News that BHP Billiton is buying Petrohawk Energy is a tremendous validation of the staying power of oil and gas shales, Cramer said Friday.
BHP is making a bet on the shale assets Cramer has been talking about, such as Eagle Ford and the Permian Basin. It is buying Petrohawk Energy for $12.1 billion, or $38.75 a share.
So, now that BHP is willing to pay up for Petrohawk’s oil-rich acreage, Cramer said its time to revisit his price targets on his oil and gas shales plays.
First, he thinks Chesapeake Energy could be a big winner.
“Just like Petrohawk, Chesapeake trades at a huge discount to its net asset value because of worries about liquidity and overspending,” he said.
The “Mad Money” host thinks Chesapeake could go to $60 based on the Petrohawk premium. That’s 86 percent higher than where the stock is right now.
And what about companies that look like Petrohawk? Cramer said EOG Resources and Pioneer Drilling both have a ton of exposure to the Eagle Ford and Permian Basin.
EOG is the biggest producer in the Eagle Ford, with 520,000 net acres and they’re the top producer in the Bakken shale. Based on the Petrohawk price, Cramer thinks EOG could hit $160 a share.
Pioneer could be worth as much as $174 based on the deal, Cramer said, although he isn’t necessarily saying it will have that kind of rally.
And then there’s Cramer’s “wild card.” He thinks it may be worth taking a speculative position on Cheniere Energy.
“I think we will have found so much natural gas in this country that we will have to export it,” Cramer said, “and Cheinere’s got the plans and the budding infrastructure to do just that.”
But Cramer cautioned home gamers not to run out and buy these names right away. Instead he suggests waiting until later next week, when you will get better prices.
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