Will GE Strike Pay Dirt with This New Engine?

General Electric (NYSE:GE) announced on Tuesday that energy developer Seneca Resources Corp. and drilling partner Ensign Drilling installed two Jenbacher gas engines to power the first liquefied natural gas-fueled drilling rigs in the Marcellus Shale region of Pennsylvania.

CHEAT SHEET Analysis: Trends Support the Industry in which GE Operates

“Unconventional gas is quickly becoming the most abundant source of natural gas in the U.S. and now accounts for about a quarter of U.S. natural gas production. By 2035, half of U.S. natural gas will come from unconventional sources, according to the U.S. Energy Information Administration,” reads GE’s announcement of the Jenbacher installations.

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Major oil and gas companies such as Exxon Mobil (NYSE:XOM) and Chesapeake Energy (NYSE:CHK) are positioning themselves to take advantage of the massive reserves of oil and gas in North American shale. The deposits have only recently become economically feasible to tap thanks to technological developments such as hydraulic fracturing and horizontal drilling.

The Jenbacher engine could become equally as important by offering a substantially cleaner and cheaper way to generate power.

How Will the Engines Help GE Capitalize on This Trend?

“GE’s unconventional resources solutions, consisting of more than 40 technologies from across the GE portfolio, are addressing fundamental industry challenges, helping customers to improve operational performance, reduce their environmental footprint, increase resource recovery and drive demand for natural gas,” reads the announcement.

While the development of the engine won’t cause the stock to jump overnight, it could readily become a staple in the company’s portfolio and become a stable, long-term revenue stream. GE claims that powering a drill rig with natural gas instead of fuel can save up to 60 percent on fuel costs, making the engine an obvious buy for upstream operations.

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