Westport Innovations (Nasdaq: WPRT), the company whose technology allows gasoline engines to run on natural gas, has reported wider first-quarter losses. But amidst the NAT GAS Act debate to add natural gas-tax incentives, could the company still be worth watching?

Decoding the numbers
Demand in Westport's light-duty business grew, contributing $10.9 million to quarterly revenues. Revenues in its joint-venture business with Cummins (NYSE: CMI), which focuses on heavy-duty engines for trucks and buses, also rose 31.7% to $31.9 million. As a result, total revenues surged 76% from the year-ago quarter to $44.9 million.

Westport's joint venture with China's largest heavy-duty engine maker, Weichai Power, has also been gaining ground, with 148% higher units being shipped in the first quarter.

What ate into the company's growing top line this quarter was higher operating expenses, which nearly doubled to $25.1 million from last year. Research and product development formed the major chunk of higher costs. The negative operating margin thus widened from a negative 18.2% to 24% year on year. Because of these higher expenses, Westport's net losses widened to $18.1 million from $8.1 million year on year.

Flurry of deals
Westport seems to be on a roll, bagging one deal after another with big companies during the first quarter. It entered into an agreement with equipment maker Caterpillar (NYSE: CAT) to combine technologies for use in larger heavy-duty engines. Another breakthrough has been Westport's tie-in with General Motors (NYSE: GM) to design engines for its light-duty vehicles. 

Westport also completed the acquisition of Emer S.p.A. of Italy, a CNG-LPG (compressed natural gas-liquified petroleum gas) fuel-system provider. The Canadian company expects this acquisition to contribute around $31 million to $34 million to revenues this calendar year.

Clearly, orders are flowing in for Westport, and the company seems to be using its cash for productive purposes such as acquisitions. The company's cash and equivalents currently stand at $162.4 million, up from $98.3 million in the same quarter last year. Its total debt-to-equity ratio is also low at 14.2%. The company's strong balance sheet suggests that it has further balance-sheet capacity to expand. 

Optimistic signs
Further validating the business' future, natural gas producers plan to make investments that compliment Westport's business. Chesapeake Energy (NYSE: CHK) announced an investment of $1 billion in natural gas infrastructure and fueling stations over the next decade. Encana (NYSE: ECA) opened two fueling stations in its just-concluded quarter and has plans for more. More fueling stations indicate that more vehicles are adopting natural gas as an alternative fuel.

UPS (NYSE: UPS), too, has started using LNG trucks powered by Westport's systems. These developments definitely signal a gradual shift toward, and a preference for, natural gas, which is precisely what Westport's future growth depends on. Tie-ins with big companies will also help Westport explore newer markets and add to its already wide and strong global presence.

The Foolish bottom line
If you have an eye for hedge-fund moves, the tidbit for you to watch is billionaire George Soros' increased investment in Westport recently. Does that move suggest passage of the NAT GAS Act? It's hard to say, but even if Westport is yet to see profits in its books, its cutting-edge technology seems reason enough to keep a close watch on the stock, at least in the longer run.

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