The Cramer Report - April 10, 2006
HOME	'Rigging The Odds'	NOV  (NATL OILWELL VARCO)
	"On Cramer's Mad Money, there's only one thing we care about as much as trying to make money, and that's justice!  Cramer justice! Tonight, I want to try to correct a little market injustice, so I can try to make you some money. For the last decade, Indonesia's oil production has been on a hideous decline.  Indonesia's a member of OPEC, but last year, they became a net importer of petroleum; that's just embarrassing! For 10 years, their production's been declining.  For 10 years, they've been trying to get it to come back up. Now, finally, oil prices are high enough that oil companies want to invest in new oil exploration and production, even in so called unstable areas. Indonesia's been waiting for this for years, and it's finally profitable enough to become a reality. But, last week, it hit a snag. Exxon Mobil (XOM) and the Indonesian state oil pt peramina said they might not drill at the $2.6 billion CEPU project until next year. This was going to be a gigantic source of oil; a 'mon-back project.  It was the biggest project in Indonesian oil history; it was going to turn the tide of Indonesia's declining oil production. And, now, even though oil prices are through the roof, above historical oil averages, and nobody, not even XOM, thinks they're coming back down. But they're not going to drill.  Why not?  It's because there aren't enough oil rigs.  There's a rig shortage! I say hallelujah, because I think - who makes oil rigs?  Cramer knows.  It's national Oilwell Varco (NOV)!  Buy, buy, buy! This stock clearly needs to be bought! Right now, at $65, this stock is 12 points beneath its 52-week high.  12 hideous, ridiculous points!  12 points and we've got a rig shortage, for heaven's sake! The price of crude hit a new high today.  I need you to be able to profit from that.  Not moan about it at the pump.   And the way to do it is to buy a stock that is levered to rigs.  Nov - down 12 points from its high. Now, I started off this segment talking about injustice.  This is an unjustly traded stock if I've ever seen one. NOV is really disliked.  And the oil service guys are really kind of bizarrely all over the map right now. Right now, you've got a tremendous opportunity to capitalize on what I regard as egregious example of injustice in the market! NOV controls 50% of the market for land-based rigs.  We have a rig shortage - I'm talking about pin action off a rig shortage.  This thing belongs at $77. NOV is unloved.  And to get in bed with an unloved stock, you have to understand why it's hated. I said this thing is treated unjustly.  And all injustice is a product of ignorance. Investors are ignorant about oil; they don't understand how the rig business works.  They think that just because hit a new high everyday, like it did over the summer... that just because oil doesn't look like it's going to 80, that everything in the oil patch must be sold, or is fully valued!  Wrong! These people think that the price of oil is priced into NOV already.  They are thinking bearishly. They think that the weakness in natural gas prices - and we've seen that come to $15 from $7 - whoa, really scary! - they think that that's going to hurt NOV's bottom line, even though NOV does a lot more business, where oil and gas prices haven't declined enough to make new rigs unprofitable. The investors keeping this stock down couldn't be more wrong. NOV has what they call late-stage leverage on wall street.  That means they make their money at the end of the oil cycle. After all the jobs get leased; after all the drilling gets contracted... then, and only then do you need NOV to get the rigs. The price of oil doesn't have anything to do with it.  Oil can go to $50 a barrel, and NOV should be poised to make you a huge amount of money.  It just has to be expensive enough for the oil companies to think they can make a profit off of investing in new rigs. NOV isn't levered to the price of oil.  It's levered to the price of oil rigs, and they've gotten so high, that it pays rather to lease or buy.  Build them, and you save.  That's why NOV's right. Now, I hate to sound like a broken record, but we've got a rig shortage!  There hasn't been one of those in the last 25 years. NOV peaked in January.  But we didn't have a rig shortage in January.  We've got one in April.  If the stock peaked out at $77, then it deserves to hit at least $77. Now, at $65, I think you've gotta back up the truck - buy, buy, buy! Bottom line: The Ignorance of the market is keeping NOV cheap, particularly vs. Schlumberger (SLB), Baker Hughes (BHI) and Halliburton (HAL).  I think you'd better buy NOV as soon as you're finished doing the homework."