I have been somewhat amazed at the rally in natural gas master limited partnerships (MLP) over the last 10 trading days or so. The nymex spot price of natural gas is right at  $6.00 up about 50¢ from the recent lows. This relatively small increase in price does not account for the tremendous price increases in the gas MLP's.

If you have not been following the European natural gas news, here is a quick recap. Before year-end Russia was threatening to cut off NG shipments to Ukraine because that country had an outstanding gas bill of about 1.5 billion euros. Ukraine managed to scrape up the cash and pay their bill by 12/31. Now the Russians are accusing the Ukrainians of stealing some of the gas that travels by pipeline through Ukraine to the rest of Europe. Russia has now cut off the gas flow entirely to the Ukraine. Eastern and Western Europe get the majority of their natural gas from Russia and during normal times 80% of that gas flows through the Ukrainian pipeline. Winter is Europe is very cold and will be getting colder if the gas stays shut off.

I am really not sure if these events are affecting the stock prices of U.S. gas producers, but it is a good excuse to look at these companies. Here are 4 upstream natural gas producers (upstream means they drill and get the gas out of the ground) that have had recent run-ups in their stock prices. They are all MLP's, dedicated to paying out the majority of their free cash flow as dividends. Each stock is listed with its recent (since around Christmas) share price gain and current yield:

• Atlas Energy Resources LLC, (NYSE:ATN) +42.3%, yield: 16%.
• Breitburn Energy Partners LP, (NASD:BBEP) +77%. yield: 23%.
• EV Energy Partners LP, (NASD:EVEP) +57.5%, yield: 15%.
• Linn Energy LLC, (NASD:LINE) +36.8%, yield: 15%.

Other natural gas companies have had nice gains, but not at the levels of these MLP's. These stocks were severely oversold with falling energy prices and still have a lot of upside potential if they can maintain their current dividend levels. Historically these stocks have carried yields in the 8% to 10% range, so you can see the market is currently pricing in some payout reductions. If you are looking into these companies make sure you understand how much of their production they have hedged and at what levels. This will give you a good indication of their ability to maintain the current payouts.

A continued rise in oil prices will help natural gas prices as will continued cold weather in North America. If you look at where these stock prices were 6 months and one year ago, you will see the recent price gains are just a small step to regaining their former values. It is also nice to collect some handsome dividends along the way. Be wary of any pending distribution cuts. I would look at some sort of hedge if I was holding one of them approaching the usual distribution announcement date. A little put option insurance might be a good idea.

For right now, this is definitely a group on a strong positive run. A cold winter in Europe may end up providing excellent profits to shareholders of U.S. natural gas companies.

Note: I have a personal long position in ATN.