ExxonMobil to Sell Non-Core Permian Basin Assets to Hilcorp Energy

BP plc’s BP current efforts to scale back on its renewable projects' expansion shall not affect the offshore wind projects that the British energy major has undertaken with the German energy company EnBW, as per Reuters. In recent months, BP has been maintaining its focus on its high-margin business while scaling down the aggressive expansion of its renewables unit. The company had previously announced that it plans to sell off its U.S. onshore wind business and divest a small stake in its offshore wind business.

Overview of the Partnership

However, per EnBW, these decisions are not likely to affect BP’s partnership with the German energy firm. BP and EnBW forged a 50-50 partnership in 2021 to develop offshore wind projects in the UK. The companies have signed lease agreements for two 60-year leases that should enable them to develop offshore wind projects in the Irish Sea. Furthermore, they have signed an option agreement related to a lease in the UK North Sea.

The three projects, named Morven, Morgan and Mona, have the collective capacity to generate up to 5.9 gigawatts (GW) of power, enough to meet the needs of approximately 6 million households in the UK.

BP’s Scale-Back Unlikely to Affect JV’s Operations

EnBW mentioned that BP’s strategy to scale down its renewables business is global. The decision does not affect the JV’s plans. EnBW further mentioned that the JV is advancing with its projects, and the operations remain unaffected by BP’s decision to cut back on further investments in renewables.

BP’s Zacks Rank and Key Picks

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

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

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

Smart Sand, Inc. 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 demand in the oil and gas market, 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.

Zacks Investment Research

Ormat Technologies, Inc. ORA recently announced that it has agreed to sign an Engineering, Procurement and Construction (EPC) contract with Contact Energy, involving geothermal energy. This contract, valued at $200 million, entails the development of the 101-megawatt (MW) Te Mihi Stage 2 geothermal power plant in New Zealand.

Te Mihi Stage 2 will gradually replace the outdated Wairakei geothermal station and is slated to be completed by mid-2027.

ORA’s Position in Geothermal Generation

With the effects of climate change becoming increasingly evident, the shift to renewable energy sources like geothermal has increased in recent times to effectively reduce greenhouse gas emissions. Since geothermal plants can provide power to the grid constantly unaffected by weather or daylight, this source of energy serves as a flexible and reliable form of backup power during major electricity outages or disruptions.

This is likely to have prompted Grand View Research to forecast a compound annual growth rate (CAGR) of 3.1% for the global geothermal energy market during the 2024-2030 time period.

Ormat Technologies, being a forerunner in generating electricity from geothermal energy, stands to gain significantly from the aforementioned market growth prospect. The latest EPC contract is the fourth major geothermal project in New Zealand, highlighting its expertise in binary technology, which works well for high-temperature geothermal sites.

Ormat Technologies expects its year-end Product Segment backlog to exceed $300 million following the contract signing. Most of the revenues from this deal will be recognized in 2026 and 2027. The Te Mihi Stage 2 project, along with 160 MW of other projects underway in New Zealand, strengthens ORA’s position as one of the leading companies contributing to this nation’s renewable energy capacity expansion.

Subject to final investment decision, Contact Energy is planning a second phase of development named Te Mihi Stage 3, which is expected to come online by mid-2031. ORA is expected to clinch another EPC contract for this facility, which, in turn, is likely to boost its future revenues.

Opportunities for ORA’s Peers

Some other companies, which are increasing investments in geothermal generation and are expected to gain from the expanding global geothermal market, are discussed below.

Baker Hughes Company BKR: It has been working on geothermal energy for more than 40 years, with projects in more than 30 countries around the world. The company has developed a prototype metal-to-metal mud motor with a mud-lubricated bearing assembly and a titanium transmission for harvesting energy from an enhanced geothermal system in Iceland.

The company has a long-term (three to five years) earnings growth rate of 25.9%. The Zacks Consensus Estimate for BKR’s 2024 sales indicates year-over-year growth of 8.4%.

Halliburton Company HAL: It provides a wide range of products, technology and integrated services to help reduce costs and manage risks in geothermal projects. The company works closely with clients to develop the best solutions for various types of geothermal energy projects.

The company has a long-term earnings growth rate of 2.7%. The Zacks Consensus Estimate for HAL’s 2025 sales indicates year-over-year growth of 3.2%.

ORA Stock’s Price Movement

Shares of ORA have gained 3.4% in the past month compared with the industry’s 11% growth.

Wall Street is speculating on the effects of possible Donald Trump policy changes when he takes office in January 2025. JPMorgan analyst Virgina Martin Heriz weighs in on the potential impacts of a second Trump presidency on sustainable investing.

Onshoring: Heriz sees a second Trump administration modifying the Inflation Reduction Act (IRA), but doing so with a "scalpel, not a sledgehammer."

The JPMorgan analyst sees the domestic content portions of the IRA as the "most safe incentives" due to bi-partisan support of supply chain onshoring. Heriz points to First Solar, Inc. , SunRun, Inc. and Sunnova Energy International Inc. as clean tech companies particularly positioned to benefit from supply chain onshoring.

Read More: Trump’s Potential ‘Health Czar’ Robert F. Kennedy Jr. Rattles Vaccine Stocks: ‘Shoot First Reaction’

Hydrogen: Heriz also sees the 45V tax credit for clean hydrogen producers as likely to stay due to strong backing from traditional energy companies and Republican-leaning areas. Clean hydrogen companies including FuelCell Energy, Inc. and Plug Power Inc. are likely safe from policy changes under a second Trump administration, according to Heriz.

EV Incentives: The analyst does expect subsidies for electric vehicles to be downsized or repealed, including the 30D clean vehicle tax credit of up to $7,500 on the purchase of a qualifying EV. Additionally, Heriz anticipates tightening EV charging incentives like the 30C tax credit that covers up to 30% of the cost of each charger. Some companies that could be negatively impacted by the repeal of EV and related charging incentives include EVgo Inc. , ChargePoint Holdings, Inc. and Blink Charging Co. .

Oil & Gas: Domestic oil and gas production is more influenced by market prices and global supply and demand rather than government policies, Heriz said. For this reason, the analyst expects a potentially reduced regulatory burden to be "helpful to the industry, but not life-changing in the short-term."

The Take-Away: While Heriz does expect policy changes to affect sustainable investing under the second Trump administration, she said that outflows in sustainable investing are mainly motivated by underperformance.

"Fund performance matters far more than politics," the JPMorgan analyst said.

Read Next:

Bitcoin Miners Hive Digital, Hut 8, Bitfarms To Report Earnings As Future Of Crypto ‘Has Never Been Brighter’

Photo: Earth phakphum via Shutterstock

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.