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Part I of this series focused on the continual reduction of rigs exploring for natural gas in the domestic US lower 48. All while commodity prices continue to surge upward with futures prices even higher. Parts II and III focused on the natural gas producers and oil service providers, respectively, that would benefit from a shortage of drilling rigs that would push prices higher.

This fourth part will focus on the natural gas users that will lose out from what could become surging prices for natural gas due to the reduced drilling levels. These unfortunate users built business plans on the expectations of abundant supplies that likely will exist down the road when more equipment becomes available. Unfortunately though, the lack of an energy policy and volatile prices could harm the very business plans expected to benefit the most in the long run.

As mentioned in Part I, the Baker Hughes (NYSE:BHI) rig report on October 12th showed an interesting divergence with the commodity markets. While natural gas had jumped some 60% in the past few months, the amount of rigs drilling for natural gas plunged to lows not seen since 1999. On the October 19th report, the natural gas rig count increased 5 up to 427. A year ago, the count was 927.

Natural Gas Users

As mentioned in Part I, the natural gas users stand to lose the most from the higher gas prices in the domestic U.S., as it discourages the customers converting to this new fuel and export opportunities.

Below is a list of the companies that stand to greatly benefit from higher prices:

Clean Energy Fuels Corp. (NASDAQ:CLNE) - the company is a leading provider of natural gas for fuel. The company has a goal of developing America's Natural Gas Highway in order to encourage the adoption of LNG as a fuel source by fleet operators.

Clean Energy already has a few regional highway corridors completed, which should greatly reduce the hesitancy to move forward with plans to adopt the cheaper fuel for transportation.

The goal by the end of 2013 is for approximately 150 LNG fueling stations co-located at Pilot-Flying J Travel Centers.

Cheniere Energy (NYSEMKT:LNG) - the company plans to be one of the leading domestic LNG exporters. Cheniere is in the process of building an LNG export facility at Sabine Pass in Louisiana that will utilize some existing facilities designed for importing LNG to reduce construction costs.

The company wants to liquefy the abundant natural gas and export it to international markets where the prices are significantly higher than in the U.S. Unfortunately, the development of four LNG trains at the Sabine Pass will take until 2015 (for the first train to be completed). The company plans to have production of 18 mtpa of capacity by 2017 with 16 mtpa already sold with long-term contracts.

See the Investor Day Highlights here for more details on the benefits and pitfalls especially as natural gas prices increase.

Westport Innovations (NASDAQ:WPRT) - the company builds proprietary solutions that allow engines to operate on clean burning fuel alternatives such as CNG and LNG.

The company expects to generate revenue growth of 50% for all of 2012. Growth in both U.S. and China has been significant and the company expects to benefit from the clean energy initiatives that are pushing for more trucks utilizing CNG and LNG engines from Westport.

Stock Returns

Below are the stock returns over the last year for the above mentioned natural gas users:

CLNE Total Return Price Chart

CLNE Total Return Price data by YCharts

Note how all the stocks surged as the 2012 winter consumed less natural gas and sent natural gas prices to recent lows. As the spring rolled around, it appears that investors were hit with the reality that industry cutbacks would alternatively lead to lower supplies and higher prices.

Conclusion

All of these users of natural gas have quickly gone from ones that benefit from abundant supplies to losers from the lack of an energy policy. All three companies offer solutions that either involve burning a cleaner fuel or exporting a commodity that would create thousands if not hundreds of thousands of jobs in the U.S.

Unfortunately, the lack of a policy that will provide for more stable prices could ultimately damage the business potential of these companies. According to the Clean Energy fuel price report, the pricing for a gallon equivalent of fuel has already merged closer between the prices of LNG and gasoline.

Imagine if oil prices were to fall while natural gas prices soar. These companies creating innovative businesses would be crushed. Though the country would likely be better off supporting these industries long-term, the short-term volatility would harm investors the most. While all three companies are intriguing, the investments are less so at this point until abundant supplies are definitely going to exist at low prices.

Source: Natural Gas Rigs: Headed Towards A Shortage - Part IV

Additional disclosure: Please consult your financial advisor before making any investment decisions.