Encana Corporation (ECA), through its subsidiary Encana Natural Gas Inc., has teamed up with Heckmann Water Resources (“HWR”) to provide liquefied natural gas (LNG) from its new mobile LNG fueling stations.
California-based HWR, the parent company of Heckmann Corporation (HEK), provides water hauling services to Encana and other producers in the Haynesville shale gas play of Louisiana. Recently, Heckmann ordered an additional 200 LNG trucks from Peterbilt Motors Corporation of Denton, Texas. The truck fleet was mechanized by Westport HD Systems from Westport Innovations Inc., Vancouver.
This is indicative of Heckmann’s initiatives to convert its water-hauling truck fleet to LNG from diesel, becoming the largest fleet operator of LNG trucks in North America. The truck fleet is intended to serve natural gas wells and water handling projects along with its network of pipelines and disposal wells.
Initially, Encana will distribute LNG to Heckmann's truck fleet from its mobile fueling stations. Later in 2011, it plans to construct its first permanent LNG fueling station in the Shreveport, Louisiana area.
Soaring oil prices over the last few weeks, following political turbulences in the Middle East and persistently growing demand for oil, demand an alternative energy that could compensate for the expensive lubricate. Hence, the switch over to LNG or compressed natural gas (CNG) makes sense given its environment friendly characteristics as well as lower costs compared with gasoline or diesel in many regions. LNG comes at a 20–40% lesser price in comparison to diesel or gasoline.
Accordingly, many companies are also making efforts to convert their fleets to alternative energy resources, like LNG or CNG. Recently, Chesapeake Energy Corporation (CHK) also completed phase-one of its entire fleet conversion drive to CNG. Chesapeake has set 2014 as its target for this mission.
Encana brought its first CNG fueling station online at Coushatta in Red River Parish, Louisiana last November and expects to open its subsequent four CNG stations in 2011, with one in Wyoming and Colorado and two in Western Canada.
EnCana is one of the largest natural gas companies in North America with a portfolio of natural gas assets spread over Canada and the U.S. This provides the company with a huge inventory of reserves and a resource base capable of robust production growth.
However, the company’s extensive natural gas exposure raises its sensitivity to gas price fluctuations compared to its more diversified independent peers with higher oil production. We are maintaining a long-term “Neutral” rating on the stock. Encana currently retains a Zacks #3 Rank (short-term 'Hold' recommendation).
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