Westport Innovations Inc. stands to take a larger share of the profits at its 50-50 joint venture with Cummins Inc. if it is able to grow the business faster than expected, under a new agreement with the engine maker.

Shares in Westport (TSX:WPT) were up Tuesday after it signed a renewed joint agreement that will focus Cummins Westport on developing natural gas engines for customers in North America, where new drilling technology has made the cleaner burning fuel cheap and plentiful.

Under the new deal, Westport and Cummins will share the profits from the joint venture equally to a point, but if Cummins Westport beats expectations, Westport will take a 75 per cent share of the earnings beyond the targets.

"When we started work together, natural gas was seen as a niche opportunity primarily driven by environmental regulations," said Westport chief executive David Demers, referring to the decade-long partnership with Cummins.

"We've seen broad acceptance recently of the significant opportunities to establish natural gas as a primary transportation fuel in many segments of the market, so it makes sense to shift our strategy to focus on the next 10 years."

In addition to the deal with Cummins, Westport has a joint venture deal with Chinese heavy-duty engine maker Weichai Power Ltd. and Hong Kong Petersen (CNG) Equipment Ltd.

Demers said Tuesday the revised deal with Cummins was unlikely to change anything with Westport's relationship with Weichai.

"But should you assume that we're going to evolve the relationship with Weichai and other partners, that is a given," he said.

Mackie Research Capital analyst Matt Gowing said the new Cummins deal has both advantages and disadvantages for Westport.

In the short term, Gowing said the new 10-year deal, which will focus on engines between 5.9 litres through 12 litres, gives Westport more stability because the previous agreement did not specify a term and could be cancelled.

The downside is that Cummins may look to compete with Westport outside of North America where the joint venture no longer applies.

"They haven't developed, that we know of, any technology themselves and they're at this time reliant on Westport," Gowing said.

"But they've been partnering with Westport for quite a few years, so I think it would be naive to say that they haven't developed some sort of knowledge of how the technology works."

Interest in natural gas-powered vehicles in North America has increased as the price of natural gas fallen, making it more economical than gasoline or diesel in addition to being cleaner burning.

New drilling technology has unlocked massive new reserves in parts of Pennsylvania, Colorado and Wyoming that were previously unavailable because the gas was trapped in shale rock.

The new joint venture agreement came as Westport raised its revenue guidance for 2011.

After the close of markets Tuesday, the company said it expected consolidated revenue between $260 million and $264 million, up from earlier guidance of $240 million to $250 million.

For year ended Dec. 31, Westport said it expects to report a per-share loss between $1.26 and $1.28.

Westport said it expects to report consolidated revenue of $96 million to $100 million for the quarter ended Dec. 31 and a loss per share between 30 and 32 cents.

Revenue for 2012 is expected to be between $400 million and $425 million.

The company also said it would look to sell five million shares. Morgan Stanley and Jefferies & Co. are the joint bookrunners for the offering.

Based on the company's share price Tuesday, the offering could be worth around $228 million.

Shares in the company closed up 90 cents at $45.56 on the Toronto Stock Exchange on Tuesday.