As the trends seem to be shifting towards more greener methods natural gas refueling is getting more popular. Clean Energy Fuels (NASDAQ:CLNE), the market leader in the natural gas refueling is enjoying these changing trends. As the company’s third quarter earnings and revenues were well above Wall Street analysts’ consensus. The company set a record amount in compressed gas deliveries and LNG sales. This success is actually more in terms of lowering costs, lowering capital expenditure and having two major deals in the pipeline.
Looking into the quarter figures, there is a 22% growth in fuel deliveries as compared to last year. But a quarter by quarter increase for 2014 was only 4%, which raised some concerns. The CFO Rick Wheeler addressed this matter publicly, stating that two of their major clients are in the transition of shifting from LNG buses to CNG buses; this caused a striking decrease in our LNG sales for the third quarter. But the 800,000 gallon decrease the LNG witnessed was 800,000 gallon CNG increase. This made the earnings seems a bit irregular when in reality they weren’t.
Another factor that should affect the market is falling oil prices. But according to the third quarter oil prices fell by 20% but in response the whole sale price for natural gas also declined by 17%. Diesel fell by 7% only. Regardless of these changes natural gas still seems to have the price advantage.
There are also two major initiatives in the growth pipeline which will create a 6 billion worth of striking demand. One is the joint venture with Mansfield. Natural gas will supply Mansfield Oil Company with natural gas fueling services. Starting early 2015, Mansfield’s 12 CNG trucks will refuel from Clean Energy station in Atlanta; with possibility of a second station opening in the near future. Mansfield will also bring with it hundreds of other bulk fuel haulers which would boost up sales and bring substantial business.
The second initiative is Clean Energy (NASDAQ:CLNE)’s investment interest in NG Advantage. NG Advantage is a supplier of natural gas to the commercial and industrial sector in New England. By considering natural gas these companies could save up 40% for fuel costs. For Clean Energy this brings in growth opportunities.
At this stage the company’s biggest weakness is how to budget and maintain a certain cash position. As the past many years the company has only been burning cash and that too in large amounts. Many of these costs incurred are due to capex as the company continues to expand. But its NG Advantage investment is likely to produce better margins and in early stages as compared to now when the company is only focused at the vehicle refueling business. The company on its own is also taking initiatives to reduce costs. In the third quarters, measures were taken to reduce cost in the sales, administrative and general departments. This move proved profitable in terms of reducing cash for the quarter, Clean Energy still isn’t profitable or has a positive cash flow but the business continues to grow, which is an indicator that demand is still there and the future holds unknown promises.