How to Strike It Big in the New Energy Boom

February 21st, 2012

By GREGORY ZUCKERMAN
The Wall Street Journal

First there was the tech boom. Then the housing bubble.

Now, new profits and investment opportunities are emerging from the surge in U.S. gas and oil production. Innovations in drilling techniques—such as hydraulic fracturing, or fracking, and horizontal drilling—have made it easier to extract oil and natural gas from shale and other rock formations. That has boosted production and led to billions of dollars of profits for some early pioneers and investors.

“America stands on the verge of a major change that puts it on a course to near self-sufficiency” in energy, says Tobias Levkovich, Citigroup’s chief U.S. equity strategist, who says the energy surge is a key reason to be upbeat on the market and U.S. economy.

“The implications are simply stunning on America’s current account figures, trade balances and even potentially the positioning [and cost] of U.S. military forces around the world,” he says. “The increase in production of shale gas could also add millions of new jobs.”

Investors are eager for an energy boost in a market that has only very recently shown some strength. The broad Standard & Poor’s 500-stock index is up more than 6% so far in 2012, after ending 2011 pretty much where it began. The S&P Energy Index is up 4.25% this year.

Much as in previous booms, however, investors risk jumping in after some of the best gains have been reaped. Indeed, the energy patch can be a tricky place to invest. Surging gas production has been a boon to consumers and companies that use natural gas for heating or to make various products. But all that added supply, along with an unusually warm winter, have sent gas prices down nearly 50% in the past year.

That drop has pressured companies like Chesapeake Energy, the second-largest natural-gas producer, which has seen its stock price fall by more than a quarter in the past year, even as it meets success extracting more gas through new techniques. Cabot Oil & Gas was the top-performing stock in the S&P 500 last year, with a gain of 100%. But so far this year, the stock has dropped about 15%, another sign of the challenges for investors playing this new wave.

It’s also true that environmental scrutiny of this drilling is on the rise. And shale extraction is relatively new, so there remains uncertainty about how long wells will produce.

Natural-gas prices may rebound from current low levels, at least over the long term, as more uses are found for this low-cost energy. But for now, analysts recommend that investors focus on companies seeing growing oil production from innovative drilling methods, rather than those sticking with gas. Two larger independent drillers that some investors recommend: EOG Resources and Continental Resources.

Other attractive stocks: Chemical companies and others benefiting from tumbling natural-gas prices. Analysts recommend companies including CF Industries Holdings and LyondellBasell Industries.

As recently as 2005, few held out much hope for any boom in U.S. energy production. Most experts said producers would see a gradual slowdown of domestic oil and gas production, and billions of dollars were invested in ways to import natural gas from abroad.

But in just the last few years, the new drilling techniques have created a new gusher. Among the innovations: drilling down in the ground and turning horizontally to capture more of the gas and oil trapped in underground shale deposits, and using a mix of water, sand and chemicals to break apart porous rock and release oil and gas.

The new drilling methods are “a completely disruptive technology” allowing companies to double and triple growth in energy production in just a few years, says Dan Rice, manager of the BlackRock Energy & Resources Fund .

Some of the most attractive companies are those that have been able to shift from natural-gas exploration to oil extraction. As recently as 2006, EOG saw 79% of its revenues come from natural gas, and just 21% from so-called liquids, which include crude oil. But the company became worried about future oversupply of natural gas and began to focus on oil. This year, EOG says, it expects to see about 75% of revenues come from liquids, and just 25% from natural gas.

Mr. Rice says shares of both EOG and Continental, which has become a major driller for oil in areas like North Dakota, are inexpensive.

He also is a fan of Range Resources and EQT, companies active in the booming Marcellus Shale region, which ranges through states including New York and West Virginia. Others recommend smaller energy producers, such as Houston-based Oasis Petroleum which could be takeover targets.

