Mad Money

Buy Nabors

Drilling Profits

Idle onshore oil drills had gotten dusty thanks to oversupply and little demand, Cramer said Monday, but resurging prices for black gold and natural gas are calling these machines back to duty. The cobwebs are being brushed off and the engines revved up as companies race to bring more product to market while business is booming.

Nabors, with its 89 idle rigs, stands to gain the most from this trend, Cramer told viewers today. “Those rigs will be needed,” he said, “and Nabors will make a killing when it contracts them out.”

The stock, trading at nine times earnings, is far below its five-year average multiple of 16, so NBR is cheap right now. If the multiple worked its way back to just 13 on the strength of increased drilling, this $34 name would pop to $48, a 40% gain.

But don’t expect a rush to profits. Cramer said he thinks there’s still at least one bad quarter left in Nabors as the company is forced to charge lower rates on its new contracts. Canada could show weakness this year, too, but “after that I’m convinced the U.S. onshore drilling recovery will fully kick in,” Cramer said, “and take Nabors higher.”

Nabors is a long-term story, which will play out during the year, not over the next few weeks. If the stock dips after a tough earnings call, just dig deeper and use the opportunity to buy some more.

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