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Cramer: Higher risk, higher reward energy play

(Click for video linked to a searchable transcript of this Mad Money segment)

If you have an appetite for risk, down 7 percent over 3 months, Jim Cramer thinks this energy stock worth a look.

It's Magnum Hunter Resources.

Part of Cramer's enthusiasm involves the company's explosive growth.

"Right now, Magnum Hunter is ramping up production like crazy. In its latest quarter, reported three weeks ago, the company posted a 110 percent increase in production year over year with management forecasting full-year production growth of 146 percent," Cramer said. "Also, the company's also got a terrific track record of growing its reserves."

In addition, Cramer said shrewd money pros, including the firm Relational Investors, are putting their capital behind this company.

"Relational Investors is one of our largest shareholders," said Magnum Hunter CEO Gary Evans on "Mad Money." "They love our high quality assets in the Marcellus, Utica and Bakken shales."

A rig hand removes drill pipe from a natural gas well at a hydraulic fracturing site in Washington Township, Pennsylvania.
Ty Wright | Bloomberg | Getty Images
A rig hand removes drill pipe from a natural gas well at a hydraulic fracturing site in Washington Township, Pennsylvania.

However, not all catalysts are bullish. As appealing as the company's growth may be, the balance sheet is equally unappealing.

"Not only is this one of the most highly leveraged companies in the industry, but it's capital expenditure budget far exceeds its cash flow, to the tune of roughly $388 million," Cramer said.

Because efforts to raise capital have been successful, Cramer said "Magnum Hunter should have enough financial breathing room to keep spending for the next twelve months, although there will be another funding gap that needs to be closed next year, too."

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Nonetheless, Cramer thinks Magnum Hunter is worthy of investment. "I like having a speculative name in the portfolio," Cramer added.

Because the company's real estate has big potential, "I'd take a closer look at Magnum Hunter."

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  • Jim Cramer

    Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

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