The next energy rally: Natural gas or oil?

When the smartest guy in the sector contradicts the crowd, you at least stop and listen.

By Jim Cramer May 10, 2012 10:41AM

Lotta smart guys are saying we have put in a bottom in natural gas and a top in oil.

 

But the smartest guy I know in the patch, EOG Resources (EOG) CEO Mark Papa, the man who de-emphasized natural gas drilling when everyone else was going gaga for it, is saying the opposite.

 

He told me Wednesday on "Mad Money" that natural gas, at a two-month high, has got ahead of itself and that crude is 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.

 

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The good news is that he thinks 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 won't get stuck getting a lower price in Cushing. 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 (DVN) here (another oil and gas company that, while shifting toward oil with alacrity, still has much more exposure to natural gas as a percentage of revenue than EOG).

 

But I do think 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.

 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust, and is long DVN.

17Comments
May 10, 2012 11:13AM
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more research on some of his nastiest scams:

gold at 1900 now 1600.............he said that eveyone should own gold

nyx at 90 now at 30 ....................he said this was his STOCK OF THE YEAR for 2010

aa at 18 now at 9...................he said this was his pick for BEST DOW STOCK OF 2011

shld at 150 now at 50...............he said never bet against ceo and buddy eddie lampert

 

i could list more but these are some of his most successful rip offs

research this unfunny comic..........don't take my word 

May 10, 2012 11:06AM
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he repeats his garbage scam i repeat his hack advice ............i will continue to point out

this scam artisist's crappy pump and dump game until he quits ripping people off

 

today's fact: just a few weeks ago this hack said $5 gasoline was inevitable.........the national average struggled to maintain $4............just another bad call or another pump and dump?

 

research one of his worst scams:chesapeake energy and it's crooked ex hedge fund

buddy mcclendon...........don't take my word ...............look it up

May 10, 2012 12:02PM
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Stick with big name / Iconic stock products that pay dividends and you won't have to follow anyone - You'll be a leader!
May 10, 2012 11:29AM
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cnbc wears the knee pads for their advertisers. cnbc,goldman sachs, madoff are all clones.kiernan,drugster krudlow,lips bartiromo carry the water for their crony buddies and will say anything to please their masters. cnbc (can not buy credibility) should be turned off as they can not be trusted for unbiased financial reporting.
May 10, 2012 2:17PM
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Watch yourself  wallstreeters, EOG's CEO Mark Papa is trying to drive the NG price back down so he can buy it back cheap! Don't let him fool you! You'll make him look good if you do!
May 10, 2012 4:32PM
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Smile

 

Let's root for gas as a "best" energy source!

May 10, 2012 12:46PM
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Tell me more... oh great one! you started as a failure got lucky once and now your still a failure with a column on msn.
May 10, 2012 1:15PM
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Natural Gas is having a dead cat bounce.   There's so much of it and not enough demand or storage.   Look for it to sink back down to the lows of $1.53 by the EOy.
May 10, 2012 3:15PM
May 10, 2012 12:16PM
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i forgot about his holy grail call ..............market down 400 since this latest rigorous call
May 10, 2012 11:44AM
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bgdgog is correct..........cnbc is only useful for it's real time ticker...........

as long as they have these re habs on they will have ZERO credibility

 

the lead hack is cramer........................here is an exercise to prove my point...........

watch SOTS on CNBC from 9-9:30 am eastern...........listen to the hack talk over his colleagues

as he spews his garbage .(if you can stomach it for 30 minutes)..............then come on this site and tell us one useful trade or investment you got from this segment............we will then monitor

your(his) pick...............cmon...if he is so good this should be simple

 

 

May 10, 2012 3:20PM
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because the us is christian and they are jews so it malkes sense that they would want

troops there to kill muslims.............this jew,muslim christian killing didn't start yesterday

you know.............and news flash:     it will never end

May 10, 2012 4:30PM
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Cramer supposedly graduated magna cum-laude from Harvard but he uses "lotta" in the first sentence of his article.  "Lotta"? This is what a Harvard education produces?   Hey Bobo you produce a "lotta" hot air.  Go back to being a lying hedge fund manager and leave the naive small time investors alone.
May 10, 2012 3:12PM
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Here is some "real advise" about energy stocks...ask yourself why the U.S. has been sending ground troops to Israel sense Jan. 2012 ???
May 10, 2012 2:38PM
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cramer has been pushing nat gas for years........it has been a loser just like him

 

don't take my word ...............research this criminal

May 10, 2012 4:22PM
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Cramer

 

   Thanks for keeping Lee and Favor on the right track...I get the impression sometimes they don't know when to go to bed at night!

May 10, 2012 3:12PM
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quite a few thumbs down on my cramer challenge.................one of you cramer lemmings should make a cramer pick and prove me wrong
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