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Cramer’s Top 10 Natural Gas Stocks

Cramer’s Top 10 Natural Gas Stocks

No doubt the widespread use of solar and wind power is ideal, but it’ll be a long time before the mass adoption of those alternative energies is a reality. In the meantime, Cramer says, the US should shift its focus to natural gas. Emitting 30% fewer carbon-dioxide emissions than oil and 40% less than coal, nat gas is a much cleaner commodity than its two dirty cousins. And the US is sitting on a ton of it: a potential 2 quadrillion cubic feet or more. The drilling company Chesapeake Energy alon

No doubt the widespread use of solar and wind power is ideal, but it’ll be a long time before the mass adoption of those alternative energies is a reality. In the meantime, Cramer says, the US should shift its focus to natural gas.

Emitting 30% fewer carbon-dioxide emissions than oil and 40% less than coal, nat gas is a much cleaner commodity than its two dirty cousins. And the US is sitting on a ton of it: a potential 2 quadrillion cubic feet or more. The drilling company Chesapeake Energy alone has 46 trillion cubic feet of unproved reserve potential, which Cramer said is “enough to supply the US with most of its energy needs for the next 20 years.” Say bye bye to our dependence on foreign oil.

There are other benefits, too, such as job creation. Whether it’s through increased drilling, pipeline building or the switch to nat-gas-fueled vehicles, the economy would see millions of new positions. And what is Cramer’s biggest concern these days – and that of business Buddha Dan DiMicco, Nucor’s CEO? Jobs. Without them, we’ll never pull out of the depression/recession of the past two years.

Now the fun part: helping you to try to make money on the trend. In order for these companies to take off, nat gas needs a little love from Washington. After all, Congress will decide whether or not this fuel becomes a national priority. Even still, though, Cramer predicts the price per thousand cubic feet will rebound to $6 or $7 in 2010 from its present, and low, level of $4 and change. That means a number of key players will benefit. Here are the 10 names that Cramer likes most.

Posted 28 Oct 2009

Chesapeake Energy (CHK)

Let’s revisit Chesapeake real quick: A huge chunk of the US natural gas reserve is in Pennsylvania’s Marcellus Shale, and thanks to a new technology, horizontal drilling, we’re now able to tap most of it. Chesapeake owns nine of the 52 rigs in the Marcellus, as well as 1.45 million net acres there. This strong foothold makes the stock, Cramer says, “without a doubt, the single best way to play” it.

Let’s revisit Chesapeake real quick: A huge chunk of the US natural gas reserve is in Pennsylvania’s Marcellus Shale, and thanks to a new technology, horizontal drilling, we’re now able to tap most of it. Chesapeake owns nine of the 52 rigs in the Marcellus, as well as 1.45 million net acres there. This strong foothold makes the stock, Cramer says, “without a doubt, the single best way to play” it.

XTO Energy (XTO)

The price of natural gas could almost double in 2010, Cramer says, and XTO Energy is in great position to benefit from the move. Also, the company’s chairman, Bob Simpson, is helping to push the nat-gas agenda in Washington, which is essential to elbow out the powerful coal lobby.Note: Since first publishing this story, Exxon Mobil has made a bid to acquire XTO Energy.

The price of natural gas could almost double in 2010, Cramer says, and XTO Energy is in great position to benefit from the move. Also, the company’s chairman, Bob Simpson, is helping to push the nat-gas agenda in Washington, which is essential to elbow out the powerful coal lobby.

Note: Since first publishing this story, Exxon Mobil has made a bid to acquire XTO Energy.

Anadarko Petroleum (APC)

Anadarko is up about 14% since Cramer’s Jan. 12, 2009, recommendation. Imagine how the stock could do if the cost per thousand cubic feet reaches Cramer’s $6-$7 price target.

Anadarko is up about 14% since Cramer’s Jan. 12, 2009, recommendation. Imagine how the stock could do if the cost per thousand cubic feet reaches Cramer’s $6-$7 price target.

Devon Energy (DVN)

Sixty-six percent of this oil-and-gas driller’s properties are natural gas, and most of it is unhedged: just 35% for the fourth quarter and none at all for 2010. By not locking in customers early, Devon can now enjoy the full benefit of the commodity’s rebound. “If natural gas is really headed to $6,” Cramer says, “Devon’s the way to play it.”