Some analysts are most excited about chemical companies like CF Industries. Nitrogen production accounts for about 80% of the company’s sales, according to analysts at Citigroup. And natural gas accounts for about 85% of the cash production costs for CF’s nitrogen production, the analysts said, a reason for optimism on the company.

Dow Chemical, meanwhile, is benefiting from falling natural-gas prices because it lowers the price for ethane, “a key material” for Dow’s ethylene production, the Citigroup analysts say.

A riskier stock with potential upside: Cheniere Energy , which once aimed to be a big importer of natural gas. A glut of U.S. gas forced the company to scrap those plans, but it now is hoping to be the nation’s first exporter of liquefied natural gas.

As natural gas drops, and consumers and power companies depending on natural gas benefit, the chemical industry will as well, Citigroup says, because “the chemical industry consumes about 10% of natural gas” in the U.S.

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GE Invests in High-Tech Green Building Outfit

September 19th, 2011

General Electric is making a foray into green buildings by investing in Project Frog, which uses various technologies to speed up new building design and construction.

GE Energy Financial Services will be one of four companies to invest $22 million in Project Frog, GE said today. The other three are venture capital companies: Claremont Creek Ventures, Greener Capital Partners, and RockPort Capital Partners.

The money will be used to expand Project Frog’s sales, and GE will install one of the company’s prefabricated buildings at the GE Learning Center in Ossining, N.Y.

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New Green Careers Grow as Sustainability is a Critical Business Goal

July 14th, 2011

Jobs opportunities may seem slim, but positions tied to sustainability are on the rise. Companies are creating job titles such as chief sustainability executive or VP of earth stewardship. These new roles have responsibilities that include: finding better ways to protect the planet, save energy, minimize the carbon foot-print, maintaining an environmentally friendly work place and overseeing their sustainability efforts and communications with an annual green report.

The number of online job postings containing the keyword ‘sustainability’ quadrupled, which aggregates online job postings.

What new positions is your company adding that contain sustainable keywords? If so, we’d love to know.

Need a good reference for eco-employment? Check out: Greenjobs, a guide to eco friendly employment.

Read more about the sustainability job market as covered in the Wall Street Journal, click here.

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Part Two of Mahmood Sabahi’s Interview

November 13th, 2010

Meet the EarthWise Team is a series of inspirational and often untold stories about the people behind important solutions, technologies and products that make our lives better and safer every day.

The series presents some of the key scientists and business professionals who have contributed to the development, progress and implementation of the green chemistry products, processes and principles ofAlbemarle and the Earthwise Initiative.

According to Mahmood Sabahi, green metrics represent the next phase of green chemistry.

Please explain green metrics.
Through the American Chemical Society’s Manufacturers Roundtable, and its Green Institute, as well as the American National Standards Institute, I have been participating in and following the discussions of green metrics with great interest.

These groups are developing ways that companies, and, by extension, their customers and ultimately consumers, can measure their “green-ness.” Developing the standards for green metrics is a complex issue that started in the pharmaceutical industry and now is generating more interest in the chemical industry. One goal is to earn a green label for consumer products; the cleaning products industry is already involved in this process.

At Albemarle, we’ve generated interest in green metrics through the TEAL program (Technology Emphasis on Albemarle’s Green Chemistry). As a leader of the TEAL program, I work with my colleagues to promote the principles of green chemistry and engineering, raising awareness of R&D and manufacturing, implementing green metrics for evaluation of manufacturing processes and developing new and safer products and processes, identifying opportunities for greener process and products, identifying and recognizing green process/ product accomplishments, and conducting life cycle inventory analysis (LCI) wherever applicable. Internally, we evaluate our manufacturing practices with the goal of improving atom efficiencies, reducing waste, reducing our carbon footprint, and utilizing renewable resources wherever possible. Plus, each year, the TEAL team evaluates Albemarle employees’ accomplishments in green chemistry/engineering and the best practices are recognized formally by the management as a way to highlight the development of newer and more eco-friendly products. We also arrange seminars and educational programs and help implement the principles of green chemistry and green engineering throughout the research area. At the individual level and among the various teams groups, we have a tremendously positive response as more people see these initiatives as “doing the right thing.” Across the chemical industry, I anticipate similar initiatives will be rolled out.

