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

Jim:          The chairman says the energy rush is on... After all the oil and gas deals we've seen... Exxon buying XTO... Total buying a quarter of Chesapeake's Barnett Shale assets... Chesapeake acted well today... Mitsui going in for a stake in Anadarko's Marcellus Shale acreage... How about BP buying Devon's best overseas properties for $7 billion last week? That stock's getting cheap. And Consol Energy... a coal company, for heaven's sake... buying Dominion Resources' Marcellus Shale natural gas assets... we've got to believe there are more takeovers coming.

So tonight, as your investing coach, I am going to help you speculate wisely... a double-barreled Speculation Friday... on a company that has so much gas that I am literally coming out here with a basket of whoopee cushions sent to me by my pro-coal, obviously pro-flatulent sister, to spice up still one more oil and gas story (he then sits on a whoopee cushion to demonstrate)...

I know the price of natural gas has been getting crushed... and some of our favorite names, like Apache and Chesapeake have gotten hit with downgrades. But you've got to understand that there are two ways to value a company... There's the price you see on the ticker, right... the price that's trading every day... what the market's willing to pay for the shares right now...

And then there's the potential value that's so much bigger... the value that a company may be to another company in a business takeover!

Right now, natural gas (the House of Pain)... Natural gas in the future... (House of Pleasure)... Given all the energy deals we've seen with so many foreign players seemingly desperate to get into the U.S. drilling boom... I have to believe that the big players in the industry understand just how much these assets could be worth, and I would be downright surprised if we don't see even more deals in the not-too-distant future... even as I think this group could be about to get shelled, as Obama's agenda is likely to be reignited over the weekend with the healthcare vote... Again, we don't know if it's going to pass... but, if it does, hey it could be bad... and the EPA (Environmental Protection Agency) is making a lot of bad noises too about the drilling they do.

But is the right way to speculate at this point in the space?...

I've got one. It's called SandRidge Energy, Inc. (SD)...

SandRidge Energy is a gassy stock that came to my attention thanks to one of your emails last week.

Here's a company that's focused on drilling in West Texas, the Permian Basin and Oklahoma... It's got an amazing amount of resources. It's got 1.3 trillion cubic feet of reserves, and the business is about 48% oil... which is good, because oil's at $50... and 52% natural gas, which is bad, because natural gas is at $4.

I think you can speculate with confidence in this one, because it's already come down to less than two points off its 52-week low. So, if we get a big selloff, as I expect to happen if the healthcare bill passes, SandRidge is less likely to get pummeled. This one's got the right bloodlines. It's CEO, Tom Ward, co-founded Chesapeake Energy. I know this guy personally. Let me tell you something... he's a terrific oil and gas guy...

The company has about potential in West Texas and the Permian Basin, which is the third-largest oil-producing area in the United States, estimated to contain 29% of our country's estimated future oil production growth. Then it has another 6.3 trillion cubic feet of additional reserve potential coming from its position in the West Texas over thrust... where its natural gas is mixed with carbon dioxide, which has to be removed before it can be used... something that's been a problem for the company.... hey, that's bad gas... (as he then proceeds to blow out a whoopee cushion on the set)... But SandRidge has a CO2 processing plant in a partnership project with Occidental Petroleum (OXY). That should start operating in July of this year. It's expected to add an additional 100 million cubic feet per day in processing capacity, because of the tougher gas here... another100 million cubic feet coming online in 2011.

Finally, it's got Oklahoma assets... 1.2 trillion cubic feet of reserve potential. And here, SandRidge has some exposure to the unconventional assets we like so much... including the Woodford Shale, as well as the horizontal drilling play in Northwest Oklahoma.

I am so shocked this stock is so low. I'm not kidding. With all the terrific assets, it's only trading at $7.44. How can it be?...

Two reasons...

Its natural gas production is on hedge after 2010. And you know how low natural gas prices are. And, more importantly, here's why it's despised... Its weighed down by $2.59 billion in debt. It was about double the leverage of most of its competitors, and people are very concerned about that. Analysts are worried that, if natural gas prices don't recover by 2011, SandRidge is going to have trouble paying that debt.

I think the stock's priced for disaster already. And the possibility that things could get better, or that an acquirer might want to buy some of its assets, just isn't at all reflected in the share price. Even the analysts, who have seven buys and nine holds on the stock, have average target prices of $12.50.

I mean, that's almost 70% higher than where SandRidge is right now...

If debt doesn't come due until 2014, I deem this stock to speculate in.

Here's the bottom line...

Mad Money Recap on Facebook

[verbatim recap]

[end of segment]

*Note:  An asterisk next to a stock indicates that Jim owns it currently for his charitable trust.  If you are interested in a particular stock, Jim Cramer recommends that you always do the homework on each stock, and that you wait at least one trading week after his show recommendation to evaluate whether it is a good stock trade or investment for you. 

To help you with this, we have created an ONGOING STOCK PORTFOLIO which provides the changing stock prices for each major stock recommendation after 1 week, 1 month and 1 quarter for you here >> 

Read Jim's next Segment here  

Market Results today: Dow:  - 37 Nasdaq:  - 17 S&P 500:  - 6 1 2 4 5 6 See all of tonight's stocks mentioned on Yahoo! Finance, here...