Chesapeake Energy Corporation (CHK), Clean Energy Fuels Corp (CLNE), Phillips 66 (PSX): America’s Latest Energy Revolution

Page 1 of 2

The recent natural gas market crash brought frackers like Chesapeake Energy Corporation (NYSE:CHK) to their knees, but now the story is starting to turn around. Bus fleets are leaving traditional diesel or gasoline fuels in favor of natural gas and in some cases saving up to 40% on their fuel bills. The rise of natural gas as a transportation fuel is very disruptive for the energy industry. Not all companies will benefit equally, and some may even see their bottom lines fall.

US Retail Gas Price Chart

US Retail Gas Price data by YCharts

Historical overview
The U.S. fracking boom brought massive supplies of natural gas into the market, overwhelmed pipeline capacity and sent prices crashing. We simply do not know what to do with all of the natural gas flowing out of newly developed fields. Every month, Bakken drillers alone are burning off more than $100 million of natural gas because there is no economical way to bring it to market. With the price of crude oil heading north, it is not hard to see why finding new uses for natural gas is a huge opportunity.

Chesapeake Energy Corporation (NYSE:CHK)

The winners
Clean Energy Fuels Corp (NASDAQ:CLNE) is building a network of new fueling stations to bring natural gas to market. While master limited partnerships are building out new pipelines to bring more gas to market, Clean Energy Fuels is taking the fuel to new commercial customers.

A full 30% of new transit vehicles are powered by natural gas. The real market potential comes from the trucking industry, with 25 billion gallons of annual fuel use. The trucking industry is in a cost war with cheaper methods of transportation like rail, making potential fuel savings from natural gas a life saver.

Clean Energy Fuels Corp (NASDAQ:CLNE) is not making money yet, but this is understandable as it is a company in a nascent industry with big capital expenditures. Natural gas vehicles will not be adopted if there is no infrastructure to fuel them, and this company is taking steps to solve the problem.

Overall, the business continues to grow. In the last four quarters, its operating income before depreciation and amortization has improved from a loss of $10.21 million to a loss of $8.5 million. The quick ratio and current ratio are warning signs of a dangerous cash position, at 2.1 and 2.7 respectively. The company does not have an excessive debt load, but it is important to keep your eye on these numbers.

Right now, Chesapeake Energy Corporation (NYSE:CHK) is focused on developing oil- and liquids-rich plays to save its bottom line. Chesapeake’s high debt load has made the company think about short-term profits above all else. Even though management is focused on other issues, in the long run, Chesapeake is one of the companies that will benefit from the growing adoption of natural gas powered vehicles.

A full 40% of the firm’s realized revenue comes from natural gas. While its liquids production is a growing portion of its production, the company still expects to produce between 1.08 bcf to 1.10 tcf of natural gas in 2013. Natural gas prices have come back up, and Chesapeake Energy Corporation (NYSE:CHK) is on track for a profitable year.

The loser
Refiners like Phillips 66 (NYSE:PSX) are some of the biggest losers within this story. Increased demand for natural gas means less demand for refined crude oil products. Also, natural gas is used as an input in many refining processes. Stronger natural gas demand will put pressure on supplies and push prices upward.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!