Update on clean energy fuels corp. – clean energy fuels corp. (nasdaq clne) seeking alpha gas dryer vs electric dryer calculator

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On March 6, in an article on Seeking Alpha, I explained that the price of Clean Energy Fuels Corporation (NASDAQ: CLNE) shares had fallen off the side of a cliff and were ripe for a recovery. In that piece, I wrote, "CLNE is a lotto ticket that could pay off, and a 100% move is not out of the question." In a follow up on March 22, I pointed out that insider buying was a positive sign for the stock and put a $3 target on the price of CLNE shares. On March 6, the price was at $1.42 per share, and by March 20, the price had rallied to $1.71, a gain of over 20 percent.

As the chart shows, not only has CLNE moved above the $2 level, but it broke above a critical level of technical resistance at the November 30, 2017 peak at $2.28 per share. The move to the upside on May 10 occurred on an extremely high-volume day in the shares, which tends to be a positive technical sign for the stock. A deal with Total takes the price above $2 per share

The move to a new short-term high in the stock came on news that the French global oil and gas giant Total S.A. (NYSE: TOT) agreed to rake a 25% stake in Clean Energy in a deal to buy 50.8 million shares for $83.4 million. The deal would make Total the largest shareholder of the company, and it is also partnering with CLNE in an agreement that will create a leasing program for heavy-duty natural gas vehicles. In addition to the equity purchase, Total could provide $100 million in lines of credit to fund leases.

The deal will increase CLNE’s cash position which could result in more cash than debt on its balance sheet. Additionally, with the price of crude oil rallying to over $70 per barrel, and natural gas below the $3 per MMBtu level, the demand for the gas-powered vehicles could be on the verge of exploding to the upside. If the price of crude oil continues its ascent, CLNE is well-positioned to take advantage of the widening spread between the two energy commodities.

The NYMEX heating oil crack spread represents the economics of processing a barrel of crude oil into distillate products. The heating oil crack is a proxy for diesel fuel. As the chart illustrates, the distillate prices have been outperforming the crude oil at a time when oil prices have risen to their highest level since 2014. The Total deal together with improving fundamentals for CLNE’s products because of the rise in diesel prices could create an earnings bonanza for the company in the months ahead. Q1 snapshot looks good

On May 10, CLNE reported first-quarter net income of $12.2 million. The company said it had a profit of 8 cents per share. Adjusted for stock option expense and nonrecurring costs, the earnings came to 10 cents per share. On a year-on-year basis, revenues increased by 14.4%. However, the increase was primarily because of $25.5 million in revenue from the U.S. federal excise tax credits for alternative fuels ( OTCPK:AFTC). While the earnings were solid, the deal with Total and cash injection could provide the company with both the staying power and capital to capture more market share given the changes in the energy markets as consumers seek cheaper alternatives than traditional diesel fuel.