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Eni (E) Strengthens Position as U.K.'s Leading CCS Operator

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Eni SpA (E - Free Report) , a leading multinational energy company, welcomed the U.K. Department for Energy Security and Net Zero's (“DESNZ”) CCUS Vision, marking a significant step in fortifying the country's carbon capture, usage and storage (CCUS) capabilities as it aims to become a competitive market by 2035.The announcement includes the initiation of the Track-1 expansion process at the HyNet industrial cluster.

Per the announcement, the U.K. government has earmarked £20 billion to support the industry's commercial-scale development, positioning the country to store 20-30 million tons of carbon dioxide (CO2) annually by 2030 and generate 50,000 new jobs.

Within this context, Eni has emerged as a leading player in the U.K.'s CCUS landscape, serving as the CO2 transport and storage operator for the HyNet consortium. The company is now planning a second U.K. CCS hub, the Bacton Energy Hub, to decarbonize the Thames Estuary region.

Eni obtained a license to store CO2 in the depleted Hewett gas field in Southern North Sea. Together, HyNet and Bacton are poised to have a combined capacity to store 500 million tons of CO2, safeguarding existing jobs and stimulating investments in new industrial supply chains.

The U.K.'s CCUS Vision timeline aims to drive down costs for industries, making it more feasible for hard-to-abate sectors to decarbonize. As part of this roadmap, the government has announced the Track-1 expansion of the HyNet CCUS industrial cluster. Interested businesses with CCUS projects are invited to apply by Mar 28, 2024.

The expansion is anticipated to add between 1.3 million and 1.5 million tons per year of CO2 to the existing 3.0 million tons, ensuring the full saturation of HyNet's Phase 1 by 2030. This milestone reinforces the project's stability following the Heads of Terms agreement for the transportation and storage project with the U.K. government in October 2023. This promises additional job opportunities and investments for the North-West of England and North Wales regions.

HyNet is set to become one of the world's first low-carbon clusters, with an initial storage capacity of around 4.5 million tons of CO2 per year, expanding to approximately 10 million tons.

Leveraging its extensive experience in storing gas in depleted fields, Eni plans to repurpose some of its existing upstream assets into CO2 storage hubs. This strategic move aims to decarbonize both Eni's industrial activities and those of third parties at a competitive cost and with a fast time-to-market approach. Eni is actively pursuing similar projects not only in the United Kingdom but also in Italy, Libya, and other locations under evaluation in the North Sea and the Far East.

Zacks Rank & Key Picks

E currently has a Zack Rank #3 (Hold).

Some better-ranked stocks in the energy sector are The Williams Companies, Inc. (WMB - Free Report) , Sunoco LP (SUN - Free Report) and Murphy USA, Inc. (MUSA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Williams Companies is well-positioned to capitalize on the anticipated substantial long-term growth in U.S. natural gas demand, thanks to its impressive portfolio of large-scale projects that create significant value. The company’s debt maturity profile is in good shape, with its $4.5-billion revolver maturing in fiscal 2023.

WMB’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 13.68%.

Sunoco is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. By distributing more than 10 fuel brands via 10,000 convenience stores under long-term distribution contracts, the partnership will continue to generate stable cash flow. 

SUN’s earnings beat estimates in two of the trailing four quarters and missed twice, delivering an average surprise of 28.33%.

Murphy USA is a low-cost, high-volume fuel seller, whose stations are located near Walmart supercenters. This enables it to attract significantly more transactions than its peers. MUSA’s sourcing infrastructure is another key competitive advantage.

The company’s earnings beat estimates in two of the trailing four quarters and missed twice, delivering an average surprise of 7.04%.

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