When people usually talk about making a natural gas play, they think of picking up a natural gas producer or explorer.
But with talk about of an abundant supply thanks to new supplies of shale gas, some experts predict the price of natural gas will be very low for years to come.
So why would you take a run at a natural gas producer when the price appreciation is projected to be, well, unexciting.
Well there is another natural gas play developing.
One that will likely flourish in a chronic oversupply situation.
And that opportunity is natural gas vehicles, or NGVs.
To be honest, I never really thought much of NGVs before.
They seemed to be products that never really took off in North America due to original equipment manufacturer (OEM) neglect and a lack of refueling infrastructure.
But a certain stock caught my eye while searching for companies that would directly benefit from a lift in NGV sales.
Westport Innovations is a Vancouver-based company that specializes in converting heavy duty vehicle engines to run on diesel & liquefied natural gas (LNG) mixtures (diesel being only a pilot fuel).
Why would LNG vehicles take off now? Well there are a couple of fundamental reasons.
As mentioned above natural gas is CHEAP right now relative to diesel.
Another is that the right market is being targeted this time - long distance haulers.
The economics will be better for Big Red because he puts on more miles in a year than any other type of vehicle on the road.
Also with dedicated hauling routes he needs fewer stations.
And his LNG tanks have almost the same range as diesel tanks.
Finally, T.
Boone Pickens (no not the country singer - the oilman) and his buddies in the senate are looking to pass a bill that would heavily subsidize natural gas vehicles in the USA, arguing that it will help wean the country off foreign oil while reducing its carbon emissions.
Now granted, Westport could still be called a "startup" as it is burning rapidly through shareholder equity despite rising revenue.
Also there is a hefty speculative premium already built into the shares - they are trading much higher than book value.
However, we've seen that share prices can rise higher still without much regard to the balance sheet.
Note that I am NOT BUYING right now, but if it falls a bit during this market pullback and shows a good entry point, I might take a run at it.
But with talk about of an abundant supply thanks to new supplies of shale gas, some experts predict the price of natural gas will be very low for years to come.
So why would you take a run at a natural gas producer when the price appreciation is projected to be, well, unexciting.
Well there is another natural gas play developing.
One that will likely flourish in a chronic oversupply situation.
And that opportunity is natural gas vehicles, or NGVs.
To be honest, I never really thought much of NGVs before.
They seemed to be products that never really took off in North America due to original equipment manufacturer (OEM) neglect and a lack of refueling infrastructure.
But a certain stock caught my eye while searching for companies that would directly benefit from a lift in NGV sales.
Westport Innovations is a Vancouver-based company that specializes in converting heavy duty vehicle engines to run on diesel & liquefied natural gas (LNG) mixtures (diesel being only a pilot fuel).
Why would LNG vehicles take off now? Well there are a couple of fundamental reasons.
As mentioned above natural gas is CHEAP right now relative to diesel.
Another is that the right market is being targeted this time - long distance haulers.
The economics will be better for Big Red because he puts on more miles in a year than any other type of vehicle on the road.
Also with dedicated hauling routes he needs fewer stations.
And his LNG tanks have almost the same range as diesel tanks.
Finally, T.
Boone Pickens (no not the country singer - the oilman) and his buddies in the senate are looking to pass a bill that would heavily subsidize natural gas vehicles in the USA, arguing that it will help wean the country off foreign oil while reducing its carbon emissions.
Now granted, Westport could still be called a "startup" as it is burning rapidly through shareholder equity despite rising revenue.
Also there is a hefty speculative premium already built into the shares - they are trading much higher than book value.
However, we've seen that share prices can rise higher still without much regard to the balance sheet.
Note that I am NOT BUYING right now, but if it falls a bit during this market pullback and shows a good entry point, I might take a run at it.
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