carbon capture and storage: a multi-trillion dollar industry in the making - carbon dioxide absorbent

by:Demi     2019-09-06
carbon capture and storage: a multi-trillion dollar industry in the making  -  carbon dioxide absorbent
The burning of fossil fuels has greatly improved the quality of human life.
The transformation of fossil carbon began in the 16 th century of Britain, where coal was used for heating due to lack of wood.
During the Industrial Revolution, as the country industrializes, demand for coal has increased, as coal has powered the heating needs of steel production, steam engines and the growing global population.
Since then, the development of fossil carbon has expanded to natural gas and oil, which together with coal have generated most of the electricity that has driven global economic growth for centuries.
Picture 1: they release water and carbon dioxide as fossil fuels burn, and historical fossil fuel consumption.
The following reaction shows the combustion of methane: methane 2O2 2H2 O co2.
At a lower concentration, carbon dioxide (CO2)
This is a harmless gas for most people.
In fact, carbon dioxide plays an important role on Earth as a greenhouse gas.
If there is no greenhouse gas, life may not exist on Earth, as the average temperature of the Earth will be close to 0 degrees Fahrenheit instead of the current 59 degrees Fahrenheit.
Greenhouse gases warm the Earth by keeping heat.
When solar radiation hits the Earth, about half of it passes through the atmosphere and hits the surface of the Earth.
The planet then absorbs and slowly radiates this heat into the atmosphere in the form of infrared rays.
While most of this infrared heat goes into space, part of it is absorbed by greenhouse gases in the atmosphere.
The gas then reallocates the heat into the atmosphere, causing the Earth to warm up.
Therefore, with the increase of greenhouse gas concentration, the ability of the atmosphere to absorb and re-radiate heat increases, resulting in a warming of the Earth.
I think the people who read this are familiar with the theory of global warming and the warming caused by burning fossil fuels.
Personally, I think the burning of fossil fuels is the driving force for the rise in CO2 concentration, and I think that is a serious problem.
The purpose of this paper, however, is not to convince readers whether carbon emissions are a problem, but to assess the investment opportunities that may arise from efforts to reduce atmospheric carbon dioxide concentrations to lower levels.
So I hope this article will be useful to all investors, regardless of what they think about global warming.
The industry I will try to evaluate is the capture and storage of carbon dioxide.
The industry is almost non-existent by most measures, so it is difficult to evaluate and even harder to invest.
Nevertheless, there are still some publicly traded companies in the general area of carbon capture and storage (CCS).
Unless carbon dioxide becomes an important raw material in certain industrial processes, the potential of the CCS industry is basically entirely dependent on the regime of the carbon tax.
Interestingly, including Equinor (EQNR), Exxon Mobil (XOM)
Royal Dutch Shell (RDS. A, RDS. B), BP (BP), Total (TOT), Chevron (CVX)
Western oil (OXY)
Publicly stated in one way or another, they support the theoretical carbon tax.
These statements should now be half-baked, as most of these companies do little to support the actual enactment of the carbon tax, and often continue to lobby against such legislation.
For me, however, the fact that these companies publicly support a carbon tax suggests that the fossil fuel industry expects a carbon tax to be part of the energy industry.
In addition, some European countries, as well as some provinces in Mexico, Chile, South Africa, Japan and Canada, have enacted or planned a carbon tax.
So, although there is no big guarantee
The scale of the carbon tax, the momentum seems to be conducive to this happening.
I estimate that the scale of the CCS industry is already between $29 trillion and $62 trillion, and if emissions continue to climb, there is a chance that the industry will grow significantly.
My estimate is based on the following factors :-11.
Increase atmospheric CO2 concentration by 8 gigabytes-
Atmospheric CO2 levels need to be reduced between 280 ppm and 350 ppm (
From the current 411 ppm)-
A $40 carbon dioxide tax per ton of carbon dioxide reader can change with changes in atmospheric concentrations and the value of carbon taxes, thus making its own estimate of the total addressable market.
Readers may also ask themselves why carbon capture and storage is necessary now that solar, wind and other renewable sources account for a growing share of global power generation.
