New York 4/3/2013 6:00:00 PM
News / Oil and Gas

Natural Gas Sets Tone For Retail Travel Centers

There are big changes coming for companies engaged in natural gas production for vehicles, those engaged in the conversion of coal and other deposits into natural gas, and travel centers, which are expanding across the U.S. Investors should take note. Clean Energy Fuels (CLNE)is the largest provider of natural gas fuel for commercial vehicles in North America and a global leader in the growing natural gas vehicle fuel market. Next Fuel (NXFI.PK) has been focusing on its biogenic coal-to-natural gas (BCTG) technology, which produces natural gas from low-grade coal and other deposits. Meanwhile, Artemis Acquisition Corp, which recently merged with Sharewell Capital Group (SHCG.PK), announced the acquisition of Travel Center Partners. Travel Center Partners has tripled its footprint in the southeast and nationally to take advantage of retail trends.

Clean Energy Fuels

A recent catalyst for Clean Energy stock was its agreement with one of China's largest private companies, ENN Group, which had planned to retrofit 50 fueling stations for natural gas across the U.S. The agreement will enable the natural gas vehicle industry in the U.S. to lower its reliance on imported oil, and encourage the use of domestically produced natural gas from Marcellus and the Permian Basin. U.S. based shippers will be able to cut their shipping expenses by nearly $2 per gallon, according to Platts. Paradoxically, China -which imports most of its natural gas -- is ahead of the U.S. in terms of the number of natural gas vehicles sold per capita.

In January 2013, Clean Energy Fuels negotiated an agreement with Covanta Energy (CVA), that let Clean Energy identify Covanta sites on which it could construct CNG stations. Each station provides compressed natural gas to a minimum of 30 trucks per day and, depending on the location, will be accessible to the public for CNG fueling.

In November 2012, Clean Energy signed an agreement with General Electric (GE) that would establish a fuel network that would enable trucks to operate on Liquefied Natural Gas (LNG) from coast-to-coast and border-to-border. This would lower truck fleet fuel costs by more than 25%, and lower carbon emissions with LNG.

The demand for natural gas is rising quickly in OECD countries. In order to limit damage to the environment, government agencies and corporations are switching their operations to natural gas. In March2013, Oklahoma governor Mary Fallin made an announcement that she plans to promote wind, solar and biomass. This also includes the conversion of 11,000 vehicles to use compressed natural gas (CNG).Furthermore, she also revealed her intention to open up one CNG fuel station every fifty miles by 2025.

Clean Energy Fuels is taking steps to grow its business. The company recently partnered with Lehigh Gas Partners LP, a wholesale distributor of fuels for motors, to develop compressed natural gas (CNG) fueling stations for up to 20 Lehigh Gas facilities. The public stations will serve commercial CNG fleets (buses, taxis) and other natural gas vehicles.

Clean Energy Fuels jumped 5% on the same day that Chinese company ENN Group announced plans to build natural gas refueling stations across the U.S. The jump is indicative of the excitement and support of investors wanting to see a physical buildout of these fueling stations. The company provides investors with a long-term opportunity to play the increasing demand for natural gas as an alternative fuel for vehicles.

Next Fuel

The use of natural gas fuel reduces operating costs for vehicles and greenhouse gas emissions up to 30% in light-duty vehicles and 23% in medium to heavy-duty vehicles. According to the U.S. Department of Energy, 98% of the natural gas consumed domestically is sourced domestically and partly from Canada, which makes natural gas a secure North American energy choice. Over the past few months, natural gas prices have been on the rise overseas, particularly in Asia, where prices have risen over 30%. Natural gas prices are putting pressure on fuel conversion prices, namely low-grade coal--which remains dirt cheap--for natural gas conversion.

Next Fuel is one of the few players that could capitalize on fuel conversion price pressure. The company is focused on developing and commercializing clean and renewable energy technologies. Next Fuel uses clean energy technologies including renewable and water remediation.

