Cramer Tonight

(c) 2009 F. Bruce Abel

Pretty good. He makes an excellent case, for once, on natural gas. APC. Anandarko.

By the way, when I say "for once," I'm not knocking Cramer for his recent calls on stocks. He has been brilliant. Just a little off on natural gas.

More on APC later.

The bigger news is that Cramer is knocking down C and BAC as "frothy." He's calling a top! For a few days.

And if TJX isn't a short after tonight I don't know what is! He nailed FDO last week along the same lines and was very right on that one.

And now, the transcript for APC, at least the beginning:


[Beginning of Cramer's verbatim comments for this segment...]Jim: Natural gas prices have dropped below $3 per thousand cubic feet… that is the lowest level since the summer of 2002... not only that, inventories are up 19% above their 5 year average… with that kind of setup… you would expect the natural gas stocks to be at multi year lows… hey, at least 52 week lows… but what have they been doing… they have been roaring… I think this move is all about Washington… all about the possibility that natural gas could be used as a cleaner, cheaper replacement fuel for oil and dirty coal… which they are masquerading as clean coal in Washington… as it will take decades for wind and solar, President Obama’s solutions, to really start to matter… not to mention batteries.This whole move is predicated upon the idea that Washington has at last embraced natural gas… that this cleaner, greener fossil fuel… I know that it is fossil which puts it in the dog house… will be a part of our energy future… take Anadarko… Anadarko Petroleum is one of the strongest derivative natural gas plays… it is one that I have been recommending since the show began… most recent I have been recommending January 12th, when it was at $38.33... the stock is now up to $54.40... a 40% increase… even if the price of the commodity has just been crushed… if natural gas is going to be part of our energy future… than Anadarko is a fantastic stock to own.In its second quarter, Anadarko reported record sales volumes, selling 56 million barrels of oil equivalent… about 4 million more than the mid point of Anadarko’s guidance… as well as record drilling efficiencies… meaning the company was able to run fewer rigs but still drill more wells… and the cost of wells coming down.Anadarko is a great growth energy play… with new discoveries in the Gulf of Mexico and Mississippi… a major new project in Ghana, that was approved by their government in July… and another project in Algeria that is expected to start producing oil in 2011... the company has also done a great job of hedging its natural gas… 80% of anticipated natural gas volumes hedged to $4.18 in the summer months… hey, who would have ever thought that was going to be good right… and more than 75% of its 2010 natural gas volume is protected with a middle floor of $5.60 and an upper ceiling of $8.25... so even if natural gas prices do not bounce back hard… Anadarko is still in good shape… and it is not starving for cash either… remember, it raised $1.3b with that secondary offering in May… that was at $45.50... made a lot of people money… you are up 20%… if you got that offering price even.Again, natural gas collapsed… and they erased another $900m in debt in early June… that leaves the company with $3.5b in cash at the end of the quarter… and no debt coming due until 2011... the big question I have with Anadarko is the same question that I have with this whole industry… and I am focused on this laser like, and you know that, I bring it up constantly… what will the future of natural gas be in this country… and do we understand the importance of energy independence… I do not have the answers to those questions… but I know someone who might… Jim Hackett, he is Anadarko’s fabulous CEO…

