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What Makes Chevron's (CVX) Renewable Energy Buy So Special?
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San Ramon, CA-based integrated oil company Chevron Corporation (CVX - Free Report) announced plans of acquiring the biodiesel producer, Renewable Energy Group Inc , for $3.15 billion in an all-cash deal for which Chevron will pay $61.50 per share of Renewable Energy Group. $61.50 per share represents a premium of about 40% to REGI’s last Friday close and a premium of about 57% on a 30-day average based on the closing stock prices on Feb 25, 2022.
According to Chevron, this acquisition amalgamates its extensive experience in manufacturing, distribution and commercial marketing with Renewable Energy Group’s increasing renewable fuels production and leading feedstock competencies. It is in line with Chevron’s objective to boost its renewable fuels output capacity to 100,000 barrels per day by 2030 and also provide surplus feedstock supplies and pre-treatment facilities.
With investors stepping up pressure on carbon emitters, the likes of CVX are looking at a monumental shift in their business models by effectively moving away from their primary operations of oil and gas development. To this end, Chevron’s existing renewable fuel partnership with Bunge, together with Renewable Energy Group’s biodiesel production facilities, will transform the energy behemoth into one of the largest North American renewable fuels producers.
The deal, anticipated to conclude by June, is expected to augment Chevron’s earnings in the first year after closing and increase free cash flow after the start-up of REGI's Geismar expansion. The supermajor will also generate the $500-$600 million range of EBITDA by 2025. Moreover, if the transaction goes through, Chevron's renewable fuels business will be headquartered in Ames, IA.
Commenting on the takeover, Chevron Chairman and CEO, Mike Wirth, said "Together, we can grow more quickly and efficiently than either could on its own."
Moreover, Renewable Energy Group CEO, Cynthia Warner, is likely to join Chevron’s Board of Directors.
Chevron is one of the largest publicly traded oil and gas companies in the world with operations spanning worldwide. The only energy component of the Dow Jones Industrial Average, CVX is fully integrated as it participates in every aspect related to energy, from oil production to refining and marketing. The company generates around $95 billion in annual revenues and produces more than three million barrels per day of oil equivalent. It currently churns out oil and natural gas at a 59/41 ratio. As of the end of 2021, the company had proved reserves of approximately 12.4 billion barrels of oil equivalent.
Renewable Energy Group is leading the energy and transportation industries’ transition to sustainability by converting renewable resources into high-quality, sustainable fuels. It is an international producer of sustainable fuels that significantly lower greenhouse gas emissions to immediately reduce the carbon impact. REGI utilizes a globally integrated procurement, distribution and logistics network to operate 11 biorefineries in the United States and Europe.
ExxonMobil beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, the average being around 5.8%. ExxonMobil stock has increased around 40.1% in a year.
The Zacks Consensus Estimate for XOM’s 2022 earnings is projected at $6.89 per share, which is an increase of about 28% from the projected year-ago earnings of $5.38 per share.
ConocoPhillips is valued at around $126 billion. The consensus estimate for ConocoPhillips’ 2022 earnings has been revised 16.5% upward over the past 60 days.
COP beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 12.6%. ConocoPhillips has rallied around 80.7% in a year.
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What Makes Chevron's (CVX) Renewable Energy Buy So Special?
San Ramon, CA-based integrated oil company Chevron Corporation (CVX - Free Report) announced plans of acquiring the biodiesel producer, Renewable Energy Group Inc , for $3.15 billion in an all-cash deal for which Chevron will pay $61.50 per share of Renewable Energy Group. $61.50 per share represents a premium of about 40% to REGI’s last Friday close and a premium of about 57% on a 30-day average based on the closing stock prices on Feb 25, 2022.
According to Chevron, this acquisition amalgamates its extensive experience in manufacturing, distribution and commercial marketing with Renewable Energy Group’s increasing renewable fuels production and leading feedstock competencies. It is in line with Chevron’s objective to boost its renewable fuels output capacity to 100,000 barrels per day by 2030 and also provide surplus feedstock supplies and pre-treatment facilities.
With investors stepping up pressure on carbon emitters, the likes of CVX are looking at a monumental shift in their business models by effectively moving away from their primary operations of oil and gas development. To this end, Chevron’s existing renewable fuel partnership with Bunge, together with Renewable Energy Group’s biodiesel production facilities, will transform the energy behemoth into one of the largest North American renewable fuels producers.
The deal, anticipated to conclude by June, is expected to augment Chevron’s earnings in the first year after closing and increase free cash flow after the start-up of REGI's Geismar expansion. The supermajor will also generate the $500-$600 million range of EBITDA by 2025. Moreover, if the transaction goes through, Chevron's renewable fuels business will be headquartered in Ames, IA.
Commenting on the takeover, Chevron Chairman and CEO, Mike Wirth, said "Together, we can grow more quickly and efficiently than either could on its own."
Moreover, Renewable Energy Group CEO, Cynthia Warner, is likely to join Chevron’s Board of Directors.
Chevron is one of the largest publicly traded oil and gas companies in the world with operations spanning worldwide. The only energy component of the Dow Jones Industrial Average, CVX is fully integrated as it participates in every aspect related to energy, from oil production to refining and marketing. The company generates around $95 billion in annual revenues and produces more than three million barrels per day of oil equivalent. It currently churns out oil and natural gas at a 59/41 ratio. As of the end of 2021, the company had proved reserves of approximately 12.4 billion barrels of oil equivalent.
Renewable Energy Group is leading the energy and transportation industries’ transition to sustainability by converting renewable resources into high-quality, sustainable fuels. It is an international producer of sustainable fuels that significantly lower greenhouse gas emissions to immediately reduce the carbon impact. REGI utilizes a globally integrated procurement, distribution and logistics network to operate 11 biorefineries in the United States and Europe.
Chevron currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks from the energy space that warrant a look include ExxonMobil (XOM - Free Report) and ConocoPhillips (COP - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ExxonMobil beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, the average being around 5.8%. ExxonMobil stock has increased around 40.1% in a year.
The Zacks Consensus Estimate for XOM’s 2022 earnings is projected at $6.89 per share, which is an increase of about 28% from the projected year-ago earnings of $5.38 per share.
ConocoPhillips is valued at around $126 billion. The consensus estimate for ConocoPhillips’ 2022 earnings has been revised 16.5% upward over the past 60 days.
COP beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 12.6%. ConocoPhillips has rallied around 80.7% in a year.