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Earth Biofuels Enters LNG Arena with Apollo LNG Acquisition

Expanding its stable of alternative fuel choices, Dallas-based Earth Biofuels Inc. said Tuesday that it has acquired Apollo LNG Inc. from Apollo Resources International Inc. in exchange for Earth Biofuels common stock. The value of the stock involved in the transaction was not being disclosed, a Earth Biofuels spokesman said.

Earth Biofuels was previously held by Apollo Resources until it was spun off into its own public company. Apollo LNG, now doing business as Earth LNG, owns a liquefied natural gas (LNG) processing facility in Topock, AZ that currently produces more than 80,000 gallons of transportation-grade LNG per day, and has a capacity of 86,000 gallons of LNG per day.

After the natural gas is liquefied at the facility, the LNG is transported to markets in specialized cryogenic tanker trucks where it is used as a transportation fuel, mainly by larger vehicles in municipal fleets that utilize a centralized fueling facility. Earth LNG owns 14 of its own cryogenic transportation tanker trucks. The company noted that LNG produced by the plant is sold primarily to municipal fleet customers on the coast of California, Orange County buses and garbage trucks, and commercial vehicles such as United Parcel Service in the Los Angeles area and Waste Management's fleet at various locations on the California coast.

"The domestic LNG business is in line with the core focus of Earth Biofuels, which is the production and marketing of clean-burning alternative fuels that help reduce U.S. dependence on foreign oil," said Earth Biofuels CEO Dennis McLaughlin. "One of the attractive features of the LNG business is that the margins are effectively locked in. The cost of the plant operations is relatively fixed, and our contracts are structured such that our LNG sales pricing fluctuates proportionately as the cost of our natural gas feedstock goes up or down. This transaction helps to expand and diversify Earth Biofuels' revenues and profitability."

Earth Biofuels said an independent fairness opinion was rendered prior to the transaction by Bernstein Conklin & Balcombe, who concluded that the market value of Apollo LNG was approximately $36 million.

"We believe the LNG industry will begin to see new plants supplied by stranded natural gas from sources such as landfills and dairy farm waste manure," said McLaughlin. "By liquefying this natural gas and getting it to transportation markets, LNG can further evolve into a renewable, clean burning fuel."

Transportation grade LNG is different from most imported LNG in that the former is of superior quality sufficient to be used as a fuel for vehicles, while the latter is typically of lesser quality and is regasified to be transported through natural gas pipelines.

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