BP Invests $7B in Indonesia Gas With First Carbon Capture Tech

Phillips 66 (PSX), the Houston-based oil giant, faces legal trouble after a federal grand jury indicted the company for violating the Clean Water Act. The charges stem from the release of nearly 800,000 gallons of contaminated wastewater from its Carson, CA, refinery into the Los Angeles County sewer system. The wastewater, which contained excessive levels of oil and grease, was allegedly discharged between 2020 and 2021 without proper knowledge of the authorities.

The indictment details two incidents in which Phillips 66’s Carson refinery released wastewater with hazardous concentrations of oil and grease. On Nov. 24, 2020, the refinery discharged 310,000 gallons of contaminated water, containing 64,000 pounds of oil and grease — 300 times the permitted limit under its environmental permit. A few months later, on Feb. 8, 2021, there was a second release, involving 480,000 gallons of wastewater with 33,700 pounds of oil and grease.

The U.S. Department of Justice charged Phillips 66 with two counts of negligently violating the Clean Water Act and four counts of knowingly violating the law. The charges carry significant penalties,including up to five years of probation per count and fines totaling up to $2.4 million.

The incident came to light after staff at a nearby wastewater treatment plant noticed the strong smell of oil, prompting an investigation into the source of contamination. While the Justice Department claims that the plant was able to capture the majority of the contaminated water before it was released into the Pacific Ocean, officials stress that such releases are unacceptable under environmental regulations.

In response to the indictment, Phillips 66 stated that it would continue cooperating with the U.S. Attorney’s Office and is prepared to defend itself in court. The company reaffirmed its commitment to operational safety and protecting its employees as well as the surrounding communities.

As the case progresses, Phillips 66’s handling of the charges could set a significant precedent for corporate accountability under the Clean Water Act.

PSX’s Zacks Rank & Key Picks

Currently, Phillips 66 carries a Zack Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like Smart Sand, Inc. SND, FuelCell Energy FCEL and Nine Energy Service NINE, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Smart Sand is a low-cost producer of high-quality Northern White frac sand, an ideal proppant for hydraulic fracturing and various industrial applications. The company provides proppant and other logistics services for several companies in the oil and gas industry. With sustained oil and gas market demand, SND is expected to see growing demand for its services, reflecting a positive outlook.

FuelCell Energy is a clean energy company offering low-carbon energy solutions. It produces power using flexible fuel sources such as biogas, natural gas and hydrogen. The company designs fuel cells that generate electricity through an electrochemical process that combines fuel with air, reducing carbon emissions and minimizing the environmental impact of power generation. As such, FCEL is anticipated to play a crucial role in the energy transition by enabling industries and communities to shift from traditional fossil fuels to low-carbon alternatives.

Nine Energy Service provides onshore completion and production services for unconventional oil and gas resource development. The company operates across key prolific basins in the United States, including the Permian, Eagle Ford, MidCon, Barnett, Bakken, Rockies, Marcellus and Utica, as well as throughout Canada. With a sustained demand for oil and gas in the future, the demand for NINE’s services is anticipated to increase, which should position the company for growth in the long run.

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Equinor ASA EQNR, a Norwegian integrated energy firm, has a diversified portfolio of assets involving oil and gas, renewables and low-carbon energy solutions. The company is committed to meeting the increasing global demand for energy while working on its goal to become a net-zero energy firm by 2050. EQNR also invests heavily in renewables, showcasing its commitment to the global energy transition and a low-carbon future. However, crude price volatility and increasing capital expenditures add to the concern.

Despite having underperforming the Oil-Energy sector on a year-to-date (YTD) basis, we believe that this Zacks Rank #3 (Hold) company’s strong fundamentals and commitment to returning capital to shareholders make it an attractive investment opportunity in the long run.

Let us delve into the key factors associated with Equinor’s strong performance.

Positive Aspects

Integrated Business Model: Equinor possesses a multi-faceted business model involving both upstream and downstream operations. The company’s upstream operations involve mainly exploration and production of oil and gas in core regions like Brazil, Norway and the U.S. Gulf of Mexico, among others.

EQNR is the major operator within the Norwegian Continental Shelf. The company continuously explores for new oil and gas reserves to replace depleting and mature fields, thereby contributing to global energy security. Its downstream operations involve refining and marketing oil and gas products. The energy firm’s presence in both upstream and downstream segments allows it to diversify its revenue streams.

Renewables: Equinor heavily invests in renewables and low-carbon energy solutions, including offshore wind, solar energy, hydrogen and carbon capture projects. The company recently acquired 41.2 million shares in Orsted A/S, representing a 9.8% stake in the company, and expanding its offshore wind portfolio.