And the growth of carbon
Free energy will undoubtedly reduce the production of carbon dioxide in the future, but there is nothing to do to reduce past carbon emissions.
In addition, despite the growing importance of renewable energy, the Energy Information Agency predicts that global fossil fuel consumption will continue to grow in at least the next decade.
Even if fossil fuel usage drops, they will still be consumed, even in the coming centuries.
In this regard, a 50% reduction from current consumption will still result in emissions reaching levels of 1960 and 1970.
Although my estimate of the total carbon capture and storage market is large, the current market is very small, so there are some limited investment options.
I will also qualify for investment options --
Regular investment
I don't see any significant catalyst for economic growth.
Still, I do expect the industry to grow in the end, and there are ways investors can relax the CCS market at the moment.
I have divided options into the following categories of publicly traded securities :-
Energy company-
Companies holding large amounts of land-
Industrial Company-
Carbon creditsI will stress that this is not an exhaustive list, and my analysis of each company is superficial.
However, I try to hit those either)
Has been involved in the CCS project, or B)
I believe that if the CCS industry takes off, it will be in a unique position to benefit.
Energy companies: almost all big energy companies may be surprised
The fossil fuel industry operates carbon capture and storage projects on a scale.
However, the separation and capture of carbon dioxide is the expertise the energy industry has honed over the years as a way to purify natural gas.
Most natural gas reserves are a mixture of methane, carbon dioxide and other gases.
Therefore, in order to provide high
To provide customers with high-quality natural gas, natural gas processing plant will not
Combustible or hazardous gases such as carbon dioxide or hydrogen sulfide.
This indirectly makes companies in the energy industry a leader in the CCS industry.
Of course, a heavy carbon tax could also threaten the entire fossil fuel industry.
Nevertheless, I still think that the energy sector is some of the best ways to reach the potential of the CCS industry.
Equinor: Equinor, formerly known as Statoil, is an undisputed leader in carbon capture and storage.
Equinor's CCS efforts began in the 1990 s when Norway imposed a tax of about $65 per ton of carbon dioxide.
One of Equinor's largest gas fields, Sleipner, has a carbon dioxide content of 9%.
Before the tax is imposed, Equinor will separate carbon dioxide from the natural gas extracted from Sleipner and discharge it into the atmosphere.
However, after the levy, Equinor began pumping the captured carbon dioxide into the Utsira formation, a saline aquifer located nearly 1 km metres under the sea floor of the North Sea to avoid the levy.
To date, Equinor has stored more than 16 million tons of carbon dioxide in the Utsira formation at a cost of about $19 per ton. The Sleipner-
The Utsira CCS project is by far the largest carbon capture and storage project.
Equinor plans to expand its CCS efforts by building a CO2 treatment and injection plant on the west coast of Norway.
Assuming the project continues to advance, the plant will receive tankers filled with compressed carbon dioxide, which will be treated and injected through pipelines into the continental shelf off the west coast of Norway.
Equinor's initial plan is to receive carbon dioxide from industrial sources on the east coast of Norway.
Equinor will be able to store CO2 at a cost lower than the carbon tax, thus generating profits for Equinor and bringing a smaller cost to the CO2 emitter.
As other neighbors have implemented or considered implementing a carbon dioxide tax, Equinor hopes the injection plant will eventually be able to handle the carbon dioxide generated by other countries in the region.
Equinor also took the lead in carrying out an activity called "Monstad carbon dioxide technology center (
Shell and Total are also partners).
The Center studied different carbon capture technologies in an industrial park.
While Equinor is the undisputed leader of CCS, basically all other oil giants, including Royal Dutch Shell, Exxon, BP, Total and Chevron, at least to some extent, investments have been made in CCS technologies and practices.
For the sake of brevity, I will introduce Shell and Exxon Mobile as they have particularly compelling knowledge in this area.
However, I encourage readers to visit the websites of Total, BP and Chevron to learn about the types of projects they are working on.
Royal Dutch Shell: Shell demonstrated its work in CCS in the Quest project in Alberta, Canada.
The Quest project is integrated into Shell's Scotford Upgrader, which converts oil sands asphalt from the Athabasca oil sands project into synthetic crude oil.
