When faced with a difficult market environment, Jim Cramer likes to fall back on long-term themes that have been working. Take energy, for example. The “Mad Money” host noted there has been a boom in oil and gas production in the U.S. Oil-rich regions of the country, such as the Bakken shale in Western North Dakota or the Eagle Ford shale in Texas, are seeing lots of activity. So regardless of current economic conditions, oil and gas companies are benefitting from the recent drilling boom.
Of course, nervous investors may be hesitant to participate in a volatile market. Instead, Cramer recommends high-yielding energy stocks, which pay investors to wait for the market to calm and the economy to turn around.
Click ahead for Cramer’s top plays in the energy sector.
By Drew Sandholm and Bruno J. Navarro
Posted 21 November 2011
Cramer picked EOG Resources as one of the best single ways to play the many large oil discoveries in the U.S. The company was the top producer in the U.S.’s two largest domestic reserves: the Bakken shale in North Dakota and the Eagle Ford shale in Texas. Not only is EOG one of the largest oil and natural gas companies in the U.S., it also has proven reserves in the Canada, China, Trinidad, and the U.K.
Cramer praised the company for shifting its emphasis away from natural gas and concentrating on higher-priced oil and nat gas liquids instead.
Read on for more from Cramer on EOG Resources.
With headquarters in Oklahoma City, Chesapeake Energy is the second-largest producer of natural gas in the U.S. Although currently a top-15 producer of oil and nat gas liquids, Chesapeake hopes to be among the top-five producers in the next few years. Cramer thinks it's well on its way, too. The company is the most active driller of new wells. He called it the "king" of the U.S.'s unconventional drilling shales.
Chesapeake is in the sweet spot of the oil and gas boom here in the United States, and it's one of the most aggressive drillers in the country, and it's a textbook example of a natural gas oriented company that decided to make a switch to producing more liquids, like oil, since they fetch a much higher price than natural gas.
Energy Transfer Partners owns and operates a diversified portfolio of energy assets, including more than 17,500 miles of natural gas pipelines in Texas, as well as operations in Arkansas, Arizona, Colorado, Louisiana, Mississippi, New Mexico, Utah, and West Virginia.
It is also one of the largest retail marketers of propane in the U.S., one division Cramer doesn’t like. Energy Transfer Partners is in the process of selling off its propane assets for $2.9 billion, though. That's good news, Cramer said, because the propane business has long been struggling. He thinks ETP is more valuable without its propane segment.
Cramer likes the stock’s 8.1 percent dividend yield, too.
Click here for more from Cramer on Energy Transfer Partners.
Based on market capitalization, ConocoPhillips is the U.S.’s third-largest integrated energy company and operates in more than 30 countries. Its four core activities include: petroleum exploration and production; natural gas gathering, processing, and marketing; petroleum refining, marketing, supply, and transportation; and chemicals and plastics production.
Cramer likes this stock because of its 3.8 percent yield. He thinks the company’s buyback plan, massive restructuring, and upcoming stock split will benefit shareholders.
For more of Cramer’s comments on ConocoPhillips, click here.
One of the largest pipeline transportation and energy storage companies in North America, Kinder Morgan owns more than 37,000 miles of pipelines and 180 terminals. The Houston-based company recently struck a $21 billion deal to buy the rival natural gas pipeline operator El Paso.
"I think Kinder Morgan Energy Partners is still a buy off its acquisition of El Paso because there will be accelerated distribution growth over time," the "Mad Money" host said.
Based in London, Ensco provides offshore contract drilling services to the oil and gas industry. It is involved in offshore drilling of both oil and natural gas, and has a large fleet of rigs. Cramer likes the stock’s 2.7 percent dividend yield.
Core Laboratories creates technologies for the oil and gas industry. It’s taking advantage of the oil boom in the U.S., but the company is seeing many of its international projects take off too. Its products are being used in Africa, as well as the shales of Argentina.
Apache is an independent energy company based in Houston. It engages in the exploration, development, and production of natural gas, crude oil, and natural gas liquids. Cramer thinks it has lots of growth potential and expects its stock will continue to push higher.
While not among Cramer's top energy plays, the "Mad Money" host still thinks Eaton is worth watching. The Cleveland-based company places near the top of its markets — trucks, cars and aerospace — due to superior technology. And those markets are holding up despite weakness in the global economy.
Cramer thinks Eaton has become a better company since he first recommended it in October 2008. Its end markets will be strong than they were last year and he expects the same thing to be true for 2012.
Better yet, Cramer said, the stock is cheap on an earnings basis. He also likes its 3 percent dividend yield.
Read on for more from Cramer on Eaton.
A diversified global manufacturing and technology company, Emerson Electric focuses on such areas as network power, process management, industrial automation, climate technologies, and tools and storage businesses. The company has approximately 127,700 employees and 240 manufacturing locations worldwide.
Cramer doesn't consider Emerson among his top energy plays, but he doesn't think its stock is worth considering. He recently highlighted it as “one of the best places to play the recovery” for its exposure to fast-growing emerging markets and its history of raising its dividend – for the past 55 consecutive years. The stock currently pays a 3.2 percent dividend yield.
Get more from Cramer on Emerson Electric here.