EQNR is committed to becoming a net-zero energy firm within 2050 by reducing emissions, balancing its portfolio by scaling up investments in wind and solar power, and developing low-carbon solutions such as hydrogen and CCS. This diversification positions Equinor as a leader in the global energy transition, addressing the growing demand for cleaner energy. This should also allow Equinor to tap into emerging markets for low-carbon solutions.

Returns to Shareholders: In recent years, EQNR has prioritized shareholder returns through dividends and share buybacks. The board has announced a regular cash dividend of 35 cents per share and an extraordinary cash dividend of 35 cents per share for the third quarter of 2024. Furthermore, the company is expected to execute a share buy-back program for 2024, valued at $6 billion, bringing its total capital distribution for the year to approximately $14 billion.

While Equinor has strong long-term potential, the current market conditions and specific challenges facing the company cannot be ignored.

Red Flags for EQNR Stock

Fluctuations in Crude Prices: Like other exploration and production companies, EQNR’s upstream business is also extremely vulnerable to oil price volatility. Any event that may lead to a downturn in the market, affecting demand for the commodity, can significantly hurt this segment’s revenues.

Currently, a slowdown in global economic activities and persistently lower crude demand from China, the world’s largest oil importer, are putting downward pressure on oil prices. These developments are anticipated to affect EQNR’s upstream business profitability.

Debt Load: Equinor's balance sheet demonstrates a notable level of debt exposure, which may weigh down on its financials. The company’s long-term debt totaled $22.4 billion at the end of the third quarter with a cash balance of $8 billion. The high level of debt raises concerns regarding the company’s financial flexibility and its ability to navigate economic downturns.

High Capital Expenditure: Equinor has a high capital spending associated with advancing its renewable projects. Renewable energy projects require substantial upfront investments and the rapid transition from oil and gas to renewables might weigh down on the short-term profitability of energy firms.

In addition, Equinor continues to invest in developing new oil and gas reserves to replace depleted fields, ensuring a reliable energy supply. While these expenditures are likely to yield long-term benefits, they lay pressure on the company’s financial performance in the near term. The company has outlined a capital spending budget of $12-$13 billion for 2024.

Final Thoughts

While certain factors, such as oil price volatility, high debt and high capital expenditures, may present short-term financial challenges, Equinor’s diversified business model, commitment to sustainability and continued ability to sustain shareholder returns providea positive outlook.

Key Picks

Some better-ranked stocks from the energy sector are Smart Sand, Inc. SND, FuelCell Energy FCEL and Nine Energy Service NINE, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Smart Sand is a low-cost producer of high-quality Northern White frac sand, an ideal proppant for hydraulic fracturing and various industrial applications. The company provides proppant and other logistics services for several companies in the oil and gas industry. With sustained oil and gas market demand, SND is expected to see growing demand for its services, providing a positive outlook.

FuelCell Energy is a clean energy company offering low-carbon energy solutions. It produces power using flexible fuel sources such as biogas, natural gas and hydrogen. The company designs fuel cells that generate electricity through an electrochemical process that combines fuel with air, reducing carbon emissions and minimizing the environmental impact of power generation. As such, FCEL is anticipated to play a crucial role in the energy transition by enabling industries and communities to shift from traditional fossil fuels to low-carbon alternatives.

Nine Energy Service provides onshore completion and production services for unconventional oil and gas resource development. The company operates across key prolific basins in the United States, including the Permian, Eagle Ford, MidCon, Barnett, Bakken, Rockies, Marcellus and Utica, as well as throughout Canada. With a sustained demand for oil and gas in the future, the need for NINE’s services is anticipated to increase, which should position the company for growth in the long run.

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Exxon Mobil Corporation XOM, the U.S. oil and gas giant, is scheduled to drill a well targeting natural gas finds offshore Cyprus in January 2025. Since the Russian invasion of Ukraine in 2022, many major energy companies have been trying to explore new energy reserves in the Mediterranean region in an attempt to diversify from Russia.

Many oil-producing companies have been eyeing the East Mediterranean region, where many natural gas discoveries have been made in recent years. Following the invasion of Ukraine, Europe witnessed energy supply disruptions and moved toward finding new resources to ensure the region’s energy security.

ExxonMobil secured exploration licenses in Cyprus in 2017. The company made a significant gas find in 2019 at a well named Glaucus. The drilling activity, scheduled for next year, includes two wells, namely Pegasus and Electra. Per a senior executive at XOM, the Electra well is anticipated to yield promising results.

