A Better Oil Play Than Schlumberger?

The most bullish call on an industry during this earnings season came late last week, Cramer said Monday, from Schlumberger. CEO Andrew Gould on his company’s conference call said that oil prices would not only stay above $80, but they’d also head higher over time.

What makes Gould’s statement so important? Cramer said the CEO is to oil what Warren Buffett is to stocks. If Gould’s this bullish, then that means the drilling is about to start in earnest. These prices indicate there’s real underlying demand for crude – rather than the price inflation generated by commodities traders – and investors should try to make money off Gould’s call.

“You need to own a driller right now,” Cramer said, especially because he thinks oil prices will reach $100 over the next 18 months.

Investors could keep it simple and buy Schlumberger , which is something that Cramer endorsed. But he likes Weatherford International even more. Weatherford’s about a third of the size of SLB, so its operating leverage will be much bigger as demand for oilfield services improves.

Like, Schlumberger, Weatherford in its latest quarternoted improvement in both the US and overseas, but it’s the international business that Cramer is focused on. WFT expects Asia, Russia and Latin America to recover over the next few quarters, and the company has strong exposure to all of these places, plus West Africa. Possibly even better, though, is Iraq. Stability there equals more drilling, and both SLB and WFT expect huge gains if and when it happens. Though Cramer thinks Weatherford is even better positioned to take advantage of Iraq’s potential.

On its conference call, Weatherford maintained its guidance for 30% growth in international markets for 2010, which will be three times the industry average. Cramer doubted it would be long before investors catch on and start buying up WFT. But for now, half of the 30 analysts covering the stock consider it a “hold.” That leaves plenty of room for upgrades that will send the share price higher.

Right now Weatherford trades at a significant discount to Schlumberger, making the former too cheap, Cramer said. He expects Gould’s call alone to push WFT back to its 52-week high of $23.

“That’s a terrific 26% return,” he said.

Cramer’s charitable trust owns Weatherford International.

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