Rex Energy Corporation (NDAQ: REXX) and Chesapeake Energy Corporation (NYSE: CHK) were both recommended by CNBC's Jim Cramer on his Mad Money program. The hedge fund manager turned television star believes that this is the year for natural gas and there is great opportunity in the Marcellus Shale at Williamsport. Cramer sees Rex Energy as the most speculative play and Chesapeake Energy as the safest play on the area that is seeing more and more drilling these days.
Rex Energy is an independent oil and gas company operating in the Illinois Basin, the Appalachian Basin, and the Southwest Region of the United States. The company has proven reserves of 15.9 million barrels of oil equivalent with 2,341 wells producing an average of 2,831 barrels of oil per day and 2.2 million cubic feet of natural gas per day. The stock has been trending up nicely and currently sits near its 52-week high at $26.17 per share.
Chesapeake Energy is another producer of oil and gas in the United States with an interest in 38,500 producing oil and gas wells that are generating 2.2 billion cubic feet per day. Its operations are located all around the United States, but it does have a large presence in the Marcellus Shale at Williamsport. The stock has also been trading up sharply, as oil and natural gas prices have skyrocketed, and sit near their 52-week high.
Oil itself set a new record of $143 per barrel yesterday, having risen some 50 percent so far this year. The primary reason for the price hike is a drop in the dollar, which analysts expect to continue to see as the second half of 2008 begins. There are some concerns about demand, however, after a government report showed lowering oil and gas demand estimates as the dollar began to hang tough at current levels. Demand destruction in the United States is now a major concern.
In the end, oil prices will continue to rise over the long-term and rise sharply when the dollar falls. Obviously, a lower dollar is able to purchase less oil, and when the commodity is priced in dollars, it must go up in value to compensate. However, even taking out these declines in the dollar's value, oil has risen substantially and is likely to continue to do so. And this is creating opportunities in areas like the Marcellus Shale.
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