Chesapeake Energy Announces Major Investment to Help Natural Gas Demand
Chesapeake Energy Corp. unveiled a plan to help the transportation industry transition to America's own abundant supplies of natural gas and oil

Chesapeake Energy will divert part of its drilling budget toward projects that will instead stimulate increased natural gas demand.
Chesapeake Energy Corp. unveiled a plan to help the transportation industry transition to America's own abundant supplies of natural gas and oil.
Central to this initiative is the creation of a $1 billion venture capital fund, Chesapeake NG Ventures Corp., dedicated to identifying and investing in companies and technologies that will replace the use of gasoline and diesel derived primarily from OPEC oil with domestic oil, natural gas and natural gas-to-liquids fuels.
To fund this effort, Chesapeake will redirect approximately 1-2% of its forecasted annual drilling budget away from efforts to increase natural gas supply toward projects that will instead stimulate increased natural gas demand. Over the next 10 years, the company anticipates committing at least $1 billion to CNGV initiatives.
According to Aubrey McClendon, Chesapeake's CEO, the company has spent four years developing the three-pronged, ten-year plan. The initiative aims to:
* Increase existing domestic onshore oil and natural gas liquids production of approximately 8 million barrels a day by 3 million to 4 million barrels a day through the acceleration of horizontal drilling and hydraulic fracturing.
* Invest in enough publicly accessible CNG and LNG fueling stations to stimulate original equipment manufacturers to increase their production of CNG and LNG vehicles.
* Deploy innovative and scalable processes to convert natural gas into a room temperature, tank-ready, liquid transportation fuel that can be blended with existing supplies of gasoline and diesel.
The company has already agreed to make two investments totaling $305 million. Clean Energy Fuel Corp. in California will receive $150 million in newly issued convertible debt to accelerate its build-out of LNG fueling infrastructure along U.S. interstates.
Chesapeake has purchased a 50% stake in Colorado-based Sundrop Fuels for $155 million. The investment will fund construction of the largest nonfood biomass-based 'green gasoline' plant in the world, capable of annually producing more than 40 million gallons of ultra-clean gasoline from natural gas and waste cellulosic material.
In addition to its planned $1 billion investment, Chesapeake will also accelerate the conversion of all 4,500 of its light-duty and 400 of its heavy-duty fleet vehicles to run on CNG, which will reduce fuel costs by an estimated $15-20 million per year.
The company is also converting at least 100 drilling rigs and all of its planned hydraulic fracturing equipment to run on LNG. The switch is expected to cut the company's diesel fuel consumption by approximately 350,000 gallons a day and save the company approximately $230 million annually.
The ambitious project has won widespread praise from analysts so far, according to the Wall Street Journal.
Analysts at Northland Capital Markets called Chesapeake's plan a "major step to increase the use of natural gas," reported the Journal, and upgraded Clean Energy Fuels to outperform with a price target of $17 a share.
Shares of Clean Energy Fuels jumped 15.4% to $15.14 on Tuesday. Chesapeake rose 0.3% to $29.84.
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