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"Expensive oil is here to stay and is not going away any time soon," Jim Cramer told "Mad Money" viewers on Wednesday.
So, instead of crying and panicking, investors need to find something to buy.
"Since high oil is here to stay, I will explain the soup-to-nuts of bringing oil out of the ground to where it is used. Who pumps it? Who has the drills? And who has the ships?" Cramer said.
Cramer believes that the real question is ... how do you profit from the oil patch?
The first thing is the drilling, he said. You need wellhead equipment -- specialized subsea equipment.
If you want to buy a rig, the only place to buy it is
National Oilwell Varco
. They are rig builders.
Once you have a rig, you'll need someone to operate it. That's when you'll look to
to help you.
They operate the rigs around the globe, said Cramer, whose charitable trust
Action Alerts PLUS owns the stock.
For shallow-water drilling, you need
, which makes jack-ups, the rig/barge combo for shallow-water drilling.
Also needed, said Cramer, is
, a company that has a $7 billion order-book backlog and just announced a $2 billion buyback.
To drill for oil, you must have a drill bit. Cramer likes
( SII) for that product.
"They are bit players in the drill bit business," Cramer said, but he still believes in their product. In addition, the company announced a 20-million share buyback program, thus providing a great safety net for the stock price in a tough market.
Once you have the drill bit, it needs to be connected to the rig and then lubricated. That will require piping, he said.
For drill pipes, you want to own
( GRP). "It's not a pure play in piping, but it makes
the best product," Cramer said.
Once you drill down, you need to control the flow of oil and prevent blowouts. For that, Cramer likes
The company makes the wellhead equipment that controls oil pressure. The company beat its most recent earnings estimates by 9 cents a share and has a big buyback in progress.
Next in the value chain is
. Amcol makes bentonite, which lubricates the drill bits, an essential ingredient in the extraction process.
Once companies actually start operations, they typically rent the equipment they require rather than purchase it. That's because many pieces of hardware are not needed continuously.
For tool-rental stocks, Cramer believes that either
Superior Energy Services
are good stocks to own.
for offshore drilling technology.
When the well turns dry and the site needs to be decommissioned,
is the company to buy. Wall Street estimates for this stock just keep going higher and higher, Cramer said.
Am I Diversified?
The first caller to ask Cramer about a portfolio owned
National Oilwell Varco
Cramer liked National Oil Varco as a good oil-sector play and Essex as the best counter-intelligence vehicle in the market. Cramer was also keen on I-Flow, which manufactures medical-device pumps, as well as Emcore's semiconductor business.
However, it was Englobal that caught his ire. Cramer called the company a second-tier oil-services company.
Given that the caller already had exposure to the oil sector, Cramer recommended switching out into a bank, or a consumer products company like
Johnson & Johnson
The next caller owned stock in
"The bottom line is that I like what you have, Cramer said. "Crystallex and JDSU are both speculative, and I'd get rid of one."
Cramer was bullish on
Abercrombie & Fitch
Cramer was bearish on
XM Satellite Radio
Level 3 Communications
For more of Cramer's insights during the most recent Lightning Round, click here.
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At the time of publication, Cramer was long Halliburton, Microsoft and Nabors Industries.
Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on Mad Money are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."