Energy Transition Trackers Commentary October 2024

Q3 2024 Summary

Through Q3, the oil & gas industry, as a whole, remained focused on financial discipline, with companies returning capital to shareholders via dividends and buybacks while investing largely in their core operations. M&A remains robust, driven by the need for operational efficiencies and scale. This consolidation is not without risk, as it raises concerns about stranded assets as the world transitions away from fossil fuels.

Energy Transition Intelligence Trackers

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Integrated Oil & Gas Tracker

The constituents of Integrated Leaders and Laggards portfolios remain unchanged in Q3, each comprising 9 companies.

The Leaders, including many large European companies such as BP, Shell and Total, have generally set the most ambitious emissions targets and have been more active investors in renewable energy, clean energy infrastructure, and carbon capture. The Integrated Laggards, including Canadian oil sands producers Suncor, Imperial Oil and Cenovus, have less ambitious targets, and their investments in the low carbon solutions lag their peers.

The Integrated Leaders portfolio continues to underperform the Integrated Laggards portfolio. The convergence seen over past quarters has dissipated with the gap widening in Q3.

Integrated Oil & Gas

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Integrated Leaders Recap

The Integrated Oil & Gas Leaders portfolio had year-to-date and quarterly results of +4.1% and -4.1%, respectively. Notable news from the Integrated

Notable Leaders news included:

  • BP announced a planned divestment of its U.S. onshore wind assets, which reflects a broader trend among oil majors to refocus on more scalable and profitable low-carbon opportunities, and follows on the heels of its Q1 decision to halt new offshore wind projects.
  • Chevron unveiled a breakthrough ultra-high-pressure drilling technology which could potentially unlock $5 billion of new oil reserves.
  • Shell announced plans to cut 20% of its oil & gas exploration workforce as part of CEO Wael Sawan’s cost-saving strategy.

Integrated Laggards Recap

The Integrated Oil & Gas Laggards portfolio had results of +8.0% and +2.0% for the same respective periods. Of note:

  • ExxonMobil said it sees 2050 global oil use at the current level.
  • Canadian oil sands producers pushed back against a proposed federal cap on oil & gas emissions.

Exploration & Production Tracker

There was one change to the E&P Tracker constituents in Q3 2024. Silverbow Resources in the Leader portfolio was acquired by Crescent Energy in the Laggard portfolio. Canadian Natural Resources was added as an E&P Leader.

Each portfolio has 18 constituents. E&P companies as a group tend to be lagging on transition activity relative to integrated companies, as most have not set ambitious emissions targets or made meaningful investments into renewable energy, though some have started to deploy carbon capture and storage (CCS).  The E&P Leaders portfolio tend to be companies whose reserves and production balances tilt more heavily toward natural gas.

The performance gap between leaders and laggards remains wide. All portfolios lagged the broad market’s results of +16.6% year-to-date and +5.5% for the third quarter, as measured by the iShares MSCI ACWI ETF. 

Exploration & Production​

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E&P Leaders Recap

The E&P Leaders portfolio produced +5.5% and -4.8% results for the year-to-date and quarterly periods, respectively. Notable news from both the E&P Leaders included:

  • Woodside Energy acquired Tellurian in a $900 million bet on growing LNG demand.
  • EQT closed its acquisition of Equitrans Midstream, which it formerly owned. The deal returns the Mountain Valley Pipeline to its original lead developer, and positions EQT to serve the growing energy demands of Virginia data centers.

E&P Laggards Recap

The E&P Laggards portfolio had results of -0.4% and -5.2% for the respective year-to-date and quarterly periods.