[Beginning of Cramer's verbatim comments for this segment...]

Jim:        If you watch the show at all, you know that I've been a gigantic backer of natural gas and natural gas stocks on the show... both as a cleaner, greener energy source than oil or coal, and as a great investment opportunity, as I believe prices could soar in the next year to as much as $6 or $7 for natural gas, from around $4 where it is right now. And that, I think, can be accomplished, even without any help from Congress pushing my nat gas agenda.

We can't count on the federal government to do the right thing, as long as the pro-black lung, anti-rainbow coalition, also known as the coal lobby, holds so much sway. Still I think, eventually, we'll come to our senses about this ideal bridge fuel, and I've given you a lot of great ways to play the move in natural gas. By the way, it's not a republican or democrat thing... it's just about how to make you money...

Tonight, I've got another top-shelf name... It's called Equitable Resources Inc. (EQT)...

Here's a natural gas company, EQT, with one of the best cost profiles in the industry that also pays a meaningful dividend. Right now, it yields about 2%... but what really sets apart this company from all the others in the industry are the low finding and developing costs... at just $1.14 per thousand cubic feet... versus an average cost of $2.16 for its peers.

This is really the cheapest large-capitalization producer of natural gas, I think, in the world.

Where do they operate? Appalachians, production from the Huron shale... the Baria sandstone in Virginia and West Virginia... It has has around 69% of its reserves there. It's also drilling in what we like to talk about a lot... we mentioned it with Governor Rendell from Pennsylvania last night... the Marcellus Shale, 9% of its reserves but, more importantly, 40% of its reserve potential...

On its conference calls, EQT's management has said that they can get finding development costs lower than $1.00 per thousand cubic feet in Huron Shale, and said the costs are down in the Marcellus, with average drilling days cut in half, from 35 to 17... You've got to understand... that, technologically, this is a marvel. Well costs are down from $5.5 million per well to $3.3 million.

EQT is mostly a production company, but it also has a mid-stream meeting pipeline business, and a gas marketing business. At the pipeline business, EQT is increasing its capacity at its Equ-trans pipeline gathering system... That's something that could double capacity... double earnings for the whole pipeline segment of the business.

You know, when we're looking at these companies, one of the things that one of our viewers alerted us to, is that we have to factor in "hedging"... hedging of natural gas stocks... Who has the most exposure to spot prices, and where they're going, and who's already sold their natural gas, locking in a price... I say that because, last week, we got a fabulous email from Jonathan from Atlanta, asking about this issue. So we did a run through iMetrics - this really cool service - that allows you to sift through SEC filings at lightning speed... We found that SandRidge Energy, Inc. (SD), Petrohawk Energy Corp. (HK) and Anadarko Petroleum (APC) and Newfield Exploration Co. (NFX) are the most hedged for 2010. So, if you're bullish on natural gas, you may not want to be in these, while iMetrics.com tells us that Comstock Resources Inc. (CRK), Whiting Petroleum Corp. (WLL), EOG Resources, Inc. (EOG) and Apache Corp. (APA) are the four least-hedged... They can benefit from a big rally in nat gas. So, from now on, we're going to use that prism too to analyze natural gas stocks, because the less hedged you are, the more benefit you get from higher prices.

EQT comes down right in the middle... 31% hedged for 2009, 41% hedged for 2010. And we want to know what that hedging strategy says about the future of natural gas pricing...

More important, we want to know how bright the future is for this low-cost nat gas producer, that has been a dynamite stock, having appreciated 345% over the last 10 years, while the S&P 500 has declined by 17%. And you wonder why I profile these companies so often?...

What a track record. Now let's talk to Murry Gerber, the CEO of Equitable Resources Inc. (EQT)...

Jim:    Mr. Gerber, welcome to Mad Money...

Murry:    Jim, it's great to be back.

Jim:     Oh, it's terrific to have you. Look, we think the future is very, very bright for natural gas, but we looked at your hedging philosophy, and we're wondering, are we too bullish, given how much you've locked in already for 2010?

