Mad Money

Bet on new energy IPO or sector veteran?

Differences between PE and PXD

(Click for video linked to a searchable transcript of this Mad Money segment)

When a new company comes public Jim Cramer often talks about bloodlines. But this time he means it literally.

That's because the newly public Parsley Energy is run by Bryan Sheffield, the son of Pioneer Natural Resources CEO Scott Sheffield.

"So, how do we figure out whether to bet on the father, at Pioneer, or the son, at Parsley?" Cramer mused. "How about a side by side comparison!"

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" that's leased or acquired just under 100,000 net acres in the Permian, with about 60 to 70 percent of that in their core area," Cramer explained.

"By way of comparison, the is a giant, with 825,000 acres in just the Sprayberry/Wolfcamp shale region of the Permian, which is the second largest oil field on earth."

Also the company also has considerable acreage in the Eagle Ford shale along with additional holdings.

In this category, Cramer said Pioneer has superior prospects.

Production growth

"Here Parsley takes the cake," Cramer said. Largely that's because Parsley was founded in 2008 and is therefore growing off a smaller base. "Last year Parsley tripled its overall production versus 2012. And it should continue to grow in excess of 100% for this year, and next year, too."

"Pioneer, on the other hand, is a senior growth company, meaning it's larger, more established, and while it's got terrific growth, you're not going to see them double or triple production in a single year because they're working off of a much higher base."

Balance sheet

"Parsley's balance sheet is in good shape, particularly after its IPO, which raised nearly $740 million," Cramer said.

"Meanwhile Pioneer has a nearly pristine balance sheet, and that's even after spending a great deal of money to build out their horizontal drilling capacity, something that should really start to pay off next year."

Cramer likes the financial positions of both companies.


Cramer said that even though Bryan Sheffield at Parsley Energy has as much crude running through his veins as red blood, his father Scott Sheffield, the chairman and CEO of Pioneer, simply has more experience.

And Cramer says track record matters. "In just the last five years, Pioneer is up more than 700%. That's a bankable track record."

Market mutiple

"Right now Pioneer trades at an enterprise multiple, the enterprise value divided by the earnings before interest, taxes, depreciation and amortization, of 9.5. Meanwhile, Parsley trades at an enterprise multiple of 8.5."

The numbers don't lie, Parsley is cheaper.

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The Decision

All told, Cramer said there's a lot to like about both of these companies. And he can endorse either stock depending on your investing style.

"If you want a consistent oil company with many years of solid high-teens production growth and a steady hand on the tiller, put your money behind Pioneer Natural Resources CEO Scott Sheffield."

"But if you're willing to take a risk and bet on a young up-and-comer with spectacular production growth, Parsley Energy CEO Bryan Sheffield looks like your man."

Call Cramer: 1-800-743-CNBC

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