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Cramer’s Take on Key Energy Services

Monday, 9 Jan 2012 | 7:30 PM ET
Cramer's Key Energy Play: Oil
Mad Money's Jim Cramer explains why he thinks, hydraulic fracturing company, Key Energy presents a fabulous buying opportunity for investors.

Every other commodity has been pummeled lately, but the price of oil has refused to go down and stay down. Be it production disruptions in Libya or instability in Iraq, Cramer thinks there will always be some geopolitical mess on the horizon that will send oil higher. Around the world, there is just too much demand for oil and not enough supply, which is why Cramer likes oil and gas driller Key Energy Services.

The Houston-based company is what’s known as a well servicing contractor, meaning it does pretty much everything needed to keep oil wells working, including maintenance or repair. With 787 rigs in operation, It’s actually the largest operator of onshore well service rigs in the U.S.
Cramer likes Key Energy Services because it’s engaged in hydraulic fracking, which is the controversial drilling technique performed in oil-rich shales. Fracking is a crucial part of horizontal drilling, a method that’s more complicated than traditional drilling. The oil wells created by horizontal drilling are up to five times more service intensive than conventional wells and that means more business for Key Energy Services.

Right now, KEG is trading off its 52-week high and is selling for just 9.7 times forward earnings with a 12 percent long-term growth rate. To Cramer, that’s incredibly cheap and he thinks this stock is a buy, buy, buy.

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