Cramer: Some wise words on energy
Jim Cramer | firstname.lastname@example.org
But the smartest guy I know in the patch, EOG Resources CEO Mark Papa, the man who deemphasized natural-gas drilling when everyone else was going gaga for it, is saying the opposite.
He told me yesterday on CNBC's "Mad Money" that natural gas, at a two-month high, has gotten ahead of itself and that crude's still in short supply globally and that $105 a barrel is the natural price for the stuff.
Papa is a big believer that North America can be energy independent in a decade through a combination of aggressive drilling aided by new technologies, plus exploitation of natural gas. But he just doesn't see the will in the country to exploit natural gas for what it can be used for, which is why he is willing to let his own drilling budget go entirely away from natural gas.
He's putting all of his chips on oil and natural gas liquids and thinks natural gas should be sold. Only a very cold winter can alleviate the glut and Papa isn't the kind of guy who bets on the weather.
The good news is that he thinks that the Eagle Ford shale is the biggest find since Prudhoe and the more he drills the bigger it is, telling me that the 800 pound gorilla is developing into the 1,000- pound gorilla. He is so sure of its potential that his company built its own rail line out of Texas to go to Louisiana so it doesn't get stuck in Cushing getting a lower price. He's getting the equivalent of Brent prices for American oil.
Now, I am not as bearish on natural gas as Papa or my charitable trust wouldn't be buying Devon here (another oil and gas company that, while shifting toward oil with alacrity, still has much more exposure to nat gas as a percentage of revenues than EOG.
But I do think that his skepticism must be aired because everywhere I go I hear there's a bottom at last in natural gas and this two-month high may be the beginning of something big.
I hope it is. But hope should never be part of the investing equation.
Disclosure: Cramer's charitable trust is long DVN.