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Shell (RDS.A) Boosts Solar Market Base With Savion Deal

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Royal Dutch Shell PLC (RDS.A) subsidiary Shell New Energies US LLC has agreed to buy Macquarie's Green Investment Group's 100% stake in Savion LLC, a US developer of solar and energy storage projects.

This acquisition is part of a $2-3 billion cash capital expenditure budget for Renewables & Energy Solutions in 2021, announced at Shell Strategy Day on Feb 11, 2021. The deal is expected to close by this year-end, upon fulfilling all the customary conditions.

Shell's ambition to establish an integrated power unit as it progresses toward being a net-zero emissions energy business by 2050, is strengthened by the Savion purchase.

Savion presently has more than 18GW of solar power and battery storage capacity under construction, which will help enhance RDS.A's solar portfolio. Notably, RDS.A wants to sell more than 560 terawatt hours of power per year, globally, by 2030 as part of this strategy, which is more than double the current sales of the business.

The Anglo-Dutch supermajor, which is already involved in the solar developments of other markets around the world, plans to utilize the solar capacity to create renewable energy in the areas where customer demand is high. This is part of its larger ambition to develop an integrated energy firm.

Following the 2017 acquisition of First Utility, which was finalized in 2018, Shell already has a power provider in the UK. In 2019, the firm changed its name to Shell Energy and announced that it transitioned all its residential clients to 100% renewable energy.

Shell's UK solar venture came at a time when Prime Minister Boris Johnson announced plans to transition Britain's power generation considerably to a renewable and nuclear set-up by 2035. This job as experts say will necessitate massive new wind and solar installations as well as storage and a redesigned infrastructure.

Shell, like its European Big Oil competitors, pledged to reduce its traditional oil and gas operations in favor of cleaner energy sources with electricity as a key component of its transition plan. Unlike its peers, this energy player primarily concentrated on long-term power purchase agreements or smaller investments in technological firms. 

Last month, RDS.A announced an agreement with Dogger Bank. The deal is related to a power purchase agreement over electricity for 15 years.

The 15-year accord comprises the purchase of 240 megawatts (MW) from Dogger Bank C. Dogger Bank Wind Farm is located off the northeast coast of England and Dogger Bank C is the third and the final phase of the 3.6-gigawatt farm.

With the inclusion of the previous 480 MW of power purchase deal with Dogger Bank A and B, Shell will be purchasing a combined 720 MW of power.

Zacks Rank & Key Picks

Shell currently has a Zack Rank #3 (Hold). Investors interested in the energy  sector might look at the following stocks worth considering with a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Occidental Petroleum Corporation OXY is an integrated oil and gas company with significant exploration and production exposure. OXY is also a producer of various basic chemicals, petrochemicals, polymers and specialty chemicals. As of 2020 end, Occidental Petroleum's preliminary worldwide proved reserves totaled 2.91 billion BOE compared with 3.9 billion BOE at the end of 2019.

In the past year, shares of Occidental Petroleum have surged 99% compared with the industry's growth of 96.6%. OXY's 2021 earnings are expected to soar 151.4% from the year-ago reported figure. Occidental Petroleum has also witnessed eight northward estimate revisions in the past 60 days. In the third quarter, OXY achieved its divestiture target of $10 billion by inking a deal to sell off its interest in two offshore Ghana assets for $750 million.

PDC Energy PDCE is an independent upstream operator dealing in exploration, development and production of natural gas, crude oil and natural gas liquids. PDCE, which reached its present status following the January 2020 merger with SRC Energy, is currently the second-largest producer in the Denver-Julesburg Basin. As of 2020 end, PDC Energy's total estimated proved reserves were 731,073 thousand barrels of oil equivalent.

In the past year, shares of PDC Energy have gained 169% compared with the industry's growth of 108.6%. PDCE's earnings for 2021 are expected to surge 273.4% from the prior-year reported figure. In the past 60 days, the Zacks Consensus Estimate for PDC Energy's 2021 earnings has been raised 26.8%. Earnings of PDCE beat the Zacks Consensus Estimate in all the last four quarters, the average being 51.06%.

Phillips 66 PSX is the leading player with respect to operations like refining, chemicals and midstream in terms of size, efficiency and strengths. PSX’s operations include processing, transportation, storing, and marketing fuels and products worldwide. PSX is currently valued at $33.9 billion and offers a quarterly dividend of 92 cents.

PSX is projected to see an earnings surge of 532.6% in 2021 from the prior-year reported number. It has witnessed three upward revisions in the past 30 days. Phillips 66’s bottom line beat the Zacks Consensus Estimate thrice in the last four quarters and missed the same once. PSX currently has a Zacks Style Score of A for Value.


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