This week is “COP26” – the United Nations Climate Change ‘Conference of the Parties’ 26th annual summit – and it represents perhaps the most important week in six years when it comes to shaping the narrative around the sustainable energy theme. This is more important now than ever given the context – with a bull market defined in many ways by renewable energy as a theme, and retail investor participation at levels not seen since the late 1990’s.
There’s a lot on the table for the future of the energy market as world leaders meet in Glasgow, Scotland. The talks will be eyed for clues to how a faster transition toward a zero-carbon economy will affect the markets, driving sector, industry, and individual stock stories for some time to come.
Plans set to be announced are expected to detail methods of cutting emissions, financing the process of transitioning away from fossil fuels, and launching a tradable credit system to offset activities responsible for future pollution potential.
The event is held every six years. But this year’s may be the most important one ever given the massive upscaling of ESG investments and vehicles for capital flows related to solving the climate change crisis.
In a recent report, Bank of America estimated that a third of global equity inflows are currently headed into sustainable energy funds.
One critical factor in this narrative is the emerging theme of Carbon Capture – the process of capturing and storing CO2 emissions before they escape into the atmosphere. According to the experts, we already have technology capable of capturing up to 90% of CO2 emissions released through the burning of fossil fuels to power life and industry today. We just need to incentivize implementation.
Given the wide application potential, the Carbon Capture theme stands to become another major growth theme for investors in the quarters ahead. With that in mind, we take a look at a few of the most interesting opportunities in the Carbon Capture theme here.
NRG Energy Inc (NYSE:NRG), based in Houston, has a CCS system that uses or sequesters as much as 1.6 million tons of CO2 each year. NRG engages in the production, sale, and distribution of energy and energy services. It operates through its Generation, Retail, and Corporate segments.
The Generation segment includes all power plant activities, domestic and international, as well as renewables. The Retail segment includes mass customers and business solutions, and other distributed and reliability products. The Corporate segment includes residential solar and electric vehicle services.
NRG Energy Inc (NYSE:NRG) recently announced it received a Climate Leadership Award for Greenhouse Gas Management (Goal Setting Certificate) at the 2021 Climate Leadership Conference, hosted by the Center for Climate and Energy Solutions (C2ES) and The Climate Registry (TCR). According to the release, the Climate Leadership Awards took place during the Climate Leadership Conference Series, which brings together forward-thinking leaders from business, government, academia, and the non-profit community to address climate change through policy, innovation, and business solutions.
“Congratulations to the 2021 Climate Leadership Award winner for their stand-out achievements,” said Amy Holm, Executive Director of TCR. “At a time when the world urgently needs more climate action and ambition, these organizations and individuals demonstrate what is possible.”
NRG has been pulling back a bit over recent days, with shares sinking something like -3% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way. NRG shares have been relatively flat over the past month of action, with very little net movement during that period.
NRG Energy Inc. (NYSE:NRG) managed to rope in revenues totaling $5.3B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 144.1%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($4.4B against $6.9B, respectively).
Viking Energy Group Inc (OTC US:VKIN) is a recent entrant into the carbon capture space. The company is a growing player in the oil and gas market, with assets located in North America in Kansas, Missouri, Texas, Louisiana, and Mississippi. But recent news of the company’s IP deal with ESG Clean Energy shifts this story into the CCS space as well.
This also applies to its majority owner, Camber Energy Inc (NYSEAMERICAN:CEI).
Viking Energy Group Inc (OTC US:VKIN) recently announced that it has entered into an Exclusive Intellectual Property License Agreement with ESG Clean Energy regarding ESG’s patent rights and know-how related to stationary electric power generation, including methods to utilize heat and capture carbon dioxide. This has the potential to catapult VKIN into a key position in the clean energy space.
According to the release, the ESG Clean Energy System is designed to generate clean electricity from internal combustion engines and utilize waste heat to capture ~ 100% of the carbon dioxide (CO2) emitted from the engine without loss of efficiency, and in a manner to facilitate the production of precious commodities (e.g., distilled/ de-ionized water; UREA (NH4); ammonia (NH3); ethanol; and methanol) for sale.
James Doris, President and Chief Executive Officer of Viking, commented, “In my view this transaction positions us as an industry leader in terms of being able to assist with the power generation needs of commercial and industrial organizations while at the same time helping them reduce their carbon footprint to satisfy regulatory requirements or to simply follow best ESG-practices. We are excited to be able to use the platform of Simson-Maxwell Ltd., our recently acquired majority-owned subsidiary, to promote the ESG Clean Energy System.”
Viking Energy Group Inc (OTC US:VKIN) also noted that the ESG Clean Energy System is designed to be utilized within a number of different environments, including Plastics Recycling Operations, Nitrogen Removal, Microgrids, Data Centers, and Crypto Mining Operations. Shares of VKIN, and CEI, have been pulling back and analysis suggests that they both may be carrying high short interest right now, suggesting the potential for a short squeeze as the carbon capture theme makes its way onto the market’s radar this week.
Equinor ASA (NYSE:EQNR) is another one of the most central plays in this theme. The company engages in the exploration, production, transport, refining, and marketing of petroleum and petroleum-derived products. It operates through the following segments: Exploration and Production Norway, Exploration and Production International, Exploration and Production USA, Marketing, Midstream, and Processing, and Other.
The Exploration and Production Norway segment includes the commercial development of oil and gas portfolios on the Norwegian continental shelf. The Exploration and Production International segment covers offshore and onshore activities in the USA, Mexico, and other operations worldwide. The Exploration and Production USA segment covers both onshore and offshore exploration, development, and Production of oil and gas in USA. The Marketing, Midstream, and Processing segment markets and trades of oil and gas commodities. The Other segment includes new energy solutions; global strategy and business development; technology; projects and drilling; and corporate staffs and services.
Equinor ASA (NYSE:EQNR) recently announced that it is accelerating its transition and setting an ambition to reach a 40% reduction in net carbon intensity by 2035, on the way towards net zero by 2050. That means stepping up investments in renewables and low carbon solutions to more than 50% of gross annual investments by 2030 and growing cash flow and returns, expecting a free cash flow of around USD 35 billion before capital distribution in 2021 – 2026 and around 12% return on average capital employed in 2021 – 2030.
“Our strategy is backed up by clear actions to accelerate our transition while growing cash flow and returns. We are optimizing our oil and gas portfolio to deliver even stronger cash flow and returns with reduced emissions from production, and we expect significant profitable growth within renewables and low carbon solutions. This is a strategy to create value as a leader in the energy transition”, says Anders Opedal, president and CEO of Equinor.
Even in light of this news, EQNR has had a rough past week of trading action, with shares sinking something like -7% in that time. Shares of the stock have been relatively flat over the past month of action, with very little net movement during that period.
Equinor ASA ADR (NYSE:EQNR) pulled in revenues totaling $149.3B during the company’s most recently reported quarterly financial data, adding up to robust growth of 89.4% on the top line on a year-over-year basis. EQNR also benefits from a strong balance sheet, with cash levels exceeding current liabilities ($215.7B against $193.5B).
Additional key tickers in the carbon capture theme that could benefit from the COP26 conference include Brookfield Renewable Partners L.P. (NYSE:BEP), Microsoft Corp. (Nasdaq:MSFT), and Tesla Inc. (Nasdaq:TSLA).
