Many casual followers of the energy space fear the words "hedging" and "energy company" thanks to Enron. In reality, hedging oil and gas production can be a very effective tool for a company, and can be a way that investors like you and I can analyze the future. Different types of companies can employ different hedging strategies, which is why you see LINN Energy (NASDAQOTH:LINEQ) and BreitBurn Energy Partners (NASDAQOTH:BBEPQ)-- both exploration and production MLPs -- hedge a very large part of their production while Big Oil doesn't.
Even more interesting, though, is that we can use a company's hedging strategy to get a feel for oil and gas prices in the future. Tune into the video below and you can find out why Ultra Petroleum's (NASDAQ:UPL) decision to move away from gas hedging is a telling sign for the future of gas prices.