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3 Stocks Poised to Benefit From US Clean Energy Transition

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The world is undergoing a significant shift toward cleaner energy sources, driven by the need to address climate change and reduce greenhouse gas emissions. Energy companies are at the crossroads, balancing the transition to renewable energies while still harnessing traditional hydrocarbons to fulfill the growing global energy demand.

For oil and gas companies, transitioning to clean energy is crucial beyond mere regulatory compliance or corporate social responsibility. It is a necessity to maintain resilience and relevance in an evolving low-carbon economy. The past two years have shown that the oil and gas sector can play a pivotal role in shaping the new energy landscape, combining investment in low-carbon technologies and maintaining hydrocarbon production.

Can the Winning Streak Continue in 2024?

As we have entered 2024, the question arises — can the momentum in the transition to cleaner energy be sustained? In the United States, there is a clear trend toward reducing the reliance on coal, with projections from the U.S. Energy Information Administration indicating a decrease from 17% of the country’s energy generation in 2023 to 15% in 2024 and 14% in 2025.

Meanwhile, natural gas and renewables are becoming increasingly dominant in the energy mix. In 2023, natural gas accounted for 42% of the U.S. energy generation, with renewables at 22%. This is expected to shift, with renewables increasing to 24% in 2024 and 25% in 2025, largely driven by significant growth in the solar sector. Solar energy, in particular, is poised to lead growth in electricity generation, reflecting its rising importance in the transition to cleaner energy sources.

3 Stocks to Consider

As of 2024, numerous oil and gas companies have taken the lead in embracing clean energy initiatives, making substantial contributions to sustainability goals and the transition toward clean energy.

Here, we have discussed three companies, each carrying a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Exxon Mobil Corporation (XOM - Free Report) : The company is focusing on carbon capture and storage (CCS) as a cornerstone of its strategy, along with investments in hydrogen, biofuels and other low-carbon technologies. The company aims to achieve net-zero greenhouse gas emissions from its operated assets by 2050.

XOM has reduced its operated greenhouse gas emissions (GHG) intensity by more than 10% since 2016. It plans to further decrease methane emissions and flaring intensity by 70-80% and 60-70%, respectively, by 2030.

ExxonMobil intends to invest more than $15 billion in lower greenhouse gas emissions initiatives over the next six years. It has also launched a Low Carbon Solutions business to commercialize its CCS technology and has numerous CCS projects worldwide, aiming to capture 20 million metric tons of carbon per year by 2030.

Chevron Corporation (CVX - Free Report) : The company’s strategy involves investing in traditional oil and gas businesses to lower their carbon intensity and expanding into low-carbon businesses, including renewable fuels, carbon capture and hydrogen technologies. By 2028, Chevron plans to invest $8 billion in low-carbon investments and $2 billion in carbon-reduction projects.

CVX has already made significant progress in its energy transition efforts. For example, the company’s operations in the deepwater U.S. Gulf of Mexico are among the world’s lowest-carbon-intensity oil and gas producers, and its methane intensity performance in the Permian Basin was in the top quartile of oil and gas producers in 2021.

The company is also advancing carbon capture, utilization, and storage (CCUS) technologies through projects like the Texas Bayou Bend project, which is positioned to be one of the largest carbon storage projects in the United States. By 2030, Chevron targets to expand its renewable fuels production capacity to 100 million barrels per day.

Furthermore, Chevron’s planned completion of the expansion of the Geismar biorefinery in 2024 is expected to increase its overall renewable fuel capacity by 30%.

Occidental Petroleum Corporation (OXY - Free Report) : The company has an ambitious clean energy plan focusing on achieving net-zero GHG emissions. The company aims to reach net-zero emissions for its operations and energy use (Scope 1 and 2) before 2040, with a more ambitious target set before 2035. Additionally, it seeks to achieve net zero for its total emissions inventory, including product use (Scope 1, 2 and 3), aiming for this goal before 2050.

Occidental has already made notable progress in its energy transition efforts. The company was the first U.S. oil and gas producer to establish net-zero emissions goals for its operations and products, aligned with the Paris Agreement. It has significantly reduced methane emissions and completed zero routine flaring across its U.S. oil and gas operations.

Occidental is leading in carbon management, progressing on the construction of the STRATOS DAC facility, the first commercial-scale DAC plant in the Permian Basin. Occidental’s strategic investments in net-zero or low-carbon technologies, including in companies like Carbon Engineering and NET Power, highlight its commitment to fostering innovation in carbon management and supporting the transition to a low-carbon economy.


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