Murry:     No I don't think so Jim. We hedged early along when EQT bought a huge position in the Appalachian basin in the early part of the decade, and we were hedging in our EBA at that point in time, so no... I don't think you should take anything about our views on natural gas from our hedging program. We were just trying to... we were a small company and made a big acquisition, and that's what we hedged.

Jim:     Okay, thank you. That's good. You have to look at these things. They're not apples-to-apples. You're in a different situation from some of the other old-line producers. How come your production cost is dramatically lower than every other company we interview?

Murry:     Well, we've got a great team, for one thing Jim. But we also bought into this acreage in Appalachia a long time ago, before anyone could spell "Marcellus Shale." And then, beyond that, the technology has been spectacular. I mean, we innovated air drilling... horizontal air drilling in the Huron Shale. Uh, that helped us dramatically improve our reserves per well, and drive our F&D (finding and development) costs down, as you mentioned earlier. And then, at Marcellus, we're at $3.3 million average per well for 3.5 BCF (billion cubic feet) reserve per well, and we're heading down. So that's what's happening... it's a great team, new technology... some of which we invented.

Jim:     Now, I think that one of the things that I'm trying to educate people on, but you can do far better, because you're in the business... The numbers that you were just talking about... the technology that you were just talking about... You're not talking about something that's, uh, as old even as the PC, or even the internet... This stuff is more recent, right?

Murry:     Oh, this is the last five years, absolutely... We have a third of our production coming from horizontal, air-drilled wells this year, and we didn't even have one horizontal, air-drilled well in 2007. So this has all occurred in the last few years.

Jim:     So, 10 years ago, there might have been a recognition that there was gigantic pot of natural gas underneath the state of Pennsylvania, but it was no different than if it were on the moon... It was not attainable, right?

Murry:     Absolutely not attainable, and that's one of the key issues that we're trying to get across... and I know you are... how abundant this resource is... and we need to get that message out, because far too many people are saying it's not abundant. Well, we have 120 years of this stuff. And, even so Jim, we're talking about only recovering about a third of the gas that's in place in these shales right now with this technology. Imagine what we'll be able to 10 years from now.

Jim:     Well, what's incredible to me... and yesterday, with Governor Rendell (PA), and he's a friend of mine... and in the New York Times yesterday... articles about technology that doesn't exist... the carbon capture from coal... it says that that technology is available now... Never do I see an article, a piece, about the technology that is horizontal drilling, that is revolutionary, that is already working. Explain to me the disconnect about how we can believe in the canard of clean coal... because this thing hasn't even worked yet... and not have any faith in the technology that's already producing trillions... trillions of square feet... of cubic gas. How can that be?

Murry:     You know, for a resource that could supply the country for 125 years, and mobilize all our vehicles by the way, and reduce our dependency by 75%, save us $300 billion repatriated... you know, $300 billion that we send overseas... I don't know, Jim. It is, as you say, it's current technology, no stimulus required... American... and, while we're waiting for a Hail Mary pass on this other technology, I don't know.

Jim:     We like KMP. That's a pipeline company. Would you ever think about splitting out your pipeline and be able produce that real good, you know, Master Limited Partnership, 7-8% return on that?

Murry:     Uh, we have considered... of course, MLPs have had a rough ride...

Jim:     Right...

Murry:     We have definitely considered getting financial partners for that asset. When you fill a pipeline, the cost of capital goes down, and there might be a good arbitrage for our shareholders. We're definitely looking at that.

Jim:     We love it on Mad Money. Murry Gerber, chairman and CEO of EQT. Thank you for continuing to deliver for all your shareholders... really appreciate it.

Murry:     Great. Thanks Jim.

Jim:     Great to have you.▼   ▼   ▼   ▼   ▼

Jim's comments AFTER the interview:     The guy's a winner... the stock's a winner... nat gas is a winner. You're a winner.

[verbatim recap]

[end of segment]

Read Jim's next Segment here  

Market Results today: Dow:   - 81 Nasdaq:   - 15 S&P 500:  - 11 Prev. Page 1 3 4 5 6 Next Page See all of tonight's stocks mentioned on Yahoo! Finance, here...