Boone Pickens Just Cashed Chesapeake Energy Corporation (CHK) Out of Clean Energy Fuels Corp (CLNE): What Should You Do?

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Chesapeake Energy Corporation (NYSE:CHK) has been decreasing its ownership stake in Clean Energy Fuels Corp (NASDAQ:CLNE) for a few months as it looks to get its own house in order. Last week, Clean Energy co-founder, board member, and outspoken proponent of domestic energy T Boone Pickens picked up a $60 million promissory note from Chesapeake Energy Corporation (NYSE:CHK) for its remaining Clean Energy shares, which will increase his stake in the company by about 25%, to more than 22 million shares. Is this strong vote of confidence from an insider and co-founder mean it’s time for you to go “all in” too?

BP CAPITAL

Momentum is building

Clean Energy Fuels Corp (NASDAQ:CLNE) and Westport Innovations Inc. (USA) (NASDAQ:WPRT) co-hosted a web presentation on June 18, aimed at helping potential customers better understand how natural gas could significantly lower costs for shippers and fleet operators. One nice bit of information that investors gained in this call was an update of Clean Energy’s buildout of its touted “America’s Natural Gas Highway.”

There are a total of 76 locations complete, with 15 now open and another 25 in construction. This is compared to only ten open just a month ago, and less than fifteen new stations under construction. This rapid expansion and opening of locations is a very positive sign. But the real question still hasn’t been answered and won’t be for several more quarters: When will the rapid growth in revenues turn into positive cash flow and profits? And don’t count the profits from last quarter. I documented in a prior post how they were in large part the product of new tax incentives and not improved business performance.

But right now, Capex is still a big number, even though it is expected to be much less this fiscal year than last. With many stations built and idle, just waiting for more shippers to buy trucks, the company is in a great position as first mover.

But I think Westport Innovations Inc. (USA) (NASDAQ:WPRT) holds the key to the future. The Cummins Inc. (NYSE:CMI)-Westport ISX 12 G  natural gas engine is now in full production, and 2013 is a critically important year for both Westport and Clean Energy Fuels Corp (NASDAQ:CLNE). Rapid adoption of these engines by shippers is central to the success of both players in the North American energy boom. And while Westport’s rapid growth in China with partner Weichai seems to be moving even faster than expected, Clean Energy is completely leveraged on rapid adoption in the US.

Opportunity on the E&P side

Natural gas Exploration and Production giant Chesapeake Energy Corporation (NYSE:CHK) has faced serious challenges over the past couple years, and is still early in its recovery phase. The aftermath of Aubrey McClendon’s mis-management of the company is central to its decision to sell all of its stake in fast-growing Clean Energy Fuels Corp (NASDAQ:CLNE), even as the company was just beginning to see returns from its expansion into LNG for trucking.  The bottom line is the company has a lot of work ahead of it before getting back on solid ground. It still carries a heavy debt load and is having to sell off assets to both meet its debt obligations and return to being the nimble player it was. Today, Ultra Petroleum Corp. (NYSE:UPL) is already there.

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