The treatment of the upgrade device leads to the generation of carbon dioxide, which is usually emitted into the atmosphere.
However, Shell installed the infrastructure at the Quest plant to capture and inject about 2 km of the carbon dioxide into the ground, which was prevented from rising to the surface due to geological reasons at the injection site.
The Quest plant captures and seals more than 1 million tons of carbon dioxide each year.
In addition, Shell, together with Chevron, plans to implement the largest CCS project in human history in the Gorgon gas field in Australia.
Although the project has not yet been launched, Shell and Chevron plan to eventually capture and store 100 million tons of carbon dioxide.
It is also worth remembering that Shell and Total are a few partners in Equinor's monststad CO2 Technology Center.
Shell also has a proprietary technology called "Cansolv.
Cansolv is an amine.
Basic technologies that can absorb and subsequently parse CO2 (
Temperature and pressure are used to switch between absorption and suction).
The technology is used in the border dam coal-fired power plant in the province of SA, where about 1 million tons of carbon dioxide are captured annually to increase oil recovery.
As far as I know, no company knows more about carbon dioxide than Exxon Mobile.
As early as the 1970 s, Exxon was working on global warming and developing technologies to control carbon dioxide emissions.
For good or bad, however, in the 1980 and 1990 s Exxon Mobile changed its strategy from supporting efforts to reducing carbon dioxide emissions to advocating a "wait-and-see" approach.
While it has been difficult to argue with Exxon oil's shareholder returns over the past 35 years, I do think that their approach to global warming and their scale is large, make them the target of climate change litigation.
I will not guess if any potential lawsuits are of value, but at the very least, I expect them to be a thorn in the eye of Exxon Mobile's legal department.
Exxon oil, however, employs and employs many of the best scientists in the world and has been working on CCS technology for years.
One of these technologies is called a controlled freezing zone (CFZ)
It offers a unique way to capture carbon.
The CFZ, originally invented in 1986, has now reached the point where Exxon thinks it "can be used commercially.
CFZ by freezing CO2 (
And other acidic gases such as hydrogen sulfide)
So these acidic gases become solid.
Under CFZ conditions, methane is still a gas, so natural gas entering the CFZ will appear in the form of sweet methane, while acid gases such as CO2 will precipitate out of the gas mixture.
Exxon oil has tested the technology at a natural gas processing plant in Shute Creek, Wyoming.
The advantage of CFZ is that it can effectively handle gases with high concentrations of CO2 (>20%).
At present, this is limited to natural gas processing plants, but it is easy to imagine how CFZ is used to capture carbon dioxide, fertilizer plants, cement plants in other enrichment sources such as refineries.
Western oil: above, in the Shell section, I mentioned that the carbon dioxide captured by Shell Cansolv technology is used to improve the recovery rate of oil (EOR).
Increasing oil production is a practice of injecting CO2 into aging oil fields to improve oil production and life span.
CO2 is achieved by increasing the pressure in the reservoir and mixing with the oil, which makes it easier for the oil to flow.
EOR is widely used in U. S. oil fields, especially in West Texas, where upstream operators cost up to $45 a tonne of carbon dioxide.
The EOR is a controversial way to store carbon because it will also cause more oil to be liberated from the already depleted reservoir.
If properly handled, however, carbon dioxide
EOR does lead to the storage of carbon dioxide in old oil fields.
Although Western oil is not a comprehensive oil giant, it can be said that it is the world's leader in increasing oil production, injecting nearly 1 trillion ft of carbon dioxide into their second stack of oil fields every year.
This makes OXY the largest CO2 injector in the basin and one of the largest in the world.
Occidental is also a pioneer of EOR because they have been practicing carbon dioxide-EOR since 1983.
Western expertise in carbon dioxide
EOR has paid huge dividends in terms of production, and as their CEO recently said, they are pulling up to 70% of their revenue
Put oil in their second stack of oil fields.
This is estimated with 6-
There have been 12% operations in the history of the second stack.
It is even more favorable than conventional fields with a normal production of 30%.
40% of the total oil can be extracted.
Western countries plan to use carbon dioxide
The oil fields it recently acquired in Oman increase oil production and will receive carbon dioxide from a nearby power plant.
