Comprehensive Energy Data Intelligence

Information About Energy Companies, Their Assets, Market Deals, Industry Documents and More...

All-in: Chevron Invests $3 Billion in Alternative Fuels

With the purchase of Renewable Energy Group Inc. for $3.15 billion, Chevron makes its largest investment in alternative fuels.

In a statement on Feb. 28, the second-largest U.S. oil and gas company said it would pay $61.5 for each share of Renewable Energy, higher than its February 25 closing price by nearly 40%. In premarket trading, renewable energy shares rose more than 37% on the backdrop of this staunch.

This turn in investments highlights the shift in the world’s attitude toward climate change. Since oil companies contribute heavily to global emissions, governments and investors are increasingly urging them to reduce their carbon footprints and join the fight against emissions.

As state and federal subsidies to decarbonize fuels increase, U.S. refineries have likewise increased the production of renewable diesel.

In line with this, by 2050, Chevron aims to cut gas emissions to zero and in September committed to investing $10 billion to reduce its carbon emissions through 2028, with about $3 billion dedicated to renewable fuels.

In the biofuel industry, agricultural waste and traditional food crops are grown specifically for use as fuel. The feedstock for biodiesel and renewable diesel is similar, however renewable diesel goes through a separate refining process so that its chemical composition is the same as ultra-low-sulfur diesel.

At the moment, various markets are being explored by Chevron as potential sources for blending biodiesel into renewable diesel.

The executive vice president of downstream products and chemicals, Mark Nelson, believes that biodiesel is viewed by business people as a blendstock to achieve optimal margins since it is less expensive than renewable diesel.

As a result, the EIA estimates that renewable diesel capacity in the U.S. may grow more than fivefold by 2024, from a current capacity of 1 billion gallons to over 5 billion gallons.

It is intended that this deal will accelerate Chevron's goal of increasing the production of renewable fuels to 100,000 barrels/day by 2030, and it will provide additional feedstock supplies and pre-treatment facilities.

According to Reuters, Chevron is not likely to break out its renewables business' financials separately immediately. But the possibility of such an outcome will grow with each year.

After the start-up of Renewable Energy Group's Geismar expansion plant in Louisiana, the transaction is expected to add earnings to Chevron in its first year and cash flow to its free cash flow. While the deal itself is expected to close in the second half of the year.

Guggenheim Securities advised Renewable Energy on the deal, while Goldman Sachs provided financial advice to Chevron.

And if you are interested in learning more about greenhouse gas emissions, and how various companies and initiatives try to combat them across the U.S., please contact our Houston sales office or SCHEDULE A DEMO to see our energy data for yourself.

Tel. +1 713-203-3128

Email: treitmeier@hartenergy.com

FREE TRIAL

$1B Deal: Williams Buys Out Houston-based Midstream in Haynesville Basin

By purchasing the gathering and processing assets of Trace Midstream, Williams' existing footprint gains expanded capacity in one of the nation's largest growth basins, bringing its Haynesville gathering capacity to over 4 Bcf/d — increasing more than 200% from 1.8 Bcf/d. The deal also includes a long-term commitment from Trace and Quantum to support Williams' Louisiana Energy Gateway project (LEG), which is aimed to deliver responsibly sourced Haynesville’s naturalgas to markets along the Texas and Louisiana GulfCoast

And Petro-Hunt E&P is the new sheriff in town with 21,430 net acres of leasehold in the Basin, production of which surpasses 7,000 bbl/d and 100 MMcf/d respectively. To take advantage of it, Petro-Hunt plans to begin an active development drilling program on these assets in the coming months heavily upgrading the numbers of its 775 operating oil wells and contributing to over 8,100 non-operated wells. Time will tell, however, whether or not this move will be able to deliver such results.

Shareholder’s payout target was increased by 50% after the largest U.S. independent oil producer surpassed Wall Street’s earnings estimates on growing energy prices, said Houston-based Conoco Phillips Co. on Aug. 4. Due to Western sanctions on major producer Russia throttling energy supply amid a rebound in demand from pandemic lows, oil and gas #prices have soared. Crude has been trading more than 25% higher since the start of the year and results also benefited from high natural gas prices. Meanwhile, shares were down a fraction, to $91.03, in early trading but are up about 26% year to date. Conoco Phillips stated, that the average price obtained for a barrel of oil and gas accelerated 77% from a year earlier to $88.57. The company acknowledges that it has not hedged any of its oil and gas sales to make the most of higher market prices. The capacity of 1.69 million boe/d was in line with Wall Street estimates, however, the company expected the current quarter’s output would be between 1.71 million and 1.76 million boe/d.

California oil joint venture, Aera Energy, of Exxon Mobil Corp. and ShellPlc is being sold to German asset manager IKAV, according to the agreement of Sept. 1. Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed. Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors. Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d. Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system. The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.

The completion of the merger between Centennial Resource Development Inc. and Colgate Energy Partners II LLC happened on Sept. 1, sealing the debut of Permian Resources Corp., which is considered the largest pure-play E&P company in the Delaware Basin. Permian Resources’ idea was to combine two successful E&P companies, creating a better, stronger, and more strategically compelling company. Centennial and Colgate announced an agreement to merge in May, denying rumors that Colgate, a privately held independent Midland-based company, had been seeking an IPO. The merger estimated Colgate at about $3.9 billion and consists of 269.3 million shares of Centennial stock, $525 million of cash, and the assumption of approximately $1.4 billion of Colgate’s outstanding net debt. Permian Resources, being the combined company, has a deep inventory of “high-quality” drilling locations on around 180,000 net acres the companies anticipate will provide more than $1 billion of free cash flow in 2023 at current strip prices, in accordance with the company release on Sept. 1.

2022 blog posts