Is Heckmann Corporation (HEK) the Perfect Penny Stock? – Chesapeake Energy Corporation (CHK), SandRidge Energy (SD)

With the country awash in natural gas inventory, you’d suspect that companies servicing the drilling industry would be doing well, but Depression-level pricing has crushed everyone, and water treatment specialist Heckmann Corporation (NYSE:HEK) has not been immune. Shares are down 13% over the past 12 months, and though they’ve jumped well above the lows they hit last fall, they remain symptomatic of the industry as a whole.

According to the Energy Information Administration, natural gas prices ticked up $0.08 to $3.57 per million Btus last week, a tight range that it hasn’t been able to shake off, but with inventories remaining above the historical five-year average — even with the number of rigs in service dropping 39% from a year ago — there doesn’t appear to be a catalyst for a breakout anytime soon.

It’s the falling rig count, though, that weighs most heavily on Heckmann Corporation (NYSE:HEK). It provides water and fluids used by drillers in the hydraulic fracturing process to access the oil and natural gas trapped therein. Once the fracking process is complete, Heckmann treats the water that is extracted for disposal.

Through the use of fracking and nontraditional drilling methods like horizontal drilling, the industry has produced copious amounts of gas, creating both a boon and bane because the influx has caused prices to crumble. But I’m convinced that will ultimately lead to the greatest economic boom yet, because the low energy cost inputs will drive innovation and development further. While Heckmann should be one of the beneficiaries of the coming natural gas boom, it’s really in oil where its future lies.

Following the purchase of Power Fuels last year, Heckmann Corporation (NYSE:HEK) became an oil-oriented play, with approximately 70% of its focus in the oil shales and liquids market and just 30% in the natural gas shale. Power Fuels is centered almost entirely in the Bakken oil play, and the goal really is to become an industry giant, a one-stop shop for environmental services.

That could be seen in its purchase of Thermo Fluids last year, what ended up becoming Heckmann’s fluids management division. It was the first real diversification away from its core gas services business and indicated a trend that it would follow with Power Fuels. The liquids market will be a driving force for the company, and it could be exports that lead the way.

Cheniere Energy, Inc. (NYSEMKT:LNG) is particularly poised to reap the rewards there, as it owns exclusive approval rights to export LNG supplies to other countries. Its Sabine Pass liquefaction facility in Louisiana has the capacity for 16.9 billion cubic feet of storage, and deliveries are expected to begin as early as 2018. French energy specialist Total has already agreed to buy $6.3 billion worth of LNG from Cheniere over a 20-year period.