The global energy industry is one of the few sectors of the economy that has been impacted by not only the pandemic but catastrophic weather occurrences, production conflicts, and disruptive new technologies in the last year. According to a non-profit International Energy Agency report, worldwide energy consumption fell by more than 5% in 2020, with drops of 8% and 7% for oil and coal, respectively. This resulted in a near-20% drop in energy-related investments throughout the world.
In addition to the pandemic losses, extreme weather events such as the Texas deep freeze and the heat waves in South Asia impacted the output capacity of power companies. Due to a supply war between Saudi Arabia and Russia, two of the world’s major oil producers, oil prices fell dramatically during much of 2020. Energy companies that rely on fossil fuels have also suffered as renewable energy sources continue to gain ground in power generating.
Renewable energy is arguably the most crucial development that investors should consider before betting on energy firms. According to the International Energy Agency, renewable energy is on pace to become the foremost source of electric power by 2025. Renewable energy sources already account for more than a quarter of the overall production capacity in the electrical sector. Hydrogen fuel cells and solar panels, as well as enhanced hydroelectric power, are leading the way.
ConocoPhillips (COP)
ConocoPhillips (COP) is a fossil-fuels-focused energy company. The business was founded in 1875 and is headquartered in Houston, TX. COP has operations in the United States, Australia, Norway, Canada, Malaysia, Indonesia, China, and Libya. After a dismal year in the energy industry, COP looks to benefit from the stability in oil prices due to an agreement between oil-producing countries to enhance cooperation. Because of the possibility of greater returns on capital and free cash flow generation, investment bank Goldman Sachs (GS) selected COP as a company with upside potential in the energy sector.
COP reported their quarterly earnings on Tuesday and beat analysts’ projections rather easily. It reported an EPS (Earnings-per-share) of $1.27 per share vs. $1.18 predicted and boasted $10.2 billion in revenue. The median price target for COP from analysts that provide 12-month price forecasts is 75.00, with a high of 88.00 and a low of 63.00. The median estimate is up 32.47% from the current price. The annual dividend yield for COP is 3.07%, paying a $1.72 per share dividend. The consensus among analysts is to purchase COP shares.
NextEra Energy Inc. (NEE)
The Florida-based energy business NextEra Energy, Inc. (NEE) was formed in 1984. By market capitalization, the company is the largest electric utility holding company. NextEra has signed a contract with OPAL Fuels to construct a renewable gas facility in Minnesota, as the US government pushes for sustainable energy sources. Once fully operational, the facility will produce 6 million gas gallon equivalents of RNG (Renewable Natural Gas) per year. Two parts make up the company’s business: FPL and NEER. Energy is the primary focus of the FPL (Florida Power & Light) side. Meanwhile, NEER (Next Era Energy Resources) produces electricity using clean and renewable sources such as wind and solar. Energy and capacity requirements are met through its services, and the company also carries out power and gas marketing and trading operations.
On April 21st, NEE CEO Jim Robo endorsed President Biden’s clean energy initiatives, saying they were a chance for the company to grow. The consensus 12-month price target for NEE is 88.00, with a high of 101.00 and a low of 78.00. The median estimate indicates an increase of 10.76% from the current price. The yearly dividend paid by NEE is $1.54 per share, with a dividend yield of 1.95%. Analysts project annual, and quarterly growth for both NEE’s EPS and revenue, and the consensus among them is to buy; the buy rating has held steady all year.
Exxon Mobil (XOM)
Exxon Mobil Corporation (XOM) is a well-known global oil and gas company. John D. Rockefeller started the firm in 1882, and it is headquartered in Irving, TX. XOM is one of the world’s largest energy companies, with over 22,000 net operational wells with proven oil and gas reserves. It operates in over 21 countries, having refineries in the majority of them. XOM is divided into three segments: Upstream, Downstream, and Chemical. The Upstream division is responsible for the production of crude oil and natural gas. The Downstream segment handles the production and distribution of petroleum products, while the Chemical side of the business mainly deals in petrochemicals. XOM operates with a refining capacity of 6.3 million barrels per day, making it one of the world’s largest oil refining businesses.
XOM has a consensus price target of 66.50 among analysts that provide 12-month price projections, with a high of 90.00 and a low of 57.00. The consensus forecast implies a gain of 14.26% from its current price. It’s been announced that on September 10th, XOM shareholders will receive a payout of $0.87 per share. The dividend yield will be 6.0% based on the payout. This is considered relatively normal for the industry. While showing an impressive $71.1 billion in sales, it has a current EPS of $1.31 per share. According to the consensus of polled analysts, it has maintained a strong buy (or hold) recommendation all year.
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