Kinder Morgan hunting for acquisitions and $75 oil

With the price of crude making a dramatic rebound lately, Jim Cramer thinks it is time to circle back to his absolute favorite energy stock, Kinder Morgan.

Kinder Morgan is a very large pipeline operator that basically acts as a toll-road operator for the transport of natural gas, refined petroleum products and carbon dioxide. This means it is not as sensitive as most other energy stocks to the fluctuation to the price of crude.

However, Cramer sees that it is perfectly positioned to benefit from many growth opportunities in the pipeline space.





The entrance for the Kinder Morgan Tank Farm in British Columbia, Canada.
Ben Nelms | Reuters
The entrance for the Kinder Morgan Tank Farm in British Columbia, Canada.

Think about it—most oil companies have announced that while they are cutting their drilling budgets, they are actually increasing production this year. And what better company to transport this oil glut to the market, than Kinder Morgan?

To get an inside perspective on the oil patch and where it could be headed this year, Cramer spoke with Rich Kinder, the CEO of Kinder Morgan International.

"You can't meet world oil demand at a $45 or $50 WTI price. I don't know what the magic number is, but I suspect it's something in the $65 to $75 range. Eventually, to get equilibrium, you are going to go back there," said Kinder.

Kinder Morgan recently made an opportunistic acquisition of Hiland Partners for $3 billion. This was a Bakken shale based pipeline previously owned by Harold Hamm, the CEO of Continental Resources.

Kinder shared with the "Mad Money" host that the company plans to make additional acquisitions, as this is the perfect environment to do so. However, any acquisitions made will be done so to stay within the toll-road concept of the company.

"We are on the prowl; we would like to make more acquisitions, if they can be accretive acquisitions that work for our shareholders," Kinder said.

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As for the future of oil prices, Kinder expects the long-term trend to be upward for the price of oil.

"I think anything can happen over a short period of time, but long-term, you can't sustain these low prices," said Kinder. "If you want to look at the macro economics of the situation, we have a total world demand in the low 90 million barrels per day. We are someplace between 1.5 to 2 million barrels oversupplied at the present time. This is not like we have 5 million barrels of excess capacity sloshing around."

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