Oxygen is also exploring technologies to get carbon dioxide directly from the air.
In terms of CCS, the ability to effectively capture CO2 directly from the air will give oxygen a huge advantage, because capturing CO2 from ambient air conditions must reduce atmospheric CO2 levels (
Capturing carbon dioxide at a point source (such as a power plant or refinery) will only prevent future emissions).
Obviously, OXY is a leader in the field of carbon dioxide capture and storage, and they seem to be committed to investing in ccs r & D and infrastructure.
Perhaps the most impressive thing about OXY's CCS efforts is that they are completely profitable for companies and should continue to do so even if a carbon tax has never been enacted. Image 2: CO2-
Three oil production diagramApache (APA)
And Cenovus Energy (CVE)
The other two E & P companies are worth mentioning in CCS.
The two companies worked with several other small companies and the Canadian government to carry out large-scale cooperation. scale CO2-
EOR/CCS project in Weyburn
Middale field in SA province
Apache has several other EOR projects, and I wouldn't be surprised to see them continue to grow their business in this regard, given their planting area in the US.
Schlumberger and Harry Burton: Schlumberger (SLB)
And Burton (HAL)
Provide interesting ways to play CCS.
Schlumberger said that they are involved in more than 80 CCS projects around the world, while Halliburton claims that they have more than 40 years of experience in CCS projects, mainly through CO2-EOR.
These are good ways to play with CO2 storage, as each is an expert in drawing, characterizing and monitoring the behavior of underground rock formations.
Based on what I 've seen from their web page, Schlumberger seems to have more experience in CCS projects, but both SLB and HAL seem to be interesting ways to play with the CCS industry.
Gold Morgan: Gold Morgan (KMI)
It is the largest CO2 transporter in North America, moving 1.
2 billion ft 3 carbon dioxide is emitted through the pipeline every day.
These pipelines deliver carbon dioxide to oil fields to increase oil production.
KMI uses some of these CO 2 for production in its own field and sells the rest of the CO 2 to other customers for EOR.
While Kinder Morgan seems to be an effective practitioner of carbon dioxide
It is foreseeable that their real advantage is their pipeline.
A source of carbon dioxide can be envisaged (
Such as power plant)
The natural gas is delivered to the regional KMI pipeline and then the CO2 is delivered to the oil field operator implementing the EOR.
Picture 3: goldmorgan CO 2 pipeline company holding a large amount of land: companies holding a large amount of land have the potential to benefit from CO2 storage.
There may be two forms of carbon dioxide storage on land: underground storage or forest storage.
For several reasons, underground storage is more likely to play a bigger role than forests.
First, there is more carbon stored underground than there is stored above ground.
Secondly, underground storage provides the option of storing carbon in a saline reservoir, which prevents carbon from easily re-entering the atmosphere.
The risk of carbon re-entering the atmosphere is a risk for companies that own timber land, as forest fires on their land may require the confiscation of carbon credits (
Or pay carbon tax).
In addition, if a company that grows a forest wants to get a carbon credit, they may have to prove that the wood harvested from the woodland is not burning.
Although most of the wood flows to infrastructure (e. g.
Houses, buildings, furniture, etc. )
, It is difficult to verify how long the infrastructure is maintained.
One potential scenario is that companies with woodlands can accumulate carbon credits and one day they need to replace them --
For example, 100 after a tree is harvested.
Therefore, while the company will need to earn more credit or repay them one day due to the large time span, assuming that the discount rate is positive, this may be beneficial to the company.
A threat to this model is that if the price of carbon credit rises faster than the return from cash flow, although forestry companies can always get more credit by planting and harvesting more trees
Texas Pacific Land Trust (Texas Pacific Land Trust)TPL)
Not the same as any other company I met.
TPL was established in 1888 due to the bankruptcy of the Texas Pacific Railway Company. TPL is a self-
Clearing the trust, which means that it sold the land that was once designated for the railway and used the proceeds to recover the shares.
Currently, TPL owns about 900,000 acres of the company's original 3 million acres.
