Let’s take a quick second to review Cramer’s oil thesis: Supply and demand – not speculation – is driving the price per barrel to the high $130s. There just isn’t enough oil in the market to bring the cost down. That’s why Americans are paying more than $4 a gallon to fill up their gas tanks.
The solution seems easy enough. Why don’t we just bring more oil to market? Well, that’s because the biggest known reserves aren’t producing like they used to. So to find new reserves companies have to dig deeper in harder-to-reach places. It’s the only way to tip the scales back toward the supply side.
All week Cramer’s been highlighting these wildcatters, the drillers that go where no driller has gone before to find new sources of oil. These picks wouldn’t work if oil were trading at $20 a barrel. The costs would be too high for too little payoff. But with oil about $136 a barrel, investing in wildcatters makes a whole lot of sense right now. Cramer’s recommended Petrohawk Energy and Rex Energy so far, and Wednesday he gave the thumbs-up to BPZ Resources, a Peruvian name that operates both on and offshore.
BPZ’s standout quality is its rapidly increasing production rate. This year’s first-quarter tally of 500 barrels a day is expected to climb to 6,000 a day by the third quarter, 8,000 by the end of 2008 and 11,000 barrels a day by the end of 2009.
BPZ holds 110 million barrels of certified reserves in the Corvina offshore field and has plans to drill a new well there soon. The results from that new tap could animate the stock as early as July. Then there’s the company’s intention to start drilling in a completely different area, the Albacora field. Plus, BPZ is hoping to move away from being a pure oil play to add natural gas to the portfolio.
Everything seems to be moving in the right direction for BPZ.
“With oil prices this high,” Cramer said, “it seems like they might as well be pumping money out of the ground.”
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