In particular, the holy grail for the natural gas industry has been transportation. According to the US Energy Information Authority, natural gas use as a vehicle fuel increased over the past five years, yet is still far below gasoline and diesel. Put another way, vehicle use represents less than 0.13% of all natural gas consumption projected for 2013.
If natural gas costs less per mile than diesel, why doesn’t the US use it? Perhaps the single biggest reason is the lack of infrastructure. While there are over 180,000 gasoline and diesel fuel stations in the country, there are less than 580 stations offering compressed natural gas and 32 liquefied natural stations. However, the trucking industry looks to expand its use of natural gas.
Add 100 to that number
Earlier this month, TravelCenters of America LLC (NYSE:TA) announced a joint venture with Royal Dutch Shell plc (ADR) (NYSE:RDS.A) to outfit 100 of its truck stops with at least two natural gas fueling stations. The stations will be located along the interstate highway system and built out over several years as market conditions dictate. TravelCenters of America LLC (NYSE:TA) currently operates 243 truck stops in the US and Canada so the Shell deal will outfit roughly 40% of them. Providing natural gas adds another dimension to the truckstop services offered by TravelCenters. For truckers, a TravelCenters of America LLC (NYSE:TA) or Petro stop can offer everything from donuts to medical care to truck repairs.
As an investment, TravelCenters of America LLC (NYSE:TA) offers two options. First, the corporation with the ticker TA. For income-minded investors, there’s TravelCenters LLC, which holds senior notes that may be redeemed after Jan. 15, 2016. The corporation pays no dividend while the LLC pays roughly 7.7%. The LLC’s IPO was last January and so far has paid a dividend once, so if you want a long-term track record, this isn’t for you. TravelCenter corporation has grown from roughly $5 per share in January to $11.75 per share in April. Despite that impressive run, the company still trades at a PE of 10.5 and a PEG of 0.7.
Looking forward, TravelCenters of America LLC (NYSE:TA) forecasts improved profits from a variety of initiatives. For example, its gross profit margin from fuel sales increased from $0.08 per gallon in 2007 to $0.17 in Q3 2012. In 2011 and 2012, 22 truck stops (or “travel centers”) were purchased and are in various stages of renovation. These offer significant cost advantages to building a travel center from scratch. Other improvements at its travel centers include high-speed diesel fuel dispensers and renovated dining facilities.
What about Clean Energy?
Clean Energy Fuels Corp (NASDAQ:CLNE) also offers natural gas to truckers. Currently, Clean Energy operates roughly half the number of stations as TravelCenters of America LLC (NYSE:TA). Clean Energy Fuels Corp (NASDAQ:CLNE) partners with Flying J to provide natural gas fuel in about 70 truck stops. The remaining fueling stations offer compressed or liquefied natural gas, but no amenities. Clean Energy also provides natural gas fuel for fleet vehicles, retrofits vehicles to burn natural gas and owns a landfill that generates so-called biomethane. For 2013, in a personal email, a company spokesman stated Clean Energy Fuels Corp (NASDAQ:CLNE) will focus on building fueling stations for fleet vehicles. The spokesman also stated the company “couldn’t be happier” with how things are progressing.
Since its IPO in 2007, Clean Energy Fuels Corp (NASDAQ:CLNE) stock has risen and fallen and now trades at around $13 per share, same as it did in the summer of 2007. While sales grew during this time, earnings haven’t. For example, only twice in the past three years has Clean Energy reported a quarterly profit despite revenues growing from $211 million to $334 million. For the past three years in fact, annual losses have widened. Perhaps this is why institutions have sold off almost a third of their holdings in Clean Energy.
So which is the better investment?
To me, this question requires no thought. For either capital gains or income, TravelCenters of America LLC (NYSE:TA) eats Clean Energy on a cracker. Don’t get me wrong, Clean Energy Fuels Corp (NASDAQ:CLNE) offers a great fuel alternative and a variety of support services to go with it. They are clearly looking to the future and becoming an all-encompassing natural gas fuel company.
I would love to see the US go hog wild on natural gas as a vehicle fuel. The sad reality is adaptation of natural gas as a fuel proceeds at a glacial pace. TravelCenter doesn’t offer natural gas as its one and only fuel, but I suspect over time, natural gas will grow in importance.
Meanwhile, TravelCenter generates earnings through traditional fuels and a diversity of amenities for truckers. I wish Clean Energy Fuels Corp (NASDAQ:CLNE) all the best, but right now, my investment dollars are going to the company producing earnings.
The article Natural Gas as a Vehicle Fuel — Is a New Day Finally Dawning? originally appeared on Fool.com and is written by Robert Zimmerman.
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