Best of the Week
Most Popular
1.Stock Market Continues Defying Gravity, Dow New All Time High - Nadeem_Walayat
2.America Superpower 2016 - Ian Bremmer
3.The US Dollar and the Precious Metals Complex - Rambus_Chartology
4.UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - Nadeem_Walayat
5.The “Real Flash Crash” Will Scare You to Death - Shah Gilani
6.Gold Price Trend Forecast - Bob_Louka
7.UK Deflation Warning - Bank of England Economic Propaganda to Print and Inflate Debt - Nadeem_Walayat
8.Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - GoldCore
9.Will Interest Rates Ever Rise? - BATR
10.Who’s Killing the Stock Market? - Shah Gilani
Last 5 days
Stock Markets Buy and Hold is Back! - 28th May 15
We're Now Frighteningly Vulnerable to a Bond Market Crash - 28th May 15
Austerity, Economics and Religion - 28th May 15
National Holidays London and the Magic of Legoland UK Review - 27th May 15
Imminent Stocks Bear Market Signaled by Dow Theory ... - 27th May 15
Gold Price Has Bottomed – More Evidence - 27th May 15
Three Reasons You Shouldn’t Try to Invest Like Warren Buffett - 27th May 15
Gold Is “100% Guarantee from Legal and Political Risks” States Russian Central Bank - 27th May 15
Don't Drown in the Sea of Global Debt - 27th May 15
Three Reasons Why Carl Icahn Is Wrong About Apple Stock - 27th May 15
Crude Oil Price Stochastic Signals - 26th May 15
Why the Stock Market Will Crash - 26th May 15
GDP, Inflation, Employment Economic Statistics: It’s All a Lie - 26th May 15
Introduction to Peak Food - 26th May 15
Should We Dump the Euro? - 26th May 15
A Geopolitical Net Assessment of Europe - 26th May 15
Stock Market Top in Place? - 26th May 15
Best Cash ISA SBI 2.3% - 2.8 Year Fix, UK Interest Rates 2016 - 26th May 15
China Sets Up Gold Bullion Fund For Central Banks - 25th May 15
Is The Silver Trade Getting Crowded? - 25th May 15
Money Murder Mystery: Who Killed the Stock Market? - 25th May 15
Why Do We Celebrate Rising U.S. House Prices? - 24th May 15
Mario Draghi’s Slippery Downward Slope - 24th May 15
Gold : Truth is Stranger than Fiction - 24th May 15
Facebook Stock Price Forecast - 24th May 15
Make a Killing on the Coming Energy "Debt Bubble" - 24th May 15
Stock Market SPX Uptrend Inflection Point - 23rd May 15
What You Know for Certain - Huge Demand for Gold And Silver - 23rd May 15
Are We in Another Credit Bubble? And Is It Different than Before? - 23rd May 15
The “Real Flash Crash” Will Scare You to Death - 23rd May 15
Venezuela: No Rule of Law, Bad Money - 23rd May 15
Robots That Can Beat the Market by 100% - 23rd May 15
Why Shake Shack Stock Is a Bad Investment - 23rd May 15
Gold Price Primary Driver Bullish - 23rd May 15
Time To Get Real About China - 22nd May 15
Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - 22nd May 15
One Investment Could Save Two Generations' Retirements - 22nd May 15
Investing is About Identifying Gifted and Talented Camps - 22nd May 15
One of Europe's Latest Debt Nightmares - 22nd May 15
UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - 22nd May 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Biggest Debt Bomb in History

U.S. the Saudi Arabia of Natural Gas, Following T. Boone Pickens into the Energy Patch

Commodities / Natural Gas Jun 01, 2012 - 07:02 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleG.S. Early writes: An iconic Southwestern energy patch player, T. Boone Pickens has built a legacy over the decades that proves the old Texas saying: "It's not the size of the dog in the fight, but the size of the fight in the dog."

In the wild days of the 1980s, made famous by a generation of traders who emulated the likes of Gordon Gekko, few could ever match the Pickens eye for the big deal.


Never eat anything bigger than your head?.... Pickens never heard that one.

As the head of Mesa Energy, his first deal was to purchase the Hugoton Production Company - made notable by the fact the company was 30 times the size of his own.

