The Next Big Stock Trend: Carbon Capture (CEI, NRG, EQNR, FCEL, KRBN, VKIN, XOM, CVX)

News out this week from Canada points to the emergence of a super-trend in its very early innings that could direct hundreds of billions of dollars in growth over coming years for companies positioned to take advantage: Carbon Capture Sequestration, Storage, and Utilization, or CCSSU, or CCUS, or CCS, or just Carbon Capture. 

Word to the wise: be on the lookout for these keywords attached to stocks.

It’s not a new idea in terms of climate change management technologies. But it’s only recently finding purchase as a phenomenon ready to be funded at scale by major governments and private industrial players.

This emerging trend got a jolt of energy with news out this week sourced from a Canadian federal government document that Canada is pushing to provide incentives for at least two gigantic new carbon capture projects by 2030. There are already nearly a dozen oil and gas companies reportedly pursuing rights to store carbon dioxide in Alberta’s massive underground caverns.

According to an article from GlobalNews.Ca, these new carbon capture hubs would be fed from clusters of carbon emission sources helping to advance Prime Minister Justin Trudeau’s goal of cutting emissions by 40-45 percent from 2005 levels by 2030.

According to the article, “the global oil industry is betting heavily that carbon capture utilization and storage (CCUS) can become a multi-billion-dollar global business with government and private investment.” This is not just a Canadian theme. It is being echoed by OECD governments around the world, which suggests a massive total addressable market in the making.

This has major implications for a number of stocks that active market participants may want to have on the radar.

NRG Energy Inc (NYSE:NRG) is a good place to start. Based in Houston, NRG’s CCS system 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 the following segments: Generation, Retail, and Corporate. 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 has priced its offering of $1.1 billion in aggregate principal amount of 3.875% senior notes due 2032. The New Notes will be senior unsecured obligations of NRG and will be guaranteed by each of NRG’s current and future subsidiaries that guarantee indebtedness under NRG’s credit agreement. The New Notes are being issued under NRG’s Sustainability-Linked Bond Framework, which sets out certain sustainability targets, including reducing greenhouse gas emissions.

According to its release, NRG intends to use the net proceeds from the offering, together with cash on hand and borrowings under one or more of its liquidity facilities, to repurchase, pursuant to NRG’s concurrent exercise of its optional redemption rights, (i) all of the $1.0 billion outstanding aggregate principal amount of its 7.25% senior notes due 2026 (the “2026 Notes”) and (ii) $355 million of the $1.23 billion outstanding aggregate principal amount of its 6.625% senior notes due 2027 (the “2027 Notes”), and to pay fees and expenses incurred in connection with the repurchase of the 2026 Notes and 2027 Notes.

The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 3% in that timeframe. 

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 another key player that has recently entered this space. While the market doesn’t seem to have noticed – which may make it even more interesting – the company has moved on this issue in a very interesting way.

Viking Energy Group, Inc. engages in the acquisition, exploration, development, and production of oil and natural gas properties. It owns and invests in oil and gas assets located in North America in Kansas, Missouri, Texas, Louisiana, and Mississippi. But recent news shifts this story in the CCUS space. This also applies to its parent company, 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.

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(1) investments by 2030 and growing cash flow and returns, expecting a free cash flow(2) of around USD 35 billion(3) before capital distribution in 2021 – 2026 and around 12%(3) return on average capital employed(2) in 2021 – 2030.

“Our strategy is backed up by clear actions to accelerate our transition while growing cash flow and returns. We are optimising 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 with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week. 

Equinor ASA (NYSE:EQNR) managed to rope in revenues totaling $149.3B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 89.4%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($215.7B against $193.5B).

Other key names involved in this space include FuelCell Energy Inc (NASDAQ:FCEL), KraneShares Global Carbon ETF (NYSEARCA:KRBN), Exxon Mobil Corporation (NYSE:XOM), and Chevron Corporation (NYSE:CVX).

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).