Although it has fallen 40% since reaching its peak in early October, the stock has recovered more than 17,600% in the past 40 years and more than 2,200% in the past 10 years.
Poor performance is mainly due to royalties obtained by TPL from energy companies drilling oil and gas on TPL land, most of which are located in the Permian Basin.
In addition, TPL recently started sourcing and processing water for energy companies, adding another dimension to their business.
Image 4: Pacific Land Trust area, Texas (
Note: The red dot indicates that TPL holds land;
About 270 acres of land were omitted from this map, and TPL sold the land but retained mine rights)
TPL has a very simple corporate structure, and since most of their revenue comes from royalties, the company has some of the highest profits and returns I have encountered as an investor: Figure 5: from the perspective of carbon capture and storage, Texas can play an important role in storing carbon.
The most obvious starting point is carbon dioxide.
On the land of TPL
In addition, if the price of carbon dioxide in the future is high enough, more carbon dioxide can be injected into these reservoirs (
Due to the high cost of carbon dioxide, most EOR operators use the minimum amount of carbon dioxide needed to pump more oil out of the ground).
Another potential option for third-party logistics is to store carbon dioxide in a saline reservoir that appears to be located under third-party logistics land.
The saline aquifer provides a particularly compelling storage option because the CO2 injected into it is converted into carbonated acid.
Unlike CO2, carbonated water does not float, which means that if there are small pores in the aquifer lining, it is likely that almost no CO2 will be discharged from storage.
Although the saline aquifer may play an increasing role in the water supply in Texas (
Some of El Paso's water supply depends on the saline aquifer)
Salt water storage layer is usually considered right
Ideal source of drinking water to make them a good sink of carbon dioxide
Figure 6: saline reservoir (
Mustard shade donation)
Weyerhaeuser in West Texas: Weyerhaeuser has more than 13 million acres of land in the United States (WY)
Is one of the largest landowners in the United States.
As mentioned at the beginning of this section, timber companies like Weyerhaeuser have several ways to manage their land and products, resulting in carbon credits.
In addition, Weyerhaeuser has more than 1,000 oil and gas production wells, and the company seems to have an area in the salt water layer.
Therefore, it seems that Weyerhaeuser may benefit from storing carbon in the ground through CO2
Increase oil production, inject carbon dioxide into old oil fields, and inject carbon dioxide into salt water layers
This is of course in addition to the carbon that can be stored on the ground as a forest/wood product.
Picture 7: Weyerhaeuser land holdings, United States (top);
Salt water layer in the United States (bottom)
Other listed companies holding large amounts of land include Gladstone Land (LAND), Limoneira (LMNR), and Cadiz (CDZI).
While one day these companies may make a profit from CCS, I feel that the Texas Pacific Land Trust and Weyerhaeuser are better bets.
However, it is worth considering that Gladstone, limonella and Sri Lanka all have California land, and limonella and gales hold a particularly large amount of land.
If California is ahead of the U. S. carbon credit/taxes, these companies may be in a profitable position.
Industrial companies: while several oil and gas giants, including Exxon and Shell, have developed patented technologies that can be used to capture and store carbon, some industrial companies produce equipment currently used for CCS projects.
This section is relatively short, so instead of going through each company alone, I subdivide this section into two main parts, gas separation and flow.
Here I would like to emphasize that I have chosen only a small number of industrial companies that I believe can benefit from the CCS project.
This is not an exhaustive list, but a way to understand companies and devices that may become important in space.
Finally, I would comment that, despite my best efforts, I could not find a listed company that produces CO2 sensors.
These will be an important part of any storage project, so if the reader is aware of a listed company that produces these sensors, feel free to share this information in the comments section.
Gas Separation: Honeywell (HON; Selexol)
Eastman chemistry (EMN; AdapT 100), and BASF (OTCQX:BASFY; OASE)
Can be used for CO2 after all manufacturing solvents
Combustion airflow.
This technology can be used for high concentration point source emissions of carbon dioxide such as power plants, refineries, cement plants.
I don't judge which of these products is the best expertise, but every company seems to profit from their respective technologies, so any competitive advantage may depend on the project and source of CO 2
Process: for CCS projects, all equipment required for natural gas flow will also be used for CO2 movement and storage.
