A positive sign for natural gas
Range Resources promises to disclose the chemicals it uses in fracking, adding transparency and value to the whole industry.
By Jim Cramer, TheStreet
Will they all follow Range Resources (RRC)?
In this already long, hot summer, the biggest bust of all commodities, and all things financial, is natural-gas futures. They can't get out of their own way. Of course, most of that is due to the glut that producers are generating as they hit pay dirt in various shales, bringing new gas on stream.
But the fuel and natural-gas companies have not helped the cause. They have become targets of environmentalists over fracking, the method of blasting with water sand and chemicals that breaks up the shale and allows the natural gas to be unleashed.
Last night on my show, we heard from John Pinkerton, head of RRC and the original Marcellus Shale driller (Pennsylvania/West Virginia). Pinkerton said his company will disclose all of the chemicals used in the process, which he said are really just variants of household chemicals we all use.
Of course, immediately, we had to think: If the chemicals aren't that harmful, then why didn't these companies disclose them in the first place?
To which I say, "Beats me."
Range "broke ranks" because, as Pinkerton said, the industry has to do a better job at explaining itself and why drilling isn't hazardous. Range is sensitive to the idea that natural-gas operations are right up there with extracting coal and drilling offshore as hazards to the environment.
I think anything that makes fracking more transparent and less of an enemy to environmentalists adds value to the whole group.
The value case for owning natural gas is that your company is worth more to a major producer than it is to you. If Range can get the ball rolling on the transparency front and continue to find low-cost gas like it does, it is easy to see how this company could be swallowed up if its price stays this low.
I know that Exxon (XOM) paid too much for XTO. But from the looks of the problems with drilling offshore in this country, combined with the lack of alternatives, natural gas is here to stay. And the companies with the most natural gas in the areas where it is needed -- the Northeast -- have the most value, if they are allowed to extract the resource unhindered.
Range has the most at stake and fits that bill perfectly.
The disclosures can only help, not hurt, the story. And the story, even at $4 natural gas, is a darned good one.
At the time of publication, Cramer held no positions in any stocks mentioned.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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