His thirst for Goliaths continued for decades to come. He once even went after Gulf Oil, which is now Exxon Mobil.

The point is Pickens has never shied away from risk when he saw reward. And for all his bold achievements there is always less "crazy" there than there seems to be.

And if you're looking for a guy who knows:

•How Wall Street traders and Texas wildcatters think.
•Who can read a geological map.
•Who can manage a hedge fund.
•And who can make money in a volatile industry... Pickens is your guy.

He's the Warren Buffett of the energy patch.

That's why there is more there than meets the eye in his unique venture into the natural gas market with Clean Energy Fuels Corp. (Nasdaq: CLNE). Pickens is its founder and largest individual shareholder.

The Original Natural Gas Evangelist
A little over a decade ago, Pickens began to build an integrated natural gas company that would support natural gas vehicles (NGVs) from golf carts to tractor trailers.

Clean Energy Fuels Corp. was the first step in the integrated energy concept -- which isn't a surprise coming from a lifelong oil man.

You also might recall that in 2008 Pickens unveiled his Pickens Plan, which promotes natural gas as an alternative to imported oil and a bridge to future renewable energy resources like wind power.

As Pickens points out, electric vehicles (EVs) may be more popular but you can't make commercial trucks electric because you can't derive the necessary torque from an electric engine.

There are also questions about what impact high levels of EV adoption would have on electricity generation and the demands on the antiquated power grid. NGVs don't have these issues.

Four years later, CLNE is a story of note because it has become a vertically integrated force in the natural gas industry.

CLNE has built a network of subsidiaries across North America to make natural gas vehicles more accessible and practical. These subsidiaries include:

•refining operations;
•distribution operations;
•engine conversions (BAF Technologies);
•commercial and consumer filling stations (Northstar);
•the financing of fleets and filling stations (CE Finance).

CLNE even has a subsidiary that develops biomethane fuels (CE Renewable Fuels). These are fuels derived from landfills and other organic waste facilities (a growth industry to be sure).

While natural gas is 23% cleaner in carbon emissions than diesel in heavy-duty vehicles - and far cleaner in NOX and PM emissions - biomethane enables an 88% reduction in carbon emissions when displacing diesel or gasoline.

The Saudi Arabia of Natural Gas
But at this point Wall Street has linked CLNE's fortunes to the price of natural gas, so the company rises and falls relative to the price of the fossil fuel. Now the stock is a bargain because natural gas is so cheap.

Nat gas prices are so low for two reasons. First, it's the weak economy. And second it's the reality embodied by the map above: new oil shale discoveries mean there are larger reserves of natural gas in the U.S. than there are oil reserves in Saudi Arabia.

The truth is we have more natural gas reserves than we know what to do with. Unless, of course, you're T. Boone Pickens.

Now, let's take that logic one step further.

If natural gas is cheap, and municipalities and fleets and trucking services can convert their vehicles to a low cost, stable alternative to petroleum with a solid, predictable infrastructure, isn't now the time to do it?

We certainly have the pipelines to move the gas around.

And since we don't have many ports for moving liquefied natural gas (LNG) to outside markets, the domestic production stays here. So when organizations commit to long-term planning, natural gas becomes the fuel of choice.

As more and more organizations, businesses, and consumers opt for natural gas powered vehicles, demand will increase, which will put pressure on supplies and move prices higher -- especially as LNG export facilities come on line in a few years.

And even when we get to that point, you can guarantee that CLNE will be a part of the LNG export business as well.

Granted this is not going to happen in the next year. But as long as all of these forces remain in play, natural gas has a bullish future.

But don't wait for the rally to jump in.

While this may not be the ultimate bottom, there is a lot more upside potential here for long-term investors in an integrated natural gas play than there is downside. CLNE is a buy below $16/share.

After all, Pickens told an audience at the National Press Club a few years ago, "I'm not a young man; I don't buy green bananas anymore."

Here's a guess CLNE is no green banana but part of a longer-term vision from somebody with an eye for the right deal.

Source :http://moneymorning.com/2012/06/01/natural-gas-following-t-boone-pickens-into-the-energy-patch/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History