Jim: Mr. Hackett, welcome back to Mad Money...Hackett: Thank you Jim.Jim: Alright, let’s get right to it… there is an oddity here.. .natural gas under $3, your stock doing well.. is that because that there is a believe that somewhere… somewhere within the owners of your stock that the fortunes for natural gas are about to change in Washington?Hackett: I do, I think that there are a couple of combined reasons. One is that we are about 40% of oil still. And that does drive a far amount of the profitability of the company as well. But two, there is a real hope that natural gas plays a very foundational role in the future of energy for this country. Which it needs too. And you have been a big prominent of that. We are finally reaching Congress, finally reaching some of the decision makers about how important this fuel is. For all of us. For a greener environment. For a substitution for foreign oil, to make it more domestically secure for us as a nation. And it is also the only thing that can back up wind and solar.Jim: Now, one of the things that was shocking to me… now I have understood, I have understood that the case that the President is deeply committed to non fossil… but in this House bill, the American Clean Energy and Security Act, they focus on something that you and I know is a fantasy… it is a Disneyland story… it is called clean coal… how the heck did clean coal get precedent over natural gas?Hackett: Well, it has temporarily at least. I think that it is a very good point to make, which is its own proven technology which it is a hope that one day we might be able to do that because we have such large coal resources. But in fact there is a cheaper way to approach. Making ourselves more environmentally free if you will of greenhouse gas emissions and other toxic substances. And that is to actually use this tremendous natural gas resource that we discovered in this country. Which is a very new phenomena in the last three years. We have got the kind of long dated reserves domestically that coal has. The difference is that we can actually grow the deliverability and serve an expanding capability. Which I think that other fuel sources will have a tough time doing, outside of nuclear.Jim: Now, one of the things that drives me crazy is that every journalist in the country… I did not get the memo… maybe because I am not a true journalist… the memo says that as soon as you mention natural gas, you have to say that it is erratic and that the pricing is crazy, and so therefore it is not a legitimate fuel… where is that memo that says that every single article has to have that except for the stuff that we talk about?Hackett: That is a good point. But even with that being said, if that is the claim that is being made, there is a very good way to fight that, which is that we have done modeling independently of the industry that actually speaks to this issue of price. And if you look at a median to longer term kind of price forecast right now, it is somewhere between $5 to $7 per BTU, that we think the price will trade at with growing demand. And what that means to all of us in America, is that you are buying natural gas for equivalent to about anywhere from $30 to $40 a barrel of oil. I think that any of us tomorrow would take any substance that could promise us less than $45 a barrel. And use it as broadly as we could. Both in electric generation and in our cars. I am driving a compressed natural gas vehicle. I have done that for over a decade. I know the supply is their. I love the price. I love the environmental impacts.Jim: Jim, one of the things that I have read, and I found it actually hard to believe, but maybe you can confirm it… we are going to be a net exporter of natural gas?Hackett: Possibly, in fact as you know some of the big shale plays up in Canada, they are looking at actually engaging in a liquefied natural gas project to export out of the Alaskan Peninsula or on the west coast of Canada. Others have talked about turning around the re-gasification facilities that we have for LNG coming into this country, and actually exporting out of the facilities into ships.Jim: Remember me saying that that is just totally nuts… we have an opportunity to being independent of energy… and what we are doing it is we are blowing it… we are importing it from some really great people over there in the Middle East… and we are sending our clean stuff overseas?Hackett: Yea, that really does not… I do not think that it will happen in any kind of mass scale. We don’t plan on that happening. We actually want the domestic demand to increase. We think that that is the appeal. Is you not sending this fuel overseas. It is a wonderful, abundant resource for all of us. And we can then use that foreign liquefied natural gas, if we even need it, as a peaking fuel to keep the price down. Manage that volatility and put it into storage in the summer when other parts of the world are not demanding it.Jim: Back in the 1930’s when our country was in the Great Depression, one of the few industries that was able to put people to work was the pipeline industry… because pipelines take a lot of people…it takes a huge amount of infrastructure to be able to get this… how many people could be put to work if we actually endorsed natural gas as our fuel?Hackett: Well, literally hundreds of thousands, and it may be more than that. Depending on where we allow the drilling to occur. There is no natural gas resources exist in most states in the Union. They are high paying jobs. It is drilling being done by smaller oil and gas companies. These are not the Exxon Mobiles, the world that are generally producing natural gas. In fact, 80% of it is done by independents. So you have these very high paying jobs in a sector that can grow very quickly. It is not bureaucratic. It responds to the market demand. So it is a wonderful economic answer. It is a wonderful energy answer for domestic security. And it is a wonderful environmental answer.Jim: Alright, something bothered me… here is a Wall Street Journal article, August 21st…there is a guy who says… we were not prepared for the pace at which the House legislation proceeded… you are that guy.. .how did you guys miss this? I have been trying to get everyone to focus on it.Hackett: Well, you are right… you have been talking about it longer. We just thought that the inherited advantages of the fuel would sell itself. So shame on us.Jim: Come on… did you really believe… this is Washington we are talking about… who are you, Mr. Smith?Hackett: Well, who would have thought that they would have actually violated a lot of the rules of subcommittee procedure to get this rushed thru the House. Before the American public could commit properly. That they would give oil all of these allowances to dirtier fuels, to get the legislation passed quickly in horse trade votes. In the middle of one of the great recessions we have had in this country. Who would have thought that all of that would have occurred? But it did.Jim: Do any of these Congressman, the Senators from Pennsylvania and New York understand that they are sitting on a spindle top?Hackett: Well, they are starting too. And I think that that is the important thing. We have spent a lot more time and effort now that we have gotten a wake up call. To make sure that we are educating people. And we have a lot of sponsors in the Senate, and we think this thing is going to work out to be the right answer at the end of the day.Jim: In the meantime, Anadarko just continues to pump… continues to find… things are just right on skad, if not better?Hackett: Yes, we are. And we like the fact that we are an exploration company. We are finding new resources for the world with oil and gas. But this natural gas future is a real one, and America has to get with it.Jim: Alright, Jim Hackett, I know that you will never again not be prepared for the pace of House Legislation… thank you so much, Jim Hackett, CEO of Anadarko Petroleum (APC)… great to talk to you.Hackett: Same here.
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Jim's comments AFTER the interview: Alright, you heard it… it is going to be the fuel… it is just a matter of time… the stocks are already reflecting that… I think that if natural gas actually one time in our life… you are going to get a doubles on some of these stocks.