Electra is located in Block 5, one of Cyprus’ 13 offshore exploration areas. According to Reuters, Electra has a huge prospect of becoming a standalone development. This means that it has the potential to become a commercially viable resource on its own. However, the company mentioned that it needs to conduct appraisal drilling of the well before reaching any conclusion. Additionally, Pegasus is situated close to Glaucus in Block 10 offshore Cyprus.

ExxonMobil mentioned that it has gathered comprehensive, three-dimensional seismic data that indicate the presence of hydrocarbon reserves. The company has identified huge prospects in the region, and it is taking the next step in the exploration phase, which involves testing the potential using a drilling rig. XOM holds licenses over two offshore blocks in partnership with QatarEnergy to explore oil and gas reserves in the country.

XOM’s Zacks Rank and Key Picks

Currently, XOM carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Smart Sand, Inc. SND, FuelCell Energy FCEL and Nine Energy Service NINE, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Smart Sand is a low-cost producer of high-quality Northern White frac sand, an ideal proppant for hydraulic fracturing and various industrial applications. The company provides proppant and other logistics services for several companies in the oil and gas industry. With sustained oil and gas market demand, SND is expected to see growing demand for its services, reflecting a positive outlook.

FuelCell Energy is a clean energy company offering low-carbon energy solutions. It produces power using flexible fuel sources such as biogas, natural gas and hydrogen. The company designs fuel cells that generate electricity through an electrochemical process that combines fuel with air, reducing carbon emissions and minimizing the environmental impact of power generation. As such, FCEL is anticipated to play a crucial role in the energy transition by enabling industries and communities to shift from traditional fossil fuels to low-carbon alternatives.

Nine Energy Service provides onshore completion and production services for unconventional oil and gas resource development. The company operates across key prolific basins in the United States, including the Permian, Eagle Ford, MidCon, Barnett, Bakken, Rockies, Marcellus and Utica, as well as throughout Canada. With a sustained demand for oil and gas in the future, the need for NINE’s services is anticipated to increase, which should position the company for growth in the long run.

Zacks Investment Research

Shell plc SHEL, the British oil and gas giant, has entered into an agreement with Ukrnafta, a subsidiary of Naftogaz, to sell 51% of its gas station network in Ukraine. Following the deal’s closure, Ukrnafta will become a majority owner of Shell’s gas station network, which currently includes 118 functional stations. The rebranding will be completed within a year. Additionally, all the 1,550 employees will retain their jobs following the deal’s closure.

Shell ranks among the top 10 fuel distribution networks in Ukraine and 7th in terms of the number of stations. The stations are mostly located in areas with high traffic, ensuring maximum visibility among its customers. Per a statement from Naftogaz Group, earnings from the newly acquired business will contribute to the national budget of Ukraine in the form of dividends.

According to EXPRO, a production consulting firm, natural gas production in Ukraine reached new highs in October since the start of Russia's invasion in February 2022. The gross natural production reached 1.6 billion cubic meters in October 2024, reflecting a 2.3% increase from the prior-year level. This is also the highest production achieved since January 2022.

With this sale, Shell has marked its exit from Ukraine. The sale was confirmed by the energy firm. Due to the prolonged conflict between Russia and Ukraine, many companies have been forced to reconsider their presence in the region. Geopolitical instability and the possibility of operational disruptions have resulted in a challenging business environment, prompting several companies operating in the region to re-evaluate their businesses in both countries.

SHEL’s Zacks Rank and Key Picks

Currently, SHEL carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Smart Sand, Inc. SND, FuelCell Energy FCEL and Nine Energy Service NINE, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Smart Sand is a low-cost producer of high-quality Northern White frac sand, an ideal proppant for hydraulic fracturing and various industrial applications. The company provides proppant and other logistics services for several companies in the oil and gas industry. With sustained oil and gas market demand, SND is expected to see growing demand for its services, reflecting a positive outlook.

FuelCell Energy is a clean energy company offering low-carbon energy solutions. It produces power using flexible fuel sources such as biogas, natural gas and hydrogen. The company designs fuel cells that generate electricity through an electrochemical process that combines fuel with air, reducing carbon emissions and minimizing the environmental impact of power generation. As such, FCEL is anticipated to play a crucial role in the energy transition by enabling industries and communities to shift from traditional fossil fuels to low-carbon alternatives.

Nine Energy Service provides onshore completion and production services for unconventional oil and gas resource development. The company operates across key prolific basins in the United States, including the Permian, Eagle Ford, MidCon, Barnett, Bakken, Rockies, Marcellus and Utica, as well as throughout Canada. With a sustained demand for oil and gas in the future, the need for NINE’s services is anticipated to increase, which should position the company for growth in the long run.

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