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Why Westport Innovations Shares Surged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Westport Innovations (Nasdaq: WPRT  ) soared 19% Tuesday after it announced an agreement with Caterpillar (NYSE: CAT  ) to develop natural gas engines for off-road equipment.

So what: While financial terms weren't disclosed, the deal is naturally reigniting optimism over Westport's growth prospects. Westport shares have been crushed over the past few months on concerns that the transition to natural gas-fueled vehicles isn't moving as quickly as expected, but the news suggests global manufacturers are still very motivated to take advantage of decade-low natural gas prices.

Now what: The development programs will start right away and be funded by Caterpillar, with commercial production expected to begin in about five years. "This is a significant opportunity that has the potential to transform important segments of the global off-road equipment industries," said Westport CEO David Demers. More important, with the stock still off a whopping 50% from its 52-week highs, there's plenty of room to buy into that bullishness.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Westport. Motley Fool newsletter services have recommended buying shares of Westport. Try any of our Foolish newsletter services free for 30 days.

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Read/Post Comments (5) | Recommend This Article (10)

Comments from our Foolish Readers

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  • Report this Comment On June 05, 2012, at 10:03 PM, steamoil wrote:

    Bullishness ? Bullishness ? ,are you kidding me ?This one day jolt for Westport mean squat. It's hard enough refueling one of those monster mining trucks with diesel, imagine what it will take to refuel it with CNG. I have said it before the conversion to nat gas in cars, trucks and anything else that can burn gas or diesel is a great concept but there are limitations, and in my opinion Caterpillar petting Westport and whispering sweet nothings to form a joint collaboration is a little too far fetched. And to take 5 years to do it no less.I don't think so.

  • Report this Comment On June 05, 2012, at 10:13 PM, steamoil wrote:

    BTW many of those big trucks, and mining machinery are running 24/7almost non-stop. It would be necessary to construct a huge nat gas storage facility on site for the refueling process, not to mention the added infrastructure that would be needed to bring gas to the mining site.IMO this piece of speculation/rumor was a ploy to give Westport a pump, and it worked because the dumb money bought into it

  • Report this Comment On June 05, 2012, at 10:55 PM, dbhendrix wrote:

    As I have told you before CNG is not a viable alternative fuel for mobile applications because of the relative density of the gas. Even compressed to 3500 psi the volume needed is about 3 times that of an equivalent amount of LPG (Propane) and even more than 3 times for diesel fuel. Additionally the tanks to hold CNG are tremendously expensive, must be recertified every 3 years and must be discarded after 10 years of use. All of that is subject to change if we can come up with a means to make LNG (Liquid Natural Gas) stay liquid without supercooling or extremely high pressure.

    Stationary engines are a different story altogether and we have seen them run on natural gas for many years at compressor stations for pipelines and similar applications.

  • Report this Comment On June 05, 2012, at 10:56 PM, Realexpectations wrote:

    cnbc had a special on all day while ago.

    Showing how to convert a F-150 in use both gas and lnq in about 4-5 hours. Not too mention lng is 75% cheaper.

  • Report this Comment On June 06, 2012, at 4:22 AM, CHill8008 wrote:

    I work at one of the largest open-pit mining operations in these United States. Fueling our 240 ton trucks with diesel isn't at all difficult, fueling them with nat gas would be only marginally more difficult. This is a 24/7 operation, but these trucks go through a rigorous inspection twice a day. There is adequate down-time for refueling built in. That goes for the loaders and dozers, etc too. The added expense of the onboard tanks is but a fraction of the total purchase price and operational expenses of the vehicle, a tire for one of these monsters is $50k, eg. We already have people on-site to test pressure vessels. Clean Energy has been invited to set-up shop here, and they've done so. I think that other mining operations here in the US may be at various stages of the conversion, but it is a conversion that is coming.

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