Companies that sell pumps, such as Flowserve (FLS)
Flow control companies like Emerson Electric will be the obvious beneficiaries (EMR).
Flow measurement companies, such as badger meters (BMI)
Will also benefit. Linde (LIN)
It is a particularly compelling choice in this field.
They have expertise in capturing carbon in gas fields and point light sources, as well as technology to clean up fuel before burning, so that it will be easier to capture carbon dioxide after burningcombustion.
However, a large part of their technology applies to clean coal plants.
Clean coal may work in some parts of the world, but as far as I know, the cost of clean coal plants is too high to compete on a large scale with natural gas.
So while Linde does have expertise in many areas in the CCS industry, I am concerned that their expertise will be offset by their heavy burden on coal.
Carbon credit: iPath global carbon credit ETN: The most direct way to buy iPath global carbon credit ETN (OTC:GRN).
GRN trading carbon credits supported by issuer debt (
Therefore, ETN or exchange trading notes).
Although it's basically a pure game in the CCS industry, I don't like GRN as an investment.
First of all, I think there are too many risks involved in pure gaming in the CCS industry.
If the industry does not grow as expected, then all the companies listed in this report will still do well.
That's not what GRN can say.
Secondly, GRN is very unstable.
GRN is currently trading at $29 and between $4. 09 and $37.
In the past two years (
Although it is fair to say that it has returned nearly £ 600% over the past few years, so high risk can bring high returns).
Finally, GRN does not generate any cash flow.
In this way, it is similar to gold, oil, or any other commodity.
As far as I know, GRN means trading, not investing.
Given its relationship with the CCS industry, I feel it is necessary to include it in this report, although I do not recommend that investors invest money.
So far, the emerging CCS industry has been dominated by the fossil fuel industry, and I expect this to happen in the foreseeable future.
Given the popularity of fossil fuel stocks, the most feasible proposal at present may be to consider holding shares in energy companies that have shown leadership in CCS.
With this in mind, my first choice for investing in CCS is Equinor, western oil, and Texas Pacific Land Trust.
As far as I know Equinor is the best way to play CCS.
They are undisputed leaders in the field, and since the 1990 s they have separated carbon from the Sleipner gas field and stored it in the Utsira formation.
Although it was cut very short, Equinor also stored carbon in the underground rock formations at the Salah gas field in Algeria.
Equinor also seems to have been researching, developing and testing a variety of new technologies at their monstaad CO2 Technology Center.
In addition, Equinor appears to be continuing its efforts to build a carbon dioxide receiving and injection plant on the west coast of Norway, which may develop into a regional center for carbon isolation.
In addition, while Equinor is most important to fossil fuel companies, they have invested heavily in green energy technology and infrastructure projects, including wind energy, solar energy and storage.
Figure 8: The proposed Equinor carbon storage facility is currently trading at a reasonable valuation with a forward PE of 11.
1 and output 4.
1%, income is easily covered (
Payment rate 44%)-
Although it is worth noting that the payment ratio is variable and was lowered after the oil price fell a few years ago. Equinor's $24.
2 billion of the debt is manageable for companies of its size ($75. 4 billion)
They hold more than $10 billion in cash and cash equivalents.
Their financial stability is reflected in their current ratio of 1.
36, and their 5-
Beta, located at 0. 91.
Several risks of investing in Equinor include oil and gas prices, a majority stake in Equinor by the Norwegian government, and currency fluctuations for investors outside Norway.
Western oil companies offer another great way to develop the CCS industry.
Their expertise in carbon dioxide
EOR provides direct benefits for their upstream production, which constitutes the largest share of OXY's profits.
When they continue to use carbon dioxide
Expertise, production and profit margins of EOR should continue to grow.
For a long time, they will put themselves in an increasingly powerful position if a large
The scale of the carbon tax.
From the perspective of E & P, Westerners look good because they have a major planting area in the second stack (
Their global planting area also looks promising)
Generate good return on investment and return on net assets, have manageable debt and easily pay their debt. 8% dividend (
Payment Rate 61%).
In addition, the forward PE at 12.
