Exxon Mobil Corporation (XOM), Linn Energy LLC (LINE): Who’s The King?

I was considering Chevron Corporation (NYSE:CVX), but it did not make me that excited. Instead, we head to the natural gas staple Chesapeake Energy Corporation (NYSE:CHK). I like the hard luck cases, and Chesapeake has been beaten up quite a bit. Consistently low natural gas prices weigh on the company and it has decided to go into oil. Oil is not that bad, but I like the idea of flipping a U-Turn into a flooded street. Perhaps, you can get Chesapeake Energy Corporation (NYSE:CHK) even cheaper.

The company just needs to get itself together and start making money, which does not seem like a large imposition since that is its job. The company is in the midst of a regime change, but I am not sure the price will go lower. If I were to take a position, I might do it by going short puts at $17 or $18. The company has $33 million in cash against $13.5 billion in long-term debt, both those numbers went the wrong way between December 2012 and March 2013. It’s debt-to-equity is below 1, but that much of a difference between cash and long-term debt when the company is posting losses is a concern, though revenue improved in the most recent quarter.

I like the macroeconomic picture over the next few years, but the company itself needs some work done. Selling puts is a great way to hold your place in line, and since the price is above $19 now, you can pocket the premium and just wait. If you decide you dislike the company, you can close your position. You might have some premium left over or have to pay a little extra, which is not a problem.

Conclusion

Only Linn Energy LLC (NASDAQ:LINE) is ready to be bought here, and its dividend will smooth out any issues. I know the market has been hitting a rough patch, but Linn does not have a history of moving too much. Chesapeake Energy Corporation (NYSE:CHK) may be at the bottom, but there is no way to know and it is better to wait for the current bad news to work itself out. It would be great if profitable Exxon Mobil Corporation (NYSE:XOM) was hit with a round of downgrades, then it would be the time to get a position. Pick Linn and one of the other too, not all three, though do more research on Linn as well. I like the dividend yield and it has a lot of pros in my book.

The article Oil Companies Are Diversifying originally appeared on Fool.com and is written by Nihar Patel.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.