Corporate finance Research Paper Example | Topics and Well Written Essays - 2000 words

Corporate finance - Research Paper Example Even though the CLNE is at its early stages of development, the company already owns and operates many natural gas fueling stations and is a global leader in developing the natural gas vehicle market. The company deals with many areas of natural gas business including â€Å"compressed natural gas (CNG) and liquefied natural gas (LNG) fueling; construction and operation of natural gas fueling stations; compressor equipment and technology; biomethane production; and vehicle conversion† (qtd in Investorideas.com). The company fuels over 530 fleet customers and 25,000 vehicles every day at over 273 stations across the United States and Canada. In addition, the organization has a strong customer base in transit, trucking, shuttle, taxi, airport, solid waste, and municipal fleet markets (Investorideas.com). Similarly, Apache Corporation is a multinational gas and oil corporation headquartered at Texas in the United States. In addition to US, the company has regional subsidiaries and operations in Canada, UK North Sea, Australia, Argentina, and Egypt. As of 2012, the firm’s market capitalization is estimated at nearly $35 billion. The Apache was founded in 1954 and the organization expanded its business horizons mainly through acquisitions. This paper will critically analyze the investment opportunities in both the firms and suggest which firm offers the best long term value for the investor. Natural gas industry analysis Porter’s five forces model is used here to analyze the natural gas industry in the United States. The five forces in the industry are described below. Degree of rivalry While analyzing the US’ natural gas industry, the degree of competitive rivalry is less as a result of unpopularity of natural gas resources. Currently, there are a few natural gas providers in each states of the US. This favorable business situation increases the scope of investments in the natural gas industry. Threat of new entrants A study conducted by the Navigant Consulting reveals that North America has enough reserves of natural gas to supply for at least 120 years (U.S Department of Energy). Hence, the United States has abundance of natural gas resources and this strength makes the country an attractive place for business investments. As a result, new players are more likely to enter the natural gas market and therefore the threat of new entrants is high. Threat of substitutes There are many substitutes to natural gas including liquefied petroleum gas (LPG) and biogas. Today, LPG is widely used in US for transportation proposes due to its easier availability and highly effective performance. In addition, the development of hybrid electric vehicles also appears to be a growth impediment to vehicle fueling natural gas. Hence, the threat of substitutes can be moderate to high in the natural gas industry. Buyer power Since the level of competition intensity is low in the natural gas industry, buyers have limited options to choose the provider. Hence, there are not much alternative to buyers but to choose any of the limited available providers. From other perspective, vehicle fueling natural gas has a number of potential substitutes and hence buyers may switch their demand to those products. In short, buyer power is low in the