Chesapeake Energy (NYSE:CHK) recently announced a collaboration with General Electric (NYSE:GE) to develop infrastructure solutions to promote natural gas as transportation fuel. This collaboration will combine GE’s technology know-how with Chesapeake’s expertise in developing innovative fueling solutions. Chesapeake Energy operates in the natural gas & oil production domain and also owns midstream and other oilfield services assets in compression, drilling, trucking and pressure pumping. It competes with Cimarex Energy (NYSE:XEC) and Linn Energy (NASDAQ:LINE) among others in the oil and natural gas segments.
The company plans to provide around 250 modular and standardized natural gas compression stations through a product called “CNG in a Box” by 2015. CNG in a Box is an on-site facility for compressing natural gas coming from a pipeline at a refilling station or industrial location and will facilitate gasoline through ease in CNG refilling. This will not only help expand access to cleaner and affordable CNG, but also reduce dependence on oil for energy needs of America.
This will significantly reduce operational costs of natural gas vehicle fueling stations and, hence, improve EBITDA margin for Chesapeake’s midstream division.
Natural gas prices has dipped lately on account of a dramatic increase in shale gas resources. With this collaboration, operators could be incentivized to install more fueling stations. This will boost Chesapeake’s midstream operations, which include marketing, gathering and compression, that account for around 2% of Chesapeake’s $35 Trefis price estimate.