Here’s a question worth considering: If natural-gas prices are at seven-year lows, then why are the sector’s companies pouring even more money into drilling? Capital expenditures should shrink when the commodity declines, but they’re not.
Take a look at Ultra Petroleum , for instance. The company cut its drilling budget by $50 million two quarters ago only to reverse direction and increase it last quarter by $65 million. Ultra is also pushing deeper into the Marcellus shale, a key natural-gas reserve in Pennsylvania, by digging 35 wells rather than the 23 originally planned, and it’s taking on debt to do it.
“You don’t do that when you expect things to get worse,” Cramer said.
The Mad Money host guessed that companies like UPL are predicting a nat-gas comeback. But to find out for sure, he invited Ultra Petroleum CEO Michael Watford onto the show. Watch the video for the full interview.
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