Goldman Sachs said in a research note Thursday the recent energy sector pullback should be viewed as a reason to buy since that strategy has worked well since late 2020. Thinking along those lines, we did add to one of our three oil exploration and production (E & P) stocks twice this month. However, we’re currently debating whether we need that much exposure to an industry so tied to the economy. West Texas Intermediate crude and energy stocks have been under intense pressure in recent weeks on the back of heightened recession fears. While debated for months, worries about the economy and how it might impact oil demand have increased following fallout from the banking crisis and concern about the Federal Reserve hiking interest rates too much. @CL.1 YTD mountain West Texas Intermediate crude YTD performance At a high level, Goldman concedes that recession risks are “more elevated than in the past.” How could they not be following the second and third largest bank blowups in U.S. history and the ripple effect across the financial industry. However, Goldman only puts 35% odds on a recession, leading analysts to reason that an economic hard landing won’t likely break oil’s buy-the-dip streak. The Goldman note pointed out that six major energy pullbacks — three in 2021 and three in 2022 — each translated into “a meaningful buying opportunity.” But, given the elevated uncertainty, the analysts are focused on what they view as quality producers with attractive valuations, meaning those with “strong balance sheets, deeper inventories and lower cost assets.” Based on that criteria, Goldman has Pioneer Natural Resources (PXD) on its “Americas Conviction List” with a buy rating. Similar to Goldman, the analysts at Citi also like Pioneer, saying it’s in a position to realize increased well productivity starting in the second half of 2023 and see increased capital efficiency into 2023. In research note Thursday, Citi upgraded PXD to a buy rating and boosted its price target to $210 per share from $193. The stock closed Thursday just above $189 per share. The Club likes and owns Pioneer, too. It’s the E & P we’ve been buying lately — adding 25 shares on March 13 and 25 more shares Monday . Both were small buys in down markets, bringing our total ownership position to 175 shares for an overall portfolio weighting of 1.3% as of Thursday’s close. The Goldman and Citi updates are certainly welcome as they clearly support our view that Pioneer’s low crude break-even levels and strong cash flow profile are supportive of continued shareholder returns, especially should energy demand rebound from current levels. As for our two other E & P stocks, we’re leaning toward booting Devon Energy (DVN) and keeping Coterra Energy (CTRA), which we bought more of in early February on a collapse in natural gas prices. Both of them carry less than a 1% weighting in our portfolio. Coterra, unlike the others, is about 50/50 oil and nat gas. Influencing our inclination to hold on to Coterra is management’s recent guidance to prioritize buybacks over the company’s base dividend and variable dividend in their mission to return at least 50% of free cash flow to shareholders. The team believes Coterra shares are among the most attractive opportunities in the market. That’s what makes a good buyback. A large variable dividend is nice, but it’s a onetime payout based on recent free cash flow generation with no guarantee that the size will remain the same to the next payout. By repurchasing shares, management is increasing the ownership stake for existing shareholders forever, barring any future equity sales, which we see no need for. If you own more of the company then the next time WTI prices increase, you stand to make much more money should management determine that a larger variable payout is warranted because you have a greater right to the free cash flow than you would have if fewer shares were repurchased. Recognizing the ups-and-downs of owning energy stocks, we still believe they should be part of any diversified portfolio. When we first moved into the energy sector in late 2021, we viewed the holdings as a hedge. The thinking: Should energy prices continue to climb, we would make money while our other holdings — those that have energy as an input cost — took a hit as the higher prices would pressure margins. Recently, we’re starting to see the opposite dynamic. However, the E & Ps we own do throw off lots of cash to shareholders, basically paying us to be patient as we figure things out. (Jim Cramer’s Charitable Trust is long PXD, DVN, CTRA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A work-over rig performs maintenance on an oil well in the Permian Basin oil production area near Wink, Texas August 22, 2018.
Nick Oxford | Reuters
Goldman Sachs said in a research note Thursday the recent energy sector pullback should be viewed as a reason to buy since that strategy has worked well since late 2020. Thinking along those lines, we did add to one of our three oil exploration and production (E&P) stocks twice this month. However, we’re currently debating whether we need that much exposure to an industry so tied to the economy.
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China just connected its largest single-capacity solar farm built on a former coal mining area, which is in the Gobi Desert, to the grid.
The Mengxi Blue Ocean Photovoltaic Power Station, located in Otog Front Banner, Ordos, Inner Mongolia, came online on November 5. With a massive installed capacity of 3 gigawatts (GW) and over 5.9 million solar panels, the plant will generate around 5.7 billion kilowatt-hours of electricity annually – enough to power 2 million households.
This huge project will save about 1.71 million tons of standard coal each year and cut carbon dioxide emissions by roughly 4.7 million tons, which is equivalent to planting 62,700 hectares (around 155,000 acres) of trees.
Built on coal mining subsidence land, Mengxi Blue Ocean is part of China’s national West-East Electricity Transfer Project, which brings investment and development to western China west while supplying the growing need for electricity in the eastern provinces.
The solar farm includes the country’s first large-scale outdoor solar testing base in the Gobi Desert climate, demonstrating the potential for large solar installations in challenging environments.
The power station makes use of new rare earth alloy grounding materials, cutting costs by 40%. It also replaces traditional concrete foundations with steel to minimize impact on the local grassland ecosystem.
Chuang Xihong, deputy director of the Engineering Construction Department of Guodian Power Group, CHN Energy’s parent company, explained that Mengxi Blue Ocean is an agrivoltaic project as well [via PV Tech]:
Fine forage and sand-fixing plants are planted under the PV modules, providing grazing for Australian White Sheep and chickens. A composite ecological development model will be established where PV power generation and breeding will go hand in hand.
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Operations at Three Mile Island are poised to restart in four years, the latest sign that the nuclear power industry is undergoing a major turnaround after a wave of plant closures.
The Unit 1 reactor at Three Mile Island, which entered service in 1974, was permanently shut down in 2019 due to economic pressure as nuclear power struggled to compete against natural gas. But the tech sector’s growing power needs are breathing new life into the industry.
Constellation Energy plants to restart Unit 1 in 2028 through an agreement with Microsoft to help power the tech company’s data centers. The plant will be renamed the Crane Clean Energy Center — after Chris Crane, the late CEO of the plant’s former owner, Exelon — and its restart is subject to approval by the Nuclear Regulatory Commission.
The Department of Energy said Unit 1 operated safely and efficiently before being shut down five years ago. However, it lies within walking distance of the site of the worst nuclear accident in U.S. history. The Unit 2 reactor suffered a partial meltdown in 1979 and has not operated since the accident. It is being decommissioned by its owner, Energy Solutions.
Constellation’s chief generation officer, Bryan Hanson said Unit 1 is in good condition and the restoration will mostly involve typical maintenance work.
Here is a look at the plant’s main control room, the turbine deck that houses the main power generator, and the facility’s iconic cooling towers. For more on the restart click here.
Main control room
The control panel in the main control room of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Constellation’s chief generation officer, Bryan Hanson, inside the main control room of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Telephones in the main control room of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Part of the main control room of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Part of the main control room of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Turbine deck
Part of the turbine deck of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Part of the turbine deck of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Electrical panels on the turbine deck of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Part of the turbine deck of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
A desk on the turbine deck of the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Cooling towers
A detail of two cooling towers at the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Power lines and a cooling tower at the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Detail of a cooling tower at the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
Cooling towers at the Three Mile Island nuclear power plant in Middletown, Pennsylvania, Oct. 30, 2024.
Danielle DeVries | CNBC
— CNBC’s Danielle DeVries contributed to this report.