I am a firm believer that the industry and the EPA must work hand in hand to create changes in environmental awareness among manufacturers. If regulation is imposed from above without extensive discussion among industry participants, it will not happen with the same degree of success as when market participants are involved in the process from the bottom-up. As green metrics become more embedded into the thought, strategy, research and production of the chemical industry and across many sectors, we all stand to benefit.

How would you characterize the other scientists with whom you work?
One of the most rewarding aspects of my professional work at Albemarle is communicating and working in a team environment with a large group of very talented and smart people. I especially value their rather diverse technical and cultural backgrounds. Although the original light bulb or idea usually shows up in one person’s head, bringing that idea to life and pushing it through to commercialization is only possible through collaboration and teamwork. It really takes a village to commercialize a product, as we have seen with GreenArmor! I have been fortunate to be involved with many very successful teams over my career.

Mahmood Sabahi, thank you for sharing these developments regarding green metrics.

Want to meet more of the Earthwise Team? Meet Joe LaymanDanielle Goossens and Richard Denison.

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Albemarle Achieves Record Quarterly Earnings

October 25th, 2010

Third quarter 2010 highlights:

  • Achieved record quarterly earnings of $1.02 per share, up nearly 80 percent over third quarter 2009 results.
  • Net sales increased 14 percent from prior year’s quarter to $585 million.
  • Outstanding operating performance with strong year-over-year profit growth across all three segments, including record segment income for Polymer Solutions and Catalysts for the third consecutive quarter.
  • Strong cash generation leading to cash and cash equivalents of $425 million at quarter end.
  • Achieved record EBITDA performance of $151 million and record EBITDA margin of 25.8 percent.

You can learn more details at the Albemarle site.

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Louisiana Governor Jindal Cites Albemarle as Top Economic Development Winner

September 2nd, 2010

ST. FRANCISVILLE – Governor Bobby Jindal’s 2010 parish tour – “Building a Better LA for Our Children” – stopped in West Feliciana Parish today where he addressed the St. Francisville Chamber of Commerce. The Governor’s tour will stop in every parish to highlight the significant progress his administration has made to create a New Louisiana that is the best place in the world to raise a family, get a great education and pursue a rewarding career. The Governor cited the BP oil spill, the President’s deepwater drilling moratorium and the national economic downturn as challenges for the state, but he emphasized that these challenges will not get in the way of building a better Louisiana because the people of Louisiana will persevere and overcome these obstacles. Read full story.

As part of the story, the Governor announced nearly 30 economic development wins that will create thousands of new jobs and retain thousands more. Below are some examples:

  • TraceSecurity, a Baton Rouge-based high-tech firm, announced earlier this year that it will relocate two of its key operating divisions, software development and national sales, from Dallas and San Diego to Baton Rouge. The relocation will create 45 new direct jobs and 72 indirect jobs.
  • Electronic Arts, the world’s leading interactive entertainment software company, established its first global quality assurance center in Baton Rouge, strengthening Louisiana’s leadership role in the rapidly growing digital media industry.
  • Tyson Foods and Syntroleum Corporation formed a new joint-venture, Dynamic Fuels, which will create high-quality diesel fuel from animal fats. This joint-venture will create 45 new, direct jobs, 366 new, indirect jobs, and it represents a $140 million capital investment.
  • Albemarle Corporation, a Fortune 1000 chemical company, relocated its corporate headquarters from Richmond, Virginia to Baton Rouge, citing confidence in Louisiana’s business climate, leadership, and reforms.

Governor Jindal said that while these statistics show significant progress, these jobs wins are about more than just numbers. The Governor told the story of someone from the Capital Region to show how these economic development wins are helping Louisianians.

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