6. The stock price is not expensive.
The size of OXY is another reason to like stocks
The market value is $49.
2 billion, they are large enough to gain the benefits of being a major participant in the energy sector, but where efficient production growth is a challenge, it is not large in scale.
As a major upstream company, Western companies are more vulnerable to fluctuations in oil and gas prices than more integrated energy companies, making OXY a more risky stock than oil giants.
Related to this, given that oil prices fell sharply in the quarter, analysts may reduce OXY's forecast earnings, so it is not surprising to see stocks under pressure in the short term, especially considering the recent decline in the market.
The top three are the Texas Pacific Land Trust.
TPL brings a unique set of assets because most of the area of TPL is on oil
The second stack basin and/or the carrying land located above the salt water storage layer.
This will enable the location of third-party logistics to store CO2 fields from CO2-
Or simply inject CO2 into the old oil layer.
The brine layer provides another sink for CO2, reducing the risk of the injected CO2 returning to the atmosphere.
However, I will not find CO2 by stating-
The EOR has been implemented on the TPL area and I am also unable to confirm that the TPL has the right to mine the brine reservoir. However, CO2-
The EOR is a very common practice in the second stack basin, where the water business source of the TPL is brine, and therefore, I think the reasonable assumption is that, it is possible for TPL to store carbon dioxide in old oil fields and brine reservoirs.
In addition to the ability to store carbon, TPL is a compelling inventory.
Assuming that the Permian Basin is produced as predicted, the TPL is the primary location to collect royalties from the oil and gas produced on their land and from the pipeline through their land
None of them raised their fingers.
This explains the huge profits of TPL and their super-high returns in terms of investment and capital.
Their nascent water business requires capital investment, but I expect these investments to pay off well because upstream operators are easiest to get water or dispose of water near the rig.
The infrastructure and energy costs of mobile water are high, so the operator's ability to do so on TPL land seems to be a win-win
Both sides won.
The earnings estimate is hard to get for the TPL, but the stock seems to be trading in a forward PE of around 22 (
Assuming $25 per share in fiscal 2018).
The output of TPL is only a very small 0.
7% although it is important to remember this as a self
Clearing the trust, TPL basically uses all the excess cash for stock repurchase.
Still, I expect the dividend to increase.
The financial position of the TPL is also good because they have no debt and hold about $100 million in cash.
In the short term, I am pleased to see how TPL has developed its water business and what growth has been made in TPL's pipeline easement income as the infrastructure has been built in the second stack.
The risks faced by TPL include the price of oil and gas, the amount of oil and gas that is ultimately produced on its property, and the number of pipelines that are ultimately built through its land.
The last two points depend not only on the fossil fuels below their land, but also on the financial status of the companies contracted to mine those fuels.
In connection with this, the compensation that third party logistics can negotiate from upstream operators and pipeline companies is another risk.
For reference, TPL received a production fee of 1/128 on approximately 85,000 acres and a production fee of 1/16 on approximately 374,000 acres.
For the TPL, the last risk I would mention is the rapid appreciation of the stock price.
While I still believe the stock has a higher operating space, it is clear that the stock is no longer a gem that was never discovered ten years ago.
So, given how much it has returned, the margin of safety is low.
I still think the TPL made a compelling investment at the current price ($536)
Although considering the bond market's suggestion that the recession will break out in the near medium term, it is better not to go all out on any stocks, especially those like TPL, this depends largely on energy prices and the health of the global economy.
While Equinor, Western oil and Texas Pacific Land Trust are my top three options, several other companies stand out from me in terms of CCS.
Specifically, Royal Dutch Shell, Exxon oil, Linde, and Weyerhaeuser seem to have a competitive advantage to some extent.
Finally, I will stress again that this article is trying to address the potential CCS industry rather than the specific companies.
So most of my company analysis is superficial and focuses on the prospects of each company in CCS, not on their normal business operations.
Please do your due diligence before making any investment decisions.
Thank you for reading and good luck with your investment.
Disclosure: I am/We are long TPL of LMNR.
This article was written by myself and expressed my views.
I received no compensation (
In addition to Seeking Alpha).
I have no business relationship with any stock company mentioned in this article.
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