by Mike Kapsch, Investment U Research
Wednesday, April 11, 2012
Legendary energy tycoon T. Boone Pickens has been on his crusade for a switch to natural gas for some time now. And of course his company, Clean Energy Fuels Corp. (Nasdaq: CLNE), stands to benefit greatly if he can convince the mainstream to make the switch.
But Pickens may have made his most poignant and intriguing argument to date in a recent TED Talk:
It’s almost disgusting to imagine that the United States in all of its debt woes and spending dilemma has paid OPEC $700 billion since just 2008 and $7 Trillion since 1976 (Including the cost of military and oil both). And why is military included in that figure?
Because, as Pickens argues, this oil habit is creating the need for our country to “police the world.”
Pickens points out that, for instance, there are 12 aircraft carriers in the world. Of those 12, 11 belong to the United States. And as Pickens’ graphic shows, the majority of those 11 are protecting the major oil shipping lanes in the Middle East.
A Look Closer at Pickens’ CLNE
So how do we curb this expensive habit?
Pickens obviously advocated switching to much cheaper and slightly cleaner natural gas. And with natural gas at historic lows, it may be the best option we have.
And if we are able to make this happen, one of the most obvious benefactors will be Pickens’ own CLNE.
Clean Energy Fuels Corp. is no stranger to Investment U.
In July 2009, David Fessler touted the company as a way to play the increasing usage of natural gas in cars and trucks.
Since then, CLNE’s shares have jumped as much as 186%. This year alone, share prices have popped as high as 84%.
Yet since hitting a record high of $24 in March, shares have fizzled to around $19.00.
But does this indicate a buying opportunity or are share prices likely to fall even further?
CLNE’s Biggest Hurdle… Politics
Headed by legendary energy tycoon, T. Boone Pickens, CLNE is the largest provider of CNG and LNG in North America.
It fuels over 25,000 vehicles daily at 273 locations in the United States and Canada. And the company is steadily growing each year. Last year, revenue increased 38% from 2010. The amount of natural gas
But shares dropped $5.00 in just the last month. And it begs the questions what’s going on here?
A big culprit – as Dave predicted it would be two years ago – is politics.
In March, the U.S. Senate rejected the New Alternatives to Give Americans Solutions (NAT GAS) Act that would’ve subsidized natural gas vehicles.
T. Boone pushed very hard for this legislation, meeting in Washington nearly a dozen times in 2011. The bill would’ve been a big boost to CLNE and T. Boone’s bottom line. Instead, it has become a catalyst for the stock’s recent slide.
For short-term investors, I wouldn’t expect another jolt in the company’s stock price anytime soon either. Operating margins at CLNE have slipped 14% over the past 12 months. Profit margins are also down 16%.
But while CLNE’s short-term outlook isn’t anything to jump at, the company’s long term prospects are hard to pass up.
America’s Natural Gas Superhighway
As T. Boone points out, there are big reasons why we need to utilize natural gas in the U.S. It’s more than just another energy source. It’s America’s road to energy independence.
CLNE is T. Boone’s way to capitalize on that dream and put it into action. In fact, the company is currently building “America’s Natural Gas Highway”. This project is set to include a network of approximately 150 LNG truck fueling stations across America.
CLNE expects the entire project to be operational in the next two years. And considering the company completed 68 fueling station projects in 2011, it should have no problem staying on track.
Chesapeake Energy (NYSE: CHK) has even agreed to provide CLNE with $150 million over the next three years to help pay for the project.
But CLNE isn’t stopping there. It also just inked a 10-year strategic partnership agreement with Saddle Creek Corporation to build natural gas fueling stations at existing Saddle Creek locations. This will help increase CLNE’s presence in Florida, Georgia, North Carolina, and Texas.
The Road Ahead
For the time being, until CLNE increases its margins and it’s clear it can build out “America’s Natural Gas Highway” on time, I might be hesitant to pick up shares – especially with the insanity of the politics in Washington.
But for long term investors who aren’t looking for a quick profit, CLNE is could be a great opportunity to benefit from what appears to be an inevitable switch to the use of natural gas in vehicles in the United States.