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CORRECTED - UPDATE 1-T. Boone Pickens bullish natgas in 2015
July 12, 2011 / 6:11 PM / 6 years ago

CORRECTED - UPDATE 1-T. Boone Pickens bullish natgas in 2015

(Corrects paragraph 11 to “buy” instead of “sell”)

* Pickens says his hedge fund is ‘up on the year’

* Does not expect natgas in 2015 to drop below $5

* Pickens owns stake in Marcellus Shale (Recasts, adds details throughout)

By Jeanine Prezioso

NEW YORK, July 12 (Reuters) - Billionaire energy investor T. Boone Pickens who has urged the United States to move toward vehicles fueled by natural gas instead of gasoline, said on Tuesday he was not a huge holder in gas futures.

Pickens, who has been buying up acreage in U.S. land rich with gas deposits, said he is bullish on 2015 natural gas prices, pegging them above $6 per million British thermal units, but has a “somewhat minor position” in them, holding options that convey the idea that gas will rise above $6, but not above $8.

“I‘m not a big holder of natural gas,” he told Reuters, referring to his position in financial futures. “I‘m a big holder in clean energy.”

Pickens, a vocal proponent of natural gas-fueled vehicles, said he has sold $8 call options, bought $6 call options and sold $5 put options in 2015 New York Mercantile Exchange natural gas futures conveying his belief that prices will not drop below $5 and will rise above $6, but not above $8.

He did not disclose specific months or periods within the 2015 timeframe.

NYMEX natural gas prices for calendar year 2015 were $5.73/mmBtu on Tuesday, according to Reuters data.

The front-month NYMEX gas contract was trading around $4.34 on Tuesday afternoon.

OPTIONS STRATEGY

Selling put options to collect premiums and finance the purchase of call options is a common trading strategy.

Buying a call option allows the holder of that option to purchase gas futures at that price even if they are trading higher. Selling a call option means the seller may have to pay out on the option should it rise to that level or higher.

A put option sale essentially sets a floor under the price level to which an investor thinks it will fall.

If the price should drop below $5, Pickens would still have to buy it at $5 from whoever purchased the option.

Pickens, who has shares in a number of natural gas producers and related energy companies through his hedge fund Dallas-based BP Capital said the fund is “up on the year,”

He declined to disclose specific equities or other holdings at the end of the second quarter.

Pickens is co-founder of Clean Energy Fuels Corp (CLNE.O) which sells compressed natural gas and liquefied natural gas that fuels light and heavy trucks.

He also said he’s been buying up U.S. shale acreage including in the Marcellus shale, one of the largest natural gas fields in the world located in the eastern U.S. [ID:nN1E76B0WF] (Reporting by Jeanine Prezioso. Additional reporting by Matt Daily; Editing by David Gregorio)

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