Next Fuel's main technology is a coal-to-gas technology (CTG Technology), involves injection of nutrient rich water into dormant coal beds,thereby rapidly creating a biogenic methane gas. Through its proprietary technology, Next Fuel has the ability to focus on less valuable deposits such as lignite (brown coal) to help owners earn a higher return on their resources. Up to 40% of natural gas reserves are thought to be biogenic, or methane. Next Fuel's platform enhances the breakdown of coal, which increases the amount of compound used to boost microbial activity. Its practice makes low-grade coal into a profitable source of energy.

One big trend working in favor of Next Fuel's technology is that possible future U.S. coal production, based on recoverable reserves, is expected to increase in all regions of the U.S. through 2100. This means that coal could become more accessible and prices could decrease. If this trend occurred, Next Fuel could have greater access to coal at lower prices, which could make its technology more profitable based on the spread between fuels.

Over the past several decades, experts have predicted that a growing global population, along with economic development, would require constantly increasing volumes of oil. However, another big trend working in Next Fuel's favor is the fact that actual U.S. oil consumption has decreased significantly through 2012 compared to forecasts.

According to an article by AOL Energy, the world may end up consuming less oil than expected. The article points to a new research report titled "Global Oil Demand Growth - the End is Nigh." According to the article:

"This rethinking of global oil demand trajectory is driven by the analyst's view that natural gas will increasingly be substituted for oil in the transportation, power generation and industrial sectors, while considerable gains in fuel economy "raise the possibility that the tipping point for oil demand may come much sooner than the markets are expecting. Potential gas-to-oil substitution could reduce global oil consumption by 2.3 million barrels of oil equivalent per day by 2020 and 5.5 mmboe/d by 2025 in a low-case scenario, while a high-case scenario could see the world's oil use decline by 4.9 mmboe/d by 2020 and 13.6 mmboe/d by 2025."

Next Fuel received initial revenues from its Coal-to-Gas (CTG) license agreement signed with its Chinese partner, Future Fuel Ltd, in mid 2012. Next Fuel took in $160,000 in revenue from license fees and payments for the initial testing units alone. Per the agreement, it is likely that additional revenue payments will be made once the (methane) biogenically generated methane gas is produced by the units. Next Fuel is trading around $1.65, between a 52-week range of $1.50 and $5.00. Next Fuel could be a significant long-term investment opportunity based on the trends in coal production, oil consumption, and natural gas usage.

Travel Center Partners

Artemis Acquisition Corp. completed its agreement with Sharewell Capital. Artemis Acquisition released the completion of filing its 15-C-211 and its 8K when acquiring Travel Center Partners in late December and filed with the SEC in early January.

Travel Center Partners is Artemis Acquisition's operations corporation with eight businesses in the c-store, gas station, truck stop, restaurant, car wash, and travel industry and a commercial real-estate development firm. Artemis, now the controlling company, will start the process to revise the parent name from Sharewell Capital to Artemis Acquisition Corp.

Travel Center Partners is set to the natural gas space following Shell's recent deal with its Ohio-based neighbor, TravelCenters of America, which plans to sell liquefied natural gas from 100 of its stations. What Shell is aiming to capture is a large piece of the heavy-duty road transport market, which is price sensitive due to low-margins in the commercial transport business. The commercial trucking industry is in a better position to move wholesale towards natural gas fleets when compared to fickle consumer market, largely driven by annual vehicle sales trends from major motor car manufacturers.

Travel Center Partners is well-placed to take advantage of commercial fleets looking for natural gas along the Southeast's interstate-rich highway system. Meanwhile Shell is gearing up for a larger rollout of its natural gas plan. It is already planning a multi-billion dollar LNG processing plant that will, in part, smooth out its natural gas refining production cycle and take more of the uncertainty away from its downstream distribution partners like TravelCenters of America.


Based on its expanding natural gas fuel network throughout the U.S.,increasing demand for natural gas in commercial and other vehicles, and a growing concern for the environment, I believe Clean Energy Fuels, Next Fuel, and Travel Center Partners, operated by Artemis and Sharewell Capital Group, could see significant stock price catalysts in the long-term.