• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Energy

Cramer: Acquisition Shows Energy Companies Know Where Values Are

We should sit up and take notice of EQT paying $6.7 billion for Rice Energy.
By JIM CRAMER Jun 19, 2017 | 11:20 AM EDT
Stocks quotes in this article: EQT, RICE, COG, SWN, APA

The hatred for oil and gas stocks may be at a multiyear high, rivaling the hideous days back in 2016 when oil collapsed to the mid-$20s. I find that so odd given that oil seems to have found its footing in the $40s and many of our companies are profitable at these levels.

Wall Street may be blind to the profitability levels and the values that are being created by the downturn, but the companies themselves aren't. That's why we should sit up and take notice of the big deal announced this morning, EQT (EQT) buying Rice Energy (RICE) for $6.7 billion, giving Rice shareholders a 25% gain in today's trading.

I think the biggest values are being created by the fantastic oil drilling techniques in the Permian, the ones that are producing oil in the $30s all in, a nice profit with oil in the $40s.

But this deal unites two powerful forces in the Marcellus and Utica shales, with EQT consolidating 187,000 acres of the Marcellus and 65,000 acres of Utica, a shale I visited a few years back in Ohio and all I can say is WOW! With natural gas at $3, a dollar above where it was last year, and Rice's $1.12 all-in price, this is a remarkable deal that will make fortunes for EQT shareholders.

There was a time when this natural gas would have been landlocked. Now, however, there are pipelines to the east to replace retiring coal and nuclear power plants and pipelines to the south for export and manufacturing. The pipelines to the south are reverse operations. They were built to transport imports and Southern natural gas but are now set up in the other direction, a true triumph of our exploitation of what many say is the largest natural gas field outside of Qatar.

For the record, if there is to be more consolidation, and I think there will, Cabot Oil and Gas (COG) , with similar all-in costs for natural gas, will likely be the center of attention and Southwestern (SWN) , a total down-and-outer that's centered in natural gas, is a natural target.

To me, the better values remain in the Permian. We have been buying Apache (APA) for Action Alerts PLUS because it is immensely profitable with oil at $44 and it has what could be the largest natural gas find in the country in years, the Alpine High play. Most investors have soured on it after the company promised big and has yet to show any real development that would indicate how big the find is. No matter, the stock is now below where it was when Alpine High was announced. 

Another company with potential is the other FANG, the symbol for Diamondback Energy, which has cratered from $115 to $85.

Why does everyone hate oil and gas so much? Because the group is largely viewed as a destroyer of performance, and any speculation in the patch has been a nightmare for anyone who has ventured into it, a virtual roach motel for portfolio managers.

This EQT-for-Rice deal shows you portfolio managers can shun the group all they want. It just creates the values that are obvious to the companies themselves.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long APA.

TAGS: Commodities | Markets | Energy | Investing | Jim Cramer | Mergers and Acquisitions | Stocks

More from Energy

3 Oil & Gas Royalty Trusts For $100 Oil

Bob Ciura
May 20, 2022 2:05 PM EDT

For investors looking to take advantage of lofty oil and gas prices, we like these investment vehicles.

Exxon Mobil Nears an Historic Upside Breakout on the Charts

Bruce Kamich
May 20, 2022 9:56 AM EDT

Here's my advice for traders.

Constellation Energy Could Power 20% Higher From Here

Bruce Kamich
May 20, 2022 7:34 AM EDT

Shares of the clean energy power generator have rallied since going public in January.

Oil, War and Inflation: Here's Where Prices Are Likely Headed

Carley Garner
May 18, 2022 1:00 PM EDT

Oil has a war and inflation hedge premium, but those aren't permanent.

Occidental Petroleum Continues to Target Higher Prices

Bruce Kamich
May 16, 2022 2:52 PM EDT

Here's our first price target and our long term objective.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:10 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "Market Timing for Dummies"
  • 01:44 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10 Portfolio

    We're making a series of trades here.
  • 03:07 PM EDT PAUL PRICE

    Why Is Walmart Down Big Today?

    Besides its poor earnings report Walmart was way...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login