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The Zacks Analyst Blog Highlights: TOTAL, Royal Dutch, Equinor, BP and Exxon

Zacks Equity Research
Mutual funds with significant exposure to the financial sector are expected to be strong investments

For Immediate Release

Chicago, IL –October 18, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: TOTAL SA TOT,Royal Dutch Shell plc RDS.A,Equinor ASA EQNR, BP plc BP and Exxon Mobil Corp. XOM.

Here are highlights from Wednesday’s Analyst Blog:

Oil Majors Spur Renewable Energy Talk: Who’s in the Lead?

While renewable energy has long been considered as a niche market, things have been changing of late amid climate change concerns. It seems that it wouldn’t take more than a decade for the renewables market to evolve into a mainstream industry.

With harmful effects of pollution and the advent of global climate change finally becoming part of everyday conversations throughout the society, old-school energy giants are compelled to increase exposure to clean and renewable alternatives. Oil supermajors like TOTAL SA, Royal Dutch Shell plc, Equinor ASA,BP plc and Exxon Mobil Corp. have started reorienting their strategies to de-carbonize the energy system via increasingly shifting to alternative fuels.

Let’s delve deeper into the efforts of the above-mentioned companies in relation to the renewables drive and find out how each one is faring in this race to increase their stakes in alternative fuels.

TOTAL Tops the List

French super major TOTAL, which has long been revving up its investments and stakes in renewable energy projects, undoubtedly excels on this front. While most of the companies have started giving more emphasis on cleaner energy over a couple of years or so, TOTAL has surely been a forward thinker in this regard. The oil giant inked around $1.4-billion deal in 2011 to become the majority stakeholder in the U.S. solar power company, SunPower Corporation. In a bid to further boost its commitment toward renewable energy investments, it inked a deal to snap up the French battery specialist Saft Group and renewable power vendor Lampiris, at a combined cost of $1.3 billion in 2016.

Last year, TOTAL purchased 23% stake in EREN Renewable Energy, which boosted its presence in the solar market as well as marked its foray into the wind power market. It also acquired energy efficiency company GreenFlex, in a bid to enhance its energy efficiency and environmental impact management. It definitely holds a huge portfolio of renewable energy holdings, with significant exposure in solar and wind power, along with energy efficiency and storage. The company is on track to achieve its target of generating 20% of its profits from low-carbon products over a 20-year time frame.  

In fact, the company launched the Total Energy Venture, making judicious investments in around 20 start-up companies relating to lithium ion batteries, cellulosic sugar recovery, microbial biofuels, and renewable fuel technologies, among others.

Shell Expands Renewable Foothold

The company will invest approximately $1 billion per year till 2020 in its New Energies division, as it intends to shift its focus on cleaner and renewable energy sources.The new business will serve as a hedge for reduced gasoline and diesel fuel demand. The company believes that pumping money into the New Energies unit is likely to significantly increase its customer base and drive revenues.

In fact, Shell has been on an acquisition spree of late — collaborating with IONITY, New Motion, First Utility and Silicon Ranch — as it attempts to diversify its portfolio beyond oil and gas. With renewable energy becoming affordable, the oil conglomerate sees potential in developing projects like hydrogen fuel-cells, alternative energies, liquefied natural gas and next-generation biofuels. Just a few months back, Shell’s New Energies division made investments in U.S. thermal storage specialist Axiom Energy, microgrids and distributed energy services player GI Energy, hydrogen compression specialist HyET and German home storage developer Sonnen.

Equinor Ramps Up Bets on Renewables

Equinor is also not much behind in this regard. Its focus on renewable energy has become more evident, with the company rebranding itself from Statoil and taking out the "oil" from its name. As the company is trying to be on the forefront of the energy transition movement from oil and gas to greener sources, it wants to plough in 15-20% of its total spending in renewable energy by 2030, profoundly improving from 5% in 2017.

Leading developer of the offshore wind farm, Equinor has developed a substantial offshore wind portfolio, including projects like Empire Wind and Arkona Wind Farm, among others, with a capacity to provide more than 1 million European homes with renewable energy. Last year, the company forayed into solar power by inking a deal with Scatec Solar.

BP’s Efforts In Line With its Tagline ‘Beyond Petroleum’

While BP’s efforts in this regard might be somewhat lesser than other European peers, these are definitely not trivial. The supermajor has stakes in 1,432 megawatts of wind power in the United States and manages 2,000 MW of solar projects, with an approximate backlog of 6,000 MW. The company proposes to invest about half a billion dollars annually in Alternative Energy business. This is in line with the company’s current focus on lowering emissions. In this respect, BP has diversified its conventional fossil operations by investing in Lightsource BP, Clean Energy, Fulcrum, DuPont and Butamax, among others.

ExxonMobil Steps Up Renewable Drive

While many supermajors are entering into various acquisition deals to boost their renewable portfolio, ExxonMobil has followed a unique approach and has been quietly investing $1 billion every year on research and development activities relating to low-carbon technologies. In fact, investments in gen-next renewable fuels will anchor the refining and logistics segment of the company. In this regard, ExxonMobil is involved in a joint venture pact with Synthetic Genomics to genetically engineer low cost algae fuels and chemicals to produce crude through sunlight, CO2, and other nutrients. The biomass would then be harvested and processed through its refining segment and transported via logistics unit. ExxonMobil’s focus on synthetic biology is one of the most elusive technologies in biotech. If it pays of well, the company will be able to meet America’s entire fuel demand with just 40,000 square miles of production capacity.

Bottom Line

One thing that can be surely ascertained from the above discussion is that the pace of investments in the renewable energy market is definitely gathering steam, with supermajors betting big on alternative fuels to adapt to the changing times of low carbon future. While TOTAL appears to be leading the renewables race, Chevron seems to be lacking a clearly defined path when it comes to clean energy. In fact, it would not be wrong to say that the U.S. oil biggies have some catching up to do compared with European peers, when it comes to renewable energy investments.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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