A tech energy play with proven growth

Here's another solid stock nobody cares about that sells for a lot less than it's worth.

By Jim Cramer Aug 15, 2012 10:02AM

Sometimes I wonder if there are hundreds of stocks like Energy XXI (EXXI), which I had on Mad Money Tuesday night.

 

You have probably never heard of it unless you watch the show. It has a huge number of fields in the Gulf of Mexico that it bought as castoffs, making it the third-largest producer in the shelf. It operates seven of the 11 largest oil fields in an area that everyone knows is nothing but net for oil companies.

 

It's a 7-year-old company with 116 million barrels equivalent of proven reserves.

 

It's got proven growth. It successfully replaced all of last year's production, and it grew proven reserves.

 

And it sells at 3x next year's EBITDA.

 

Three times!

 

Not only that, but it has tons of prospects it's exploring now and it is using horizontal drilling to go back over the other properties to get more out of them. Its balance sheet is terrific, and it is throwing off an immense amount of cash.

 

So why doesn't it sell for more?

 

I think it's because its Gulf of Mexico properties are older wells, long since minded by ExxonMobil (XOM). In fact, the wells were pretty much left because they have already produced 1.6 billion barrels before they were sold.

 

I think it is that figure more than anything else that makes Energy XXI a passed-over company. Why in heck would you want to own an oil field after the best operator in the world left it for dead?

 

The answer, of course, is that Energy XXI is a technology play. It can go into the same old fields that have been abandoned and get out more oil than anyone ever thought possible just a few years ago.

 

It's not as good as going into virgin Bakken or Eagleford, but it's pretty clear that there was A lot more recoverable oil there than Exxon knew about when it sold the wells, which by that point couldn't move the needle anyway.

 

So it might lack the upside of a brand-spanking-new company hitting pay dirt in some unexplored part of the United States. But with its technology, its assets, its balance sheet and its prospects, Energy XXI is just one more stock that nobody cares about that sells for a lot less than it is worth.

 

 

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 has no positions in the stocks mentioned.

 

 


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12Comments
Aug 15, 2012 2:42PM
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Cramer is entertaining, but I tought he was discredited year ago.  Does anyone listen, or act on, his histrionics any more.
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Lost my **** in the stock market so nice to hear the same ole stories.  If Cramer believed half the stuff he sells he wouldn't have to work right 
Aug 15, 2012 2:30PM
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"long since minded"

 I'm not sure what that means.

 

It means that Jim Cramer is a tool and doesn't even proofread his articles! It should read mined, as in past tense of mining, hence XOM left it for dead. And speaking of which Jim Cramer will do just that to your wallet if you follow his advice.

Aug 15, 2012 3:00PM
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an energy stock that is over $34, and pays out a measly $.28 cents dividend??  no thanks, plenty of energy stocks that pay great divys for owning their stock.
Aug 15, 2012 2:48PM
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Folks, read the fine print next to Cramer's picture:  he manages a "charitible trust,"  so he can claim he has "no positions" on any of the stocks he mention.  Clever.
Aug 15, 2012 5:25PM
Aug 15, 2012 3:02PM
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It's just not that difficult to pick up some more shares of XOM and COP.  Even a cave man can do it.

 

 

Aug 15, 2012 5:30PM
Aug 15, 2012 5:36PM
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You're a fool Cramer. Corporate profits are not great and the market isn't going up because of profits. Look at revenues after you factor out inflation. I'll choose to blame the Fed. policy of manipulating markets to hold up the stock market. These profits downright suck and are obtained by cutting jobs, gutting R&D, slashing IT spending, and not reinvesting in property plant and equipment. These are not healthy sustainable profits and this should be reflected in the market, but the market is rigged to the upside by the Fed. policies.
Aug 16, 2012 11:17AM
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Energy XXI is up 15% since Cramer started pumping it.  You can go ahead and dump it now BoBo.
Aug 15, 2012 11:27AM
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"long since minded"

 

I'm not sure what that means.

 

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