Some Companies Will Benefit From Natural Gas in More Ways Than One
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Natural gas is steadily becoming a realistic source of energy for the future. More companies are adopting it as it is slowly seeping into the mainstream consciousness. America has an abundant amount of the stuff, with much of it coming from the process known as fracking. Certain companies are in line to benefit from the upcoming natural gas boom in more ways than one.
"Don't get high on your own supply"
These were unheeded words of wisdom spoken to Al Pacino in the film Scarface (and maybe this is a bad analogy), but this is similar to what some energy companies are doing, by taking advantage of the cheap natural gas they are pulling in and using it to fuel the same equipment that they use to get it. That's why soon this message may not apply to energy companies such as Halliburton (NYSE: HAL) and Apache Corp (NYSE: APA). Both companies plan to use their own supply for power and fuel, by aligning themselves with Caterpillar (NYSE: CAT) to create a dual-fuel technology (one that mixes natural gas and diesel) to power equipment used in the hydraulic fracturing process, or "fracking." Apache's Executive Vice president Mike Bahorich chimed in on the situation, explaining that:
“Taking advantage of natural gas can lead to cost savings for the industry and for energy consumers, new jobs and a cleaner environment – it’s time for us to use this resource to its full potential. We commend Halliburton for its ability to take on our dual-fuel challenge and quickly make it possible.”
Why is all of this significant? In what will be one of the largest dual-fuel projects ever conducted in the gas and oil industry, the three companies plan to have 12 dual-fuel pumps (24,000 horsepower) powered by using what is being called "Dynamic Gas Blending" engines, retrofitted to burn conditioned field gas. Apache plans to eventually shift to using field gas as a power source. Caterpillar is charged with the task of converting Halliburton’s new Q-10 pumps to dual fuel, allowing the company to utilize both compressed natural gas and liquid natural gas in their dual-fuel system. Caterpillar will be supplying bifuel kits that allow pumping truck engines to run on diesel when idling and on natural gas when throttled up for pumping, as well.
Apache also plans to implement permanently mobile frac spreads using natural gas to power a fleet at its Granite Wash operations. By using these frac spreads to fracture about 140 wells in 2013, the company is estimating they may be able to cut diesel costs by up to 60%. Apache also sought out Halliburton, as well as Schlumberger, to help. Compressed natural gas is cheaper, but liquid natural gas is more efficient to transport. While Schlumberger is expected to help supply CNG, Halliburton will be supplying LNG, through their invented system that quickly connects natural gas to pumping engines and makes it a viable, usable fuel source for Apache. It's becoming quite clear that companies such as Halliburton and Apache will be able to save tremendously on fuel costs by utilizing natural gas going into the future.
And they are not alone...
Privately held Pennsylvania General Energy is also planning to convert engines to run on natural gas or a blend of the gas with diesel, saving significantly in fuel costs. The company plans to use field gas from their lines connected in the Marcellus Shale wells to fuel their trucks as well. All of these companies have one thing in common- they are looking to power themselves with the very gas that they are drilling for when fracking. It's like getting high on your own supply, but in a good, cost saving way. According to PGE's CEO Douglas E. Kuntz:
"You're going to see this spreading quite rapidly across the industry... As the technology evolves, you'll see more companies across the country doing more natural gas fueling of this equipment."
Not just for energy companies
Another company that has been on my watch list is Waste Management (NYSE: WM). The company doesn't seem like a natural gas play at first glance; usually being thought of as more of a boring trash collector. Think again. The company boasts the largest fleet of its kind in North America, with almost 1,800 vehicles powered by compressed and liquefied natural gas. Waste Management also operates 15 CNG fueling stations, which are all public. The company is obviously a supporter of natural gas as an alternative energy source, but there is even more to the story.
The main advantage for Waste Management may ironically lay hidden in the trash we pay them to take away from us. The company currently has 110 landfill-gas-to-energy (LGTE) projects, which currently generate enough energy to power 400,000 homes every day. Waste Management also has a huge opportunity for growth at a low cost, and as pointed out by Motley Fool author Maxx Chatsko, the company has also developed a system to turn biogas into usable CNG. This CNG could power the company's trucks, which means that they should be able to save tremendously on fuel costs going forward, by taking our trash and turning it into an energy source.
The bottom line
Many companies that are fracking for natural gas may begin to utilize the abundant supply of it to also fuel their machines and equipment to save costs. Other companies are developing ways to extract the gas from waste. Either way, these are the companies that will benefit from widespread adoption of natural gas in more ways than one. Waste Management especially will be an interesting company going forward, as they blend their traditional garbage and waste collection services into an alternative energy source, which may even power a significant amount of their fleet one day.
Jharry1 has no position in any stocks mentioned. The Motley Fool recommends Halliburton and Waste Management. The Motley Fool owns shares of Apache, Halliburton, and Waste Management. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!