Getting In on the Nat Gas Trade
It is possible, Cramer said Thursday, to play the dramatic increase in U.S. natural gas production without being held hostage to low nat gas prices. To do so, the "Mad Money" host recommends owning high-yielding pipeline players, like Kinder Morgan Energy Partners and Copano Energy .
With headquarters in Houston, Texas, Copano Energy owns roughly 6.200 miles of active natural gas gathering and transmission pipelines. It also owns seven nat gas processing plants, 200 miles of nat gas liquids pipelines, as well as a 50 mile crude oil pipeline. Copano has been expanding its infrastructure in Texas, especially in the high-growth shale plays, like the Eagle Ford shale. Cramer said the company is currently going through a major transformation, though.
Right now, two-thirds of Copano's business is tied to commodity contracts that fluctuate with commodity prices. The remaining third comes from fee-based contracts that provide a safer, more visible future revenues. By end 2012, though, this business model will have flipped, so that two-thirds of its business is fee-based.
"This is a company that's becoming a much more stable way to play the resources being extracted by the U.S. oil and gas shales with steady cash flows," Cramer said. "Since Copano's distribution vanes with how much money it makes, that also means the yield will become more stable, as well."
Copano's stock is up 48 percent since Cramer first recommended it on April 28, 2010 when it was trading at $24.95. Cramer thinks there is a lot more upside left in this name, but to learn more about the company, he invited CEO Bruce Northcutt on to "Mad Money." Watch the video to see the full conversation.
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