Natural gas prices continue to tread just above historic lows with the June futures contract showing a price of $2.711/mmBtu as of May 21, 2012. With the introduction of horizontal drilling and hydraulic fracturing on the shale rock formations, technology has unlocked an abundance of previously unknown natural gas reserves that is sure to keep commodity prices low for an extended period of time.
As a result of this dynamic shift in the commodities market, exploration companies most commonly associated with natural gas have fundamentally failed to provide the ideal investment opportunity for investors. Despite a grand future for the natural gas industry in light of the growing demand that is sure to ensue, investors in such companies have often come up short as the supply glut results in a race to the bottom. Those able to produce gas the cheapest have continued to do so at razor thin margins, if not for at a loss.
Yet falling natural gas prices have provided opportunities for correlated names in the industry space whose business model is dependent upon the prevalence of cheap natural gas. Companies that specialize in using natural gas as a fuel source have continued to prosper. Likewise, companies that specialize in making natural gas readily available have also found abundant demand as the desire for an inexpensive energy source becomes more mainstream. The following names offer a brief list of companies that have continued to see their business increase particularly as natural gas prices look to stabilize near their record lows.
- Clean Energy Fuels Corp (CLNE). Clean Energy is a company helping to fill the infrastructure void necessary the use of natural gas as a transportation fuel. The company designs, builds, operates, and maintains fueling stations. It also supplies compressed natural gas and liquefied natural gas for large vehicles. The company supports a market capitalization of $1.09 billion, a price-to-book ratio of 2.18, and a price-to-sales ratio of 3.77. While not presently earning a profit, the company has seen revenues grow from $131.5 million in December 2009 to $292.7 million in December 2011.
- Fuel Systems Solutions (FSYS). Fuel Systems designs, manufactures, and distributes components necessary for vehicles that run on alternative fuels such as natural gas. Offering everything from pressure regulators, to fuel meters, and even to gaseous fueled internal combustion engines, the company's name has become synonymous with gas-related vehicle parts. The company currently trades with a market capitalization of $306 million, a price-to-book ratio of 0.96, and a price-to-sales ratio of 0.75. The company has a forward price-to-earnings ratio of 15.97. However, the company has seen significant insider ownership purchases in early 2012 as beneficial owner Kevin Douglass bought up $8.9 million worth of shares between $23 - $24/share. As of May 20, the company now trades at $15.33.
- Golar LNG (GLNG). The discrepancy in natural gas prices between here in the United States and many of the countries abroad is growing to be ever more stark as prices continue to seek a bottom domestically. As a result, a company like Golar who specializes in the transportation, regasification, and liquefaction of liquefied natural gas grows to be ever more necessary as a middle man in the global natural gas trade. The company currently trades with a market capitalization of $2.6 billion, carries a price-to-book ratio of 3.88, and retains a price-to-sales ratio of 8.77. The company has a moderate forward price-to-earnings ratio of 11.12 and even offers an above average annual dividend yield of 4%.
- Chart Industries (GTLS). With a ticker symbol that refers to "gas-to-liquid systems," Chart Industries specializes as a manufacturer of cryogenic and heat transfer systems. Pertaining to natural gas, the company's products are necessary for condensing gas into a liquid which allows for easier transportation and storage. The company currently trades with a market capitalization of $1.87 billion, has a price-to-book ratio of 2.97, and a price-to-sales ratio of 2.22. The company currently supports a forward price-to-earnings ratio of 16.03, but has seen a quarterly revenue growth (year-over-year) rate of 32.6%.
- Westport Innovations (WPRT). Westport's contribution to the natural gas space lies in its development and distribution of engine and fuel systems used in vehicles running on natural gas. The company also has a 50:50 joint venture with engine maker Cummins Inc (CMI). As of May 21, Westport supported a market capitalization of $1.3 billion, carried a price-to-book ratio of 2.92, and had a price-to-sales ratio of 3.95. While not presently earning a profit, the company has seen revenues grow from $143.2 million in December 2009 to $212.6 million in December 2011.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.