's always going to be a cyclical business we're gonna have high cycles low cycles we trying to hedge for five years to -- those cycles.
The other thing we do we hedges specially on this particular opportunity we has about half of this production in the form -- put so we said in floors but we kept unlimited upside.
So for us to see really higher gas prices we're gonna have to creates more demand domestically for that.
And that we're doing everything we can't through American natural gas alliance to educate.
The the lower 48 or are are out constituency base here in the US to think about ways to burn natural gas to make it -- are there energy solution.
Everybody's saying it more about that as oil continues to you don't have to do much except -- -- -- what the oil prices are doing.
Are you suspecting that many American households are going to be many more.
In the next year when they see the gas prices are gonna stay low we'll switch from oil to gas.
Well -- you know you gotta think it is the most a cost effective fuel source for -- right now in the US and we talked about converting -- for for major fuel sources for vehicles for that matter for.
-- utility vehicles and long haul vehicles and when you look at it on a value per per gallon basis is -- 40% of what we're currently pain at the pump.
From from a cost standpoint so the more we can convert to natural gas -- the better off we'll be.
Well you've got Boone Pickens -- they've also got a company like Ryder System saying you know what why not -- convert our trucks to run on natural gas.
Do you see -- day I would imagine you hope for a day where.
Cars on the street run on natural gas and and is that a Smart thing to -- for.
I I sure hope we can get to that point.
That's gonna take some infrastructure build out to be able to do that but I sure hope we can get to that point because it is an abundant fuel here.
You know -- the technology development that develop in this continues to improve.
In nature but we're creating a lot of gas growth at this point in time in our organization we're hopeful that we'll see that demand growth.
It's funny to look at your stock it's been a -- five years -- -- a great a couple of years out especially recently so good to see -- that -- best of luck with these new purchases made -- drilling go easy.
Okay thank you very much Mark Ellis chairman president and CEO of --