Sixty-six percent of this oil-and-gas driller’s properties are natural gas, and most of it is unhedged: just 35% for the fourth quarter and none at all for 2010. By not locking in customers early, Devon can now enjoy the full benefit of the commodity’s rebound.

“If natural gas is really headed to $6,” Cramer says, “Devon’s the way to play it.”

Click here for Cramer's most recent report on Devon Energy

Ultra Petroleum (UPL)

Cramer isn’t the only person who thinks natural gas prices are headed higher. UPL CEO Michael Watford set his price target at $6, very close to the Mad Money host’s estimate. That’s probably why Ultra Petro is ramping up its drilling, especially in the Marcellus Shale. The company is digging 35 wells there, well above the originally planned 23.

Cramer isn’t the only person who thinks natural gas prices are headed higher. UPL CEO Michael Watford set his price target at $6, very close to the Mad Money host’s estimate. That’s probably why Ultra Petro is ramping up its drilling, especially in the Marcellus Shale. The company is digging 35 wells there, well above the originally planned 23.

EQT (EQT)

Margins are crucial in any business, and EQT is an industry leader when it comes to natural gas. Right now the company’s finding and development costs come in at just $1.14 per thousand cubic feet, which is significantly lower than its peers’ $2.16. Management even boasted that it could bring that number down to $1 in its Huron Shale reserves, in Virginia, and said that costs are down big in the Marcellus as well.

Margins are crucial in any business, and EQT is an industry leader when it comes to natural gas. Right now the company’s finding and development costs come in at just $1.14 per thousand cubic feet, which is significantly lower than its peers’ $2.16. Management even boasted that it could bring that number down to $1 in its Huron Shale reserves, in Virginia, and said that costs are down big in the Marcellus as well.

Range Resources (RRC)

Range Resources is another top-notch Marcellus Shale play. This wildcatter, as Cramer calls the companies that drill in hard-to-reach places, gets 86% of its 19.1 trillion cubic feet to 26.1 trillion cubic feet of reserve potential from the Pennsylvania nat-gas depository. Cramer also likes the sold balance sheet, with no debt coming due until 2012, and the possible sale of non-core assets to raise more cash. He thinks RRC “still has room to go much higher.”

Range Resources is another top-notch Marcellus Shale play. This wildcatter, as Cramer calls the companies that drill in hard-to-reach places, gets 86% of its 19.1 trillion cubic feet to 26.1 trillion cubic feet of reserve potential from the Pennsylvania nat-gas depository. Cramer also likes the solid balance sheet, with no debt coming due until 2012, and the possible sale of non-core assets to raise more cash. He thinks RRC “still has room to go much higher.”

Read more about Range Resources here

Halliburton (HAL)

“If you’re in the natural-gas drilling business,” Cramer said recently, “you’re going to have multiple years of good.” That’s why he’s so bullish on Halliburton.

“If you’re in the natural-gas drilling business,” Cramer said recently, “you’re going to have multiple years of good.” That’s why he’s so bullish on Halliburton.

Clean Energy Fuels (CLNE)

Cramer envisions fleets and fleets of nat-gas-fueled vehicles and the filling stations necessary to keep their tanks full. Enter Clean Energy Fuels, which owns the largest chain of natural-gas filling stations.

Cramer envisions fleets and fleets of nat-gas-fueled vehicles and the filling stations necessary to keep their tanks full. Enter Clean Energy Fuels, which owns the largest chain of natural-gas filling stations.

Fuel Systems Solutions (FSYS)

If old-model cars are going to run on natural gas, then someone needs to build the technology to make that possible. That’s where Fuel Systems comes in. And if Washington passes the NAT GAS Act presently working its way through Congress, which contains tons of incentives, credits and other subsidies to encourage the commodity’s development, then this company could see a big pickup in business. But what if that doesn’t happen?

If old-model cars are going to run on natural gas, then someone needs to build the technology to make that possible. That’s where Fuel Systems comes in. And if Washington passes the NAT GAS Act presently working its way through Congress, which contains tons of incentives, credits and other subsidies to encourage the commodity’s development, then this company could see a big pickup in business. But what if that doesn’t happen?