The "Mad Money" mantra the past two days has been simple -- believe in natural gas. After becoming a follower of the faith after his talk with
CEO Michael Linn on Tuesday, Jim Cramer kept pounding the mantra last night with a call:
With 65% of production from natural gas, he said the company has the right exposure. Its shares were up 22 cents, or half a percent, in morning trading. It jumped a little over 2% in pre-market movements.
Still, the natural gas sector is not for the faint of heart; price drops from an overflow of supply have left many investors rattled. Cramer, though, sees a bottoming-out coming. Linn revealed two days ago that consolidations are on the horizon, so Cramer said Anadarko may be the one left standing with the most to gain.
Cramer is big on Anadarko for a few reasons: One, a strong balance sheet as compared to the rest of the sector -- $2.2 billion in cash and a net debt ratio of around 30%. But with slow production looming, he's even more impressed by the company's track record of replacing its reserves. Over the last three years, Cramer said the company has a replacement rate of more than 200%.
He also said Anadarko may have been staring at a capital shortfall. But last Tuesday, the company, headquartered just outside of Houston, priced a secondary offering of 30 million shares at $45.50. Underwriters have an option for another 4.5 million.
Though the company saw its stock tumble after the announcement, net proceeds from the offering are "expected to be used for general corporate purposes, including future capital expenditures," according to a release. Cramer says the capital comes at the right time to clean up its balance sheet and prepare to take advantage of consolidations on the horizon.
Expenditures may include offshore opportunities in West Africa and the Marcellus Shale.
For the first quarter, Anadarko said it lost $338 million, or 73 cents per share, as compared with an income of $286 million, or 60 cents per share, in the year-ago period. Natural gas sales volumes averaged 2.3 billion cubic feet per day, up from 2.1 Bcf year-over-year. But total price per thousand cubic feet fell to $3.26 from $6.17 from the same period.
Natural gas liquids sales volumes averaged 40 thousand barrels per day, up slightly from 39 thousand in the year over period. But, again, price per barrel fell to $23.05 from $56.42 in first quarter 2008.
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