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Apr.10

6:34 PM ET

Worst House in Best Neighborhood

Posted By:Tom Brennan

Topics:Stock Picks | Stock Market

Sectors:Oil and Gas

A recovery in U.S. land drilling should help oil-services company Baker Hughes catch up with its peers, Cramer said during Thursday’s Mad Money.

While the OSX Oil Services Index is up 18% since Jan. 22, Baker Hughes [BHI Loading... () ] has gained only 3%. Since a stock’s sector accounts for 50% of its performance, you might think BHI would be performing better than it has been. But a couple of key problems have held the company back: poor execution and the Department of Justice.

Apparently, Wall Street is unhappy with BHI’s unwillingness to get as aggressive as the rest of its cohort in penetrating foreign markets. Plus, the company is dealing with a deferred prosecution agreement it made with the DoJ over “misconduct in Kazakhstan.” The agreement expires in April 2009, and Cramer said he thinks there should be less pressure on the stock as that date approaches.

There are plenty of reasons to be positive about BHI, though. Fifty-eight percent of revenues come from overseas, and earnings are growing at 21%.

Then there’s the U.S. land drilling. The rig count here is up since BHI last offered guidance, so Cramer said there’s a good chance the extra business could result in an upside surprise, giving Wall Street just what it wants from this company.

With natural gas prices so high, drilling has taken off. XTO Energy [XTO Loading... () ], Chesapeake [CHK Loading... () ], Devon [DVN Loading... () ], Apache [APA Loading... () ] and Anadarko [APC Loading... () ] have all increased their output. The need for drill bits, drilling fluid and drilling systems go straight to BHI’s bottom line, and so does the well construction business BHI does for these firms after the drilling’s done.