Executive Decision: Ultra Petroleum CEO Mike Watford

The oil and natural gas stocks are down enough that Cramer’s giving them a closer look. One of his favorites right now is Ultra Petroleum, a great exploration and production company.

Ultra’s costs are about half that of its peers, and it’s growing reserves and production well into the double digits each year. In fact, Ultra expects production growth to average 33% a year through 2010. So the decline in natural gas prices is not hurting this company.

What’s hurting the stock, though, is massive hedge-fund selling. Cramer’s talked about this before. Poor performance has clients demanding their money back, so hedge funds are unloading huge positions to raise cash. Ultra’s dropped to about $47 from $102 as a result.

Cramer thinks that’s just too cheap, for investors and potential acquirers. If Ultra earned the same price as other recent nat-gas acquisitions, then the stock would be trading at just about $58 a share, an $11 premium.

Ultra Petroleum CEO Mike Watford appeared on Mad Money Tuesday to talk about his business. Is Ultra overly sensitive to nat gas prices? Does your company hedge against future prices? How come no one talks about your Pindale reserves? These are all questions Watford anwered for Cramer.

Watch the video to see why Cramer thinks Ultra Petroleum is a buy.

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    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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