Mad Money

Cramer: Einhorn's frack attack was dead wrong

Not all energy investors created equally: Cramer
Not all energy investors created equally: Cramer

If there is one thing that Jim Cramer knows from his years spent covering the oil patch on the markets, it is that not all oil companies are created equally. Yet, sometimes they are attacked equally, and their stocks are equally impacted.

Einhorn, the founder and president of Greenlight Capital, spoke during the Sohn Investment Conference on May 4 and set his sights on arguing that oil frackers drill "lots and lots of holes" and burn through too much cash.

He cited Pioneer Natural Resources as the "mother fracker" and EOG Resources as the "father fracker" in his frack attack, calling EOG and various other shale-based oil producers overvalued.

"I think it is important to point out that EOG was singled out during the so-called frack attack by David Einhorn, the legendary short-seller, and I'm struggling to understand his beef with this particular company," the "Mad Money" host said.

In Cramer's perspective, this judgment impacted EOG's stock heavily, especially considering that the quarter was pretty good.

Hazlan Abdul Hakim | Getty Images

Yes, the company lost money, but it did manage to lower costs in the Eagle Ford, Delaware Basin and Bakken tremendously. Cramer noted that the company maintains it has better economics at $65 a share than it did at $95 three years ago.

"No one disputes that EOG has the best rate of return of all the independent oil companies in the United States," Cramer said.

EOG has a solid balance sheet, with the least amount of leverage. Additionally, its properties produce more oil per well than most of its competitors in the three shale plays.

And while Cramer does recognize that it is hard to value EOG based on its correlation to the price of oil, it just doesn't make sense to lump it in with the rest of the group in Einhorn's attack.

Which, by the way, Cramer thinks his frack attack is 10 months too late considering that crude is on its way back up and many of the independent oil companies are well off their highs. EOG bet that in this quarter oil would go back to the $60s—totally nailed it!

"I think it did everything exactly right. So how can EOG not be worth more if oil is going higher?" Cramer asked.

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In 2011, Einhorn directly attacked Cramer as a primary advocate in his famous "GAAP-uccino" attack on Keurig, formerly known as Green Mountain Coffee Roasters. Needless to say, Cramer felt plenty of gratification when the New York Times wrote in November that Greenlight Capital had an entry point of $47.59 on its short on Keurig, and covered the position at $67.

The same guy who boned the big Keurig short has now declared EOG as overvalued.

"Like every hedge fund manager with good presentation skills, we lap it up. But with all due respect, I think he was dead wrong to single out EOG with the rest of the group," Cramer said.

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