Exxon Mobil Corporation (XOM - Free Report) intends to use renewable energy to support operations in Texas.
Denmark’s Orsted A/S will supply 500 megawatt (MW) of wind and solar power to ExxonMobil under a 12-year agreement. The tenure marks the largest ever renewable power contract inked by an oil company. The contracted power is enough to supply about 400,000 average U.S. homes.
Beginning in 2020, ExxonMobil will purchase 250 MW of solar and 250 MW of wind power from farms in Permian. The Sage Draw wind farm, which is expected to be complete by early 2020 by Orsted’s Lincoln Clean Energy, will supply wind power. Solar power will be sourced from Permian Solar farm, which is scheduled for completion in the second quarter of 2021.
In August 2018, ExxonMobil was reportedly seeking renewable energy under long-term contracts from a group of potential developers. However, the company was accused by investors of downplaying the risks of global warming. In view of these allegations, ExxonMobil is making a conscious effort to switch to clean energy as it will become cheap and compete with fossil fuels.
As the energy companies are transforming into renewable sources of energy to reduce carbon emissions, the need for wind and solar farms is escalating. The farms are being built in a region where electricity demand is rising on the back of growing oil production. While production in the Permian is soaring, the takeaway capacity is not increasing in proportion. The infrastructural bottlenecks in the lucrative Permian shale play are concerns. Due to pipeline capacity, constraints producers have to sell products at a discounted rate.
Delaware Basin, a part of the Permian Basin, consumed an equivalent of 350 megawatts in summer 2018, which is three times the consumption from 2015 levels. This amount has the capability to power about 280,000 U.S. homes. The demand is expected to increase by three folds again by 2022.
Zacks Rank & Other Key Picks
Currently, ExxonMobil carries a Zacks Rank #3 (Hold).
A few better-ranked players in the same sector are Eni SpA (E - Free Report) , Enterprise Products Partners L.P. (EPD - Free Report) and SunCoke Energy, Inc (SXC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Rome-based Eni is among the leading integrated energy players in the world. The company delivered an average positive earnings surprise of 16.7% in the last four quarters.
Headquartered in Houston, TX, Enterprise Products Partners is among the leading midstream energy players in North America. It pulled off an average positive earnings surprise of 9.3% in the last four quarters.
SunCoke acquires, owns and operates the coke making and coal mining operations. The company delivered an average positive earnings surprise of 302.6% in the last four quarters.
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