4 Investing Ideas From BP's 2014 World Energy Review

From Cloud Peak Energy's coal mines to SunPower's solar panels BP's latest statistical review shows that the world's energy system is evolving in new ways.

Jun 23, 2014 at 2:57PM

BP's (NYSE:BP) Statistical Review of World Energy shows the limited options that face the global energy system. With 2013's primary energy growth rate of 2.3% falling below its 10-year average, there are signs that the search for economical, emission-light energy is taking its toll. A diversified portfolio is the only way to help adjust the energy system we have inherited. 

Natural gas 
Turnaround plays are not only exciting, they can be very profitable. Chesapeake Energy (NYSE:CHK) has been accumulating cash, and recently announced that non-core asset sales are expected to help decrease its net leverage by $3 billion with a limited impact on 2014 production. Basically, the company continues to rationalize its capex budget. From 2010 to 2013 Chesapeake's net cash used in investing activities has fallen from $8.5 billion to $3 billion.

BP's Statistical Energy Review notes that in 2013 only the U.S. saw above-average growth of natural gas consumption. Thanks to a growing distribution network, Chesapeake is right in the middle of the shale boom. It continues to develop unconventional plays like the Utica and Marcellus to reach its goal of producing 1 million barrels of oil equivalent, or BOE, per day. Natural gas is a relatively clean fuel, and the EPA's push to make America's utilities less carbon-intensive puts more wind in Chesapeake's sails.

Coal 
Our old friend coal is not painted in a very flattering light, but in 2013 it was the fastest growing fuel and reached its highest portion of primary energy production since 1970.

China's leader Xi Jinping stated that the nation needs an energy revolution to deal with pollution issues and supply challenges. This is not encouraging news for coal, as China contributed 67% of coal's demand growth in 2013. The upside is that other big Asian consumers like India are there to help pick up the slack. 

Not all coal is the same. Utilities can buy relatively clean, low-sulfur Powder River Basin coal from Cloud Peak Energy (NYSE:CLD), or stick to more traditional dirty sources.  China and the U.S. are tiring of highly polluting coal, and Cloud Peak Energy is a critical part of the solution.

Cloud Peak Energy already has access to critical export facilities on the Pacific Coast. The company's 1.5% profit margin is slim, but its 18.1% gross margin and 6.3% EBIT margin give it room to breathe, while marginal coal producers are forced to reduce production.

Nuclear 
Global nuclear energy output grew by 0.9% in 2013. This is significant as it was the first increase since Fukushima rocked the world in 2011. Nuclear now accounts for its smallest percentage of global energy production since 1984.

In the midst of these difficulties, nuclear still has a strong future thanks to its military applications and baseload capabilities. Nuclear weapons are an important part of the nation's military, and escalating tensions continue to bring Asian nuclear abilities to the forefront. In addition to the security applications, nuclear energy provides a straightforward way to replicate coal's baseload generation without emissions.

Cameco (NYSE:CCJ) is the world's preeminent pure-play uranium miner. It has a host of high-quality mines and a small total debt-to-equity ratio of 0.25. Its margins are low as the industry is still recovering from Fukushima, but this has allowed Cameco to buy up assets from potentially dangerous competitors. The good news is that its gross margin of 35.2% lets it sit back and watch the market recover.

Renewables
In 2013 Renewable Energy used in power generation grew 16.3%, contributing a total of 5.3% of global power generation. SunPower (NASDAQ:SPWR) is on the right side of this growing industry. Its high-efficiency solar panels and low degradation rate let its solar panels produce 75% more energy than its competitors on a given rooftop over 25 years.

SunPower's distributed generation operations still face risks from unstable government policies, but its push to commercialize energy storage solutions in Australia will eventually help to decrease its dependency on retail feed-in-tariffs. Its profit margin of 5.4% shows that renewables are already in the black.

Final thoughts
The 20th century was dominated by fossil fuels. Fossil fuels continue to play a significant role, but a move to emission-light generation is pushing SunPower, Chesapeake, Cloud Peak Energy, and Cameco to the forefront of the energy industry.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Joshua Bondy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers