The Company: Range Resources, a natural gas exploration company operating in the United States.

The Upshot: Range is working to unlock the shale gas potential in the unconventional Appalachian Basin. Currently three rigs are in operation, and management said the 40-well horizontal program is progressing with encouraging results. Plans are to steadily increase drilling operations to eight rigs by year-end 2009. With regard to delivery, Range has secured firm capacity that escalates to 150 Millions of Cubic Feet Equivalent (Mmcfe) per day over time, from year-end production projected at 30 Mmcfe per day. The company is in discussions to increase pipeline capacity to more than 300 Mmcfe per day by year-end 2009.

“The times they are a-changin,” sang Bob Dylan. Historically, drilling activity and gas prices formed a feedback loop. As inventories fell, demand and prices increased-signaling producers to ramp-up rig and drilling rates. No longer — with billions being spent on onshore drilling, companies can ill-afford to shut-in capacity.

As of August 29, natural gas in storage was 2,847 billion cubic feet, which is about four-percent above the 5-year average (2003-2007), according to the Energy Information Association. Not surprisingly, at the New York Mercantile Exchange, the futures contract for October delivery at the Henry Hub settled Wednesday at $7.264 per MMBtu — down more than 14 percent from the average price Range realized for its natural gas delivered in its second-quarter ended June 30.

New wells are marginally economic only where the projected production revenue approaches the cost of drilling the well. Range spent $469 million on development and exploration for the six-months ended June 30 — almost $124 million more than the net cash generated from operations. Eventually, the company caps its wells, or offsets revenue decline (in times of sustainable natural gas price declines) by expanding production.

The Question: Will the price of natural gas on the futures market force energy companies to rethink where and how much they invest in unconventional resources like Marcellus?

The Company: Transocean, the world’s largest offshore drilling contractor.

The Upshot: Transocean operates a contract drilling fleet of 39 High-Specification Floaters (capable of drilling in water depths up to 10,000 feet). As of August 1, only three of these floaters had any available uncommitted time in 2009.

In June and July, Transocean announced a total of seven contract awards for its high-end floaters, resulting in 30 contracted years and $4.9 billion of estimated contract revenues. Italian oil company Eni SpA contracted the drillship Deepwater Pathfinder for five-years (starting in March 2010), at a record dayrate of approximately $650,000 per day. Built in 1998, the PathFinder is currently under contract to a consortium lead by Shell and Chevron through July 2009 at a price of $395,000 a day.

New offshore discoveries are pumping up demand, too. In July, the company said it received contracts for four rigs worth about $3 billion from Brazilian state-run oil company Petrobras, which is drilling oil wells in deepwaters off the Brazilian coast, known as the Tupi Field.

According to the company’s Fleet Status Report, Transocean has an additional 10 deepwater rigs under construction, of which five will be capable of drilling in water depths up to 12,000 feet.

The Question: Will deepwater drilling projects remain financially viable if oil price levels drop — and stay — at lower levels?

The Company: Patriot Coal, the third largest producer of coal in the eastern United States.

The Upshot: Spun off from Peabody Energy in October 2007, Patriot Coal is a leading producer of thermal coal in the eastern United States, with operations and coal reserves in Appalachia and the Illinois Basin. Central Appalachia accounts for 75 percent of total coal mining revenue. Spot prices for thermal coal in the region have increased more than 150 percent since the beginning of 2008, selling for $140 per short ton for the week ended August 29, according to the Energy Information Administration. Forward pricing trends remain favorable, too, as Central Appalachia has been experiencing reduced coal production due to permitting, equipment and labor constraints, and safety regulations. Management forecasts its production to be lower by 0.9 million tons year-to-date as compared to last year.

Management of Patriot Coal opines that significant unsigned production affords the coal miner an opportunity to benefit from strong coal prices. As of June 30, 17 percent and 50 percent of respective 2009 and 2010 total planned production of steam coal has yet to be contracted.

The Question: Are thermal coal prices at or near peak cyclical levels?

The Company: Energy Conversion Devices, a provider of thin-film flexible solar laminate products for the building integrated and commercial rooftop markets.

The Upshot: By 2012, management estimates approximately 70 percent of the total PV market will be comprised of rooftop and building integrated applications, representing about a five-gigawatt opportunity for the company.

Management believes that its UNI-SOLAR rooftop solar laminates  can offer its customers about a 10 percent to 20 percent installation cost advantage and significant energy savings by employing their unused rooftop space to reduce the reliance on the electrical grid. This approach to energy — which is called distributed power — generates electricity at the location of use. Unlike traditional solar firms, such applications do not burden the transmission lines and do not require the use of valuable land.

As of June 30, Energy Conversion Devices had a backlog of more than $1.8 billion, with about 70 percent of growth coming from Europe (France, Italy, Germany, and Spain) and about 20 percent of installation sales in the United States.

To meet growing demand for its products, the company will need to aggressively ramp-up new capacity. Manufacturing plans call for an expansion of current nameplate capacity of 118-megawatts to an expected one-gigawatt by 2012.

The Question: What effect will a failure to extend the Investment Tax Credit in the United States beyond December 2008 have on North American sales going forward?

The Company: Clean Energy Fuels, the largest provider of compressed and liquefied natural gas for alternative-fuel vehicles in North America.

The Upshot: The Pickens Plan alleges that by building new wind generation facilities and tapping huge stores of domestic natural gas, the country can replace more than one-third of our foreign oil imports in 10 years.

“Independence” rhetoric aside, what troubles me in the energy debate is Picken’s lack of transparency. In addition to sinking millions of his own money on a 4,000-megawatt wind farm in Texas, he owns about 61 percent of the common stock of Clean Energy Fuels, the largest provider of natural gas in North America for transportation (which I positively commented about in this blog back on June 23).

The Question: Is the Pickens Plan motivated by self-interest or a sincere effort to both make money and do well by the country. What do you think?

The Company: Quest Resource Corp, a producer of natural gas.

The Upshot: Quest Resource was nonspecific, but I suspect that the undisclosed entity is dedicated to exploration and production of coal bed methane gas in the Cherokee Basin area in southeast Kansas and northeast Oklahoma, an area where Cash first put roots down in the 1980s.

Quest Resources paid Cash about $2.6 million in salary, cash bonus, and stock grants in 2007, according to the 2008 proxy statement filed with the SEC on May 20, 2008.

In addition, the company rewarded him an estimated $4.3 million in stock last year in connection with his new employment agreement.

Cash stands to lose almost $5.5 million in compensation due to him (salary, unvested equity, and cash bonus) if the Board determines he left-or was terminated-for reason(s) of theft or dishonest acts that materially enriched him at the expense of shareholders.

The company has wiped clean any fingerprint of Cash from its officers/biography homepage.

The Question: Could the fallout — and uncertainty — from Cash’s alleged activities delay pending exploration and development in the emerging Marcellus Shale play located in southwest Pennsylvania?

The Company: Gushan Environmental Energy, China’s largest producer of biodiesel as measured by annual production capacity.

The Upshot: Gross profit margin for the second-quarter of 2008 ended June 30 fell 250 basis points year-over-year to 41.3 percent. Respective increases in sales volume of biodiesel of 21.8% (to 59,921 tons) and average selling price per ton of 33.5% (to $865.00) were more than offset by a decline in sales of higher margin, chemical by-products, such as erucic acid and erucic amide (sold directly to foundry, pharmaceutical, and food customers).

In addition, the overall average unit costs for the primary feedstocks, vegetable oil offal and used cooking oil, escalated 31.2% year-on-year to $348.40 per ton in the second-quarter of 2008, a result of Gushan’s suppliers passing on their own running cost increases.

As Gushan expands operations to new locations in China, management expects the usage ratio of used cooking oil to increase because used cooking oil is more readily available in these expansion areas, according to the company’s 2007 annual report filed on June 30 with the SEC.

Unlike vegetable oil offal, used cooking oil produces comparatively lower quantities of by-products. By utilizing a greater percentage of used cooking oil as a portion of raw materials, management expects the percentage of revenues contributed by by-products to decrease, which could adversely impact profitability.

Direct users (including marine vessel operators and factories), petroleum wholesalers, and individual retail gas stations represented 47.6 percent, 34.2 percent, and 18.2 percent, respectively of 2007 biodiesel revenue.

The government of the People’s Republic of China controls the retail price of biodiesel through ‘guidance pricing.’ As such, Gushan is looking to expand sales to chemical customers (at higher average selling prices than it receives from other direct users). These customers use biodiesel to produce a variety of products, including elasticizers, surfactants, leather greasing agents, and anticoagulants

The Question: Can Gushan shift more production to higher-margin chemical markets to offset potential volume losses of profitable by-products?

The Company: Suntech Power, a Chinese solar energy company.

The Upshot: Contrary to anticipation, Suntech Power said in a conference call with analysts that 45 percent of its polysilicon, which accounts for about 70 percent of Suntech’s costs of goods sold, still came from the spot market in the second-quarter, and that ratio should remain the same for the rest of 2008.

The current-shortage of solar-grade silicon supply, however, may finally be comingy to an end as suppliers and new entrants ramp up output in coming years. At Greentech Media’s PV Annual 2008, Travis Bradford, president of the Prometheus Institute, said he expects the amount of silicon for the solar industry to quadruple from 30,070 tons in 2007 to 125,302 tons in 2012.

Suntech is on track to reach installed capacity of one giga-watt in output by the end of 2008 and 1.4 giga-watts by year-end 2009. The company has procured 900 mega-watts of competitively priced silicon for 2009. One megawatt, or 1 million watts, is enough energy to power about 800 homes.

In addition, raw material costs as a percentage of total costs of goods sold are expected to decline at least 20 percent the coming year, according to Chairman and Chief Executive Dr. Zhengrong Shi.

“Take nothing on its looks; take everything on evidence,” wrote Charles Dickens in is semi-autobiographical classic, Great Expectations. “There’s no better rule.”

Equity investments in silicon suppliers, such as Shunda Holdings and Glory Silicon, should ensure stability in its supply chain, lower fixed-cost pricing going forward, reduce dependence on the spot market, and ensure enough feedstock and silicon wafers to hit targeted manufacturing output of 2.0 giga-watts in 2010, lowering dependence on the higher-priced priced spot market silicon.

A next-generation PV process, called Pluto, is expected to allow conversion efficiency rates in the range of 18 percent to 19 percent on PV cells manufactured with mono-crystalline silicon wafers, up from a current 16.4 percent.

The Question: Could lower silicon prices and improving technologies lead to the achievement of grid parity with fossil fuel electric power generation sooner than the now expected 2015?

The Company: AeroVironment, a provider of small, unmanned aircraft systems to the U.S. military.

The Upshot: Sole supplier to all U.S. Department of Defense programs for unmanned aircraft systems (UAS), small planes — with names like Raven, Dragon Eye, and WASP — contributed 86 percent of total sales for fiscal 2008 ended April 30. The company derives about 14 percent of its revenue from sales of its patented PosiCharge fast charge system, which can quickly recharge industrial vehicle batteries, such as forklifts and airport ground support equipment, with a high electric current while they remain in the vehicles during scheduled breaks.

In addition to developing non-military markets for its small UAS, such as border and petrochemical infrastructure monitoring, the company is pursuing clean energy applications for its proprietary aerospace design technology.

Leveraging its competence in high-efficiency electric powertrain and lightweight, low-speed propeller designs, the company has introduced a small, modular wind turbine solution, called the Architectural Wind system, designed for installation on building rooftops in urban areas, combining functional with architectural aesthetics.

One early adopter of the Architectural Wind system is Massport, operator of Logan International airport, located in Boston, Massachusetts. On July 22, AeroVironment announced the successful installation of the project at the airport, which comprises 20 five-blade wind turbines. Each turbine is expected to generate about 60,000 kilowatt-hours of electricity each year.

The company says that Architectural Wind systems have been installed on buildings throughout the country, including the new Kettle Foods potato chip factory in Beloit, Wisconsin; Laughlin Air Force Base near Del Rio, Texas; and, the St. Louis County Government Service Center.

Clean energy advocates should not hastily dismiss AeroVironment as just another newcomer. Unlike many companies that herald their innovations — without proof of concept — AeroVironment has a 35-year history of converting ideas into results, including the Gossamer Condor, the first human powered airplane capable of controlled and sustained flight; the Solar Challenger, which set records for solar-powered manned flight in July 1981; and, the Global Observer, successfully completing the world’s first liquid hydrogen powered, unmanned test flight in 2005.

The Question: What do you the reader think — can AeroVironment successfully deliver on its promising wind-turbine payload?

The Company: National Oilwell Varco, a global provider of equipment and components used in oil and gas drilling.

The Upshot: Rig Technology revenue in the second-quarter increased 36 percent to $1.9 billion, as higher oil and gas prices spurred growing demand for new rigs as well as the equipment, consumables and services needed to reactivate and/or refurbish many older rigs.

Price inflation for steel products — used in oil and gas wells — is running about 45 percent this year, fueled by a run-up in prices of its major raw material inputs, coking coal and iron ore. Metallurgical coal is up about 13 percent in price year-on-year to about $104 per metric ton and the price of iron ore scrap has doubled in three years to more than $200 per ton, according to the Energy Information Administration.

The company has generally been successful in mitigating the financial impact of price escalations in all grades of steel by applying surcharges to and adjusting prices on the products it sells. In fact, profit margin grew 230 basis points, as a favorable product mix (higher margin, more-complex directional and extended reach pipe drilling) and higher production volumes offset rising raw material and employee costs.

Efficiency initiatives, such as quick response manufacturing and broader outsourcing, however, will be of little benefit should an expected shortage in supplies of steel piping itself materialize.

The supply of steel pipe is the lowest he’s ever seen, said Tudor, Pickering, Holt analyst Jeff Tillery in an interview with The Dallas Morning News. Distributors are keeping less than four months’ supply today, compared with six months in 2006.

The Question: Could newer oil and gas plays, such as the Haynesville Shale in Louisiana or the Iara region (off the Brazilian coast), witness drilling delays in 2009?