This photo depicts a TradingView stock market chart of Occidental Petroleum Corporation… [+] Displayed on a smartphone with the logo in the background. (Photo illustration by Igor Golovaniov/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
Some really smart people are taking a keen interest in clean energy. This is what investors should do now.
Bill Gates made headlines last week when he called tree planting a foolish response to climate change. These days, Microsoft MSFT founders are completely working on decarbonization.
Investors should buy Occidental Petroleum OXY (OXY).
Elon Musk appeared on the Joe Rogan podcast last year with an important message. The CEO of Tesla (TSLA) is passionate about climate change. They also have a long history of wealth creation and managing projects that are good for the planet. Decarbonization, the process of removing carbon from the atmosphere, achieves both.
Musk said that humans are currently playing a crazy game with the environment. We are extracting large amounts of carbon buried underground and releasing it into the atmosphere and oceans. Musk called this process the stupidest experiment in human history.
They hope to mitigate the impacts of this process with the XPrize, a $100 million fund to find viable decarbonization projects.
Bill Gates also understands that the defenders must stand on their own merit, or perish.
Bill Gates told new York Times
In September the NYT said it was working with small decarbonization companies to make carbon capture, utilization and storage commercially viable.
CCUS strategies are not currently profitable because converting carbon in the atmosphere into a solid state that can be safely buried underground is energy intensive and expensive.
Climeworks AG operates a CCUS facility near Reykjavik, Iceland. Named Orca for the Icelandic word for energy, the facility looks like a giant vacuum. Giant fans pull contaminated sour gas from the Icelandic sky to wash it with geothermal fluids from the Hellishidi Power Plant, according to a UNESCO report.
When fully functional, Orca will pull 4,000 tons of CO2 from the atmosphere. It helps that the plant is operated using cheap energy supplied by a nearby geothermal power plant.
Occidental Petroleum is known for its petrochemicals and oil and gas exploitation businesses. However, the Houston, Texas-based company became involved in carbon management 40 years ago when it became clear that the oil and gas industry was going to change dramatically as the world went greener.
CCUS is considered a development of large oil and gas companies. Companies spent generations extracting carbon from the ground, and now they are in the best position to remove that pollutant from the atmosphere.
Occidental has two major CCUS projects in the works. A Colorado facility will extract 725,000 tons of CO2 when it comes fully online. A project in West Texas plans to recover 700,000 tons, according to a report by U.S. News and World Report
The scale of these projects undoubtedly caught the attention of Warren Buffett, another billionaire investor. Berkshire Hathaway BRK.B, their investment holding company, is the largest Occidental Petroleum shareholder with 222 million shares, or 24.9% of the company.
Buffett may see changing appetite for clean energy projects… Republicans and Democrats in Washington are uniting to embrace decarbonization. This is a “when pigs fly” moment that serious investors should understand. These businesses can be made viable by government incentives and loans.
At a share price of $62.89, Occidental Petroleum trades at 12.5 times forward earnings and 1.7 times sales. Shares could easily trade at $76 over the next 18 months, a 20.8% gain from current levels.
Long-term investors can buy the stock up to $64.
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