Cheap natural gas, expansion and the prospect of profitability seem to be driving Seal Beach-based Clean Energy Fuels Corp. on Wall Street.
The company, 40% owned by Texas billionaire T. Boone Pickens, builds and runs natural gas fueling stations for fleets of taxis, buses and other vehicles.
Clean Energy’s shares have nearly tripled since the start of the year,easily outpacing the 15% or so gain of the S & P; 500 index. The company had a market value of $825 million last week.
Low natural gas prices have brought more business for Clean Energy as some fleet operators make the switch from diesel fuel, the company’s main rival.
Clean Energy could reach profitability this year, according to David Woodburn, an analyst for San Francisco-based ThinkEquity LLC, part of London’s Panmure Gordon & Co.
For the second quarter, Clean Energy posted a loss of $6.4 million, versus a loss of $3.2 million a year earlier.
Analysts on average expect a third-quarter loss of $2.4 million with some predicting a profit of $1.2 million.
For the fourth quarter, analysts on average project a loss of $1.2 million, but some are forecasting a profit of $1.2 million.
Being profitable would allow Clean Energy to finance the building of stations on its own.
By the end of the year, Clean Energy plans to add about 20 stations for a total of 200. Forty are planned for 2010.
Up to now, the company has raised money from investors and grants to build stations, which cost $1 million to $3 million each.
Clean Energy typically makes its money back on stations within four years, according to Chief Executive Andrew Littlefair.
Revenue at Clean Energy has been in decline,falling 17% from a year earlier to $28 million in the second quarter,as a result of lower natural gas prices.
The trend lowers costs and helps toward profitability.
Clean Energy’s second-quarter gross profit came in at $11.7 million, up from $8.6 million for the prior quarter as it sold more natural gas at a lower cost.
“A lot of their success has to do with the price of natural gas,” Woodburn said. “The more customers can save with natural gas compared to diesel fuel, the more popular they become.”
For the second and third quarters, the company made about 49 cents on each gallon of natural gas sold,the most ever.
In the past, Clean Energy made about 42 cents on a gallon, Woodburn said.
The analyst said he doesn’t see natural gas prices rising anytime soon.
“There’s not much of a threat to rising natural gas prices with new ways to access it,” he said. “There’s actually a glut of it out there.”
Clean Energy also could benefit from $300 million in grants from the Energy Department.
The company stands out from other alternative fuel companies by not being a “science experiment,” Woodburn said.
In the past six years Clean Energy has raised about $150 million in grants.
Stations
Clean Energy looks to build stations near airports, utility companies, universities, city yards and other places they’re likely to see a lot of use.
“We’re not looking for people who will just put a nickel in,” Littlefair said. “Volume is the key.”
Some of Clean Energy’s biggest local buyers include the Orange County Transportation Authority, which has 500 natural gas vehicles, and Santa Ana-based California Yellow Cab, which has 200.
Walt Disney Co.’s Disneyland Resort, Houston-based Waste Management Inc. and the cities of Anaheim and Irvine also are customers.
Two of Clean Energy’s biggest competitors are Trillium USA LLC in Salt Lake City and Pinnacle CNG Co. in Midland, Texas.
Other alternatives, such as electricity and hybrid technologies, pose a threat.
So far, the high cost of developing those technologies hasn’t allowed that to happen, Littlefair said.
On average, it costs about $300,000 to build a diesel fueled bus, $340,000 to build a natural gas one and $550,000 to build a hybrid that uses a combination of diesel and electricity, he said.
In July, Clean Energy raised $74 million from a stock sale with the proceeds going toward stations, an investment in biomethane production and acquisitions.
In September, Clean Energy said it was buying Dallas-based BAF Technologies Inc., which converts vehicles to run on natural gas, for $4.5 million.
Clean Energy also is dabbling in biomethane, a form of natural gas extracted from landfills. Right now, biomethane accounts for 10% of its business and is growing.
Trash hauler customers like the idea of harvesting biomethane from their waste sites, Littlefair said.
Clean Energy employs about 180 people, including 65 in Seal Beach. This year it’s hired about 20 people, half of them locally.
Legendary oilman and corporate raider Pickens started Clean Energy as a tiny part of his Dallas-based Mesa Petroleum in the late 1980s. He split it off in the late 1990s.
The company is part of Pickens’ push toward alternative sources of energy.
In 2008, he called for $1 trillion in government and private investment in windmills to cut dependence on foreign oil.
