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number cruncher

What we are looking for?

Natural gas companies that are also participating in the green economy.

Russia’s invasion of Ukraine has Europe facing an energy crunch and a potential energy crisis this winter. Last year, 45 per cent of Europe’s heat was generated from gas, and 45 per cent of that gas came from Russia. In the short term, European Union leaders are seeking suppliers to replace the flows of natural gas from Russia that have been cut off.

In the medium- to long-term, however, the EU’s strategic plan to meet the twin goals of energy security and decarbonization is to shift its energy mix to carbon-free sources, which will lower the demand for natural gas. And as heating becomes increasingly electrified, through solutions such as, for example, replacing gas-fired furnaces with electric heat pumps, demand for natural gas will fall even further – as only about 20 per cent of Europe’s electricity is generated by gas.

This places investors in a conundrum. Selling natural gas should be a very lucrative business next year, but a business model based solely on fossil fuels could become relatively obsolete shortly thereafter. With this in mind, we will see whether any of next year’s biggest natural gas sellers are also taking part in the green economy of the future – as defined by the FTSE Russell Green Revenues Classification System (GRCS).

More about London Stock Exchange Group

LSEG is a leading global financial markets infrastructure and data provider. We play a vital social and economic role in the world’s financial system. With our trusted expertise and global scale, we enable the sustainable growth and stability of our customers and their communities. We are leaders in data and analytics, capital formation and trade execution, and clearing and risk management.

The screen

We are looking for companies that satisfy two criteria:

  • They are forecast to produce a daily average of at least 10 million cubic feet of natural gas next year;
  • They generate at least 2 per cent of their revenue from activities considered green by the Green Revenues Classification System.

What we found

Natural gas producers generating at least 2 per cent of their revenues from 'green' activities

CompanyTickerMkt. Cap. (US$ Mil.)Gas Prod./Day (Cu.Ft.)Green Rev. (%)1Y Rtn. (%)Div. Yld. (%)Recent Close (US$)
Texas Pacific Land Corp.TPL-N19,06837,300,00015.0108.40.52,474.87
Berry Corp.BRY-Q61110,888,0005.
Galp Energia SGPS.GLPEY-OTC9,90063,550,0004.
Repsol SAREPYY-OTC21,0781,514,333,3303.752.34.915.29
Shell PLCSHEL-N196,5068,023,250,0003.750.74.256.13
Braskem SABAK-N3,435187,000,0003.0-
Occidental PetroleumOXY-N56,7251,674,979,0002.3133.20.962.37

Source: LSEG

The screen yields seven companies, with only one – Shell PLC SHEL-N – that would be considered an oil and gas major.

Among this group, Texas Pacific Land Corp. TPL-N stands out, with more than 15 per cent of its revenues coming from “green” activities. Interestingly, these green revenues don’t come from energy at all, but rather from what Goldman Sachs called “the petroleum for the next century” – water.

Ranked No. 2 on our list, with green revenue at just over 5 per cent, is Berry Corp. BRY-Q, whose green revenues come from its traditional gas-fired power generation business, but where the waste heat is reused for large-scale heating purposes.

Shell – the largest company of the group, and the one forecast to produce the most natural gas next year – has a diverse portfolio of green activities, including wind-powered energy generation, developing large-scale power-storage batteries, and supplying components to electric vehicles.

Investors are advised to do their own research before trading in any of the securities shown.

Hugh Smith, CFA, MBA, is director of sustainable finance and investing at London Stock Exchange Group.