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Two oil supermajors. Two stocks rising on higher oil prices. And two completely different approaches to alternative energy.
That approach makes Shell stock the better buy over Exxon Mobil Corp. (NYSE: XOM).
Last month, an activist hedge fund gained two board seats at Exxon in an effort to push the Big Oil firm toward a greener future.
Royal Dutch Shell Plc. (NYSE: RDS.A) made similar headlines last month. In its home nation of the Netherlands, a court ruled that Shell has to reduce its carbon emissions by 45% by 2030. The suit was brought by Friends of the Earth Netherlands, an environmental group that seems to have suing Royal Dutch Shell as its reason for existence, and was a big win for the activists.
That's where the similarities end.
Exxon fought tooth and nail against the activists trying to gain board seats.
Royal Dutch Shell pointed out that it had just announced plans last September to reduce emissions in line with the standards of the Paris Climate Agreement with carbon emissions reductions of 20% by 2030 and 45% by 2035.
Shell was quick to point out that it was already ramping up its activities in low-carbon fuels had been something of a leader in focusing on renewables among the world's largest oil companies.
That's what makes Shell stock not just the better buy over its rival, but the best energy stock to buy right now...
Shell Stock Is a Top Energy Play
Investors did not have a negative reaction to the Netherlands court case. The story is a great headline but not a serious event that will hurt the company in a meaningful way.
The truth is that Shell is hyper-focused on growing its renewable and low-carbon energy business. The plan is to spend 50% of capital expenditure, or more than $12 billion a year, to increase its renewables business.
Shell is still pumping oil, and it will for decades longer. If we stopped producing oil, as some of the more aggressive climate activists are telling the world it needs to do immediately, the global economy would crater. Worldwide, the standard of living would decrease dramatically.
Still, Shell is reducing its oil operations. Last year was the first time that the company produced more natural gas than it did oil. Management said in a recent presentation that it does not intend to do any more frontier oil exploration after 2025.
Natural gas is going to play a much bigger role in reducing emissions than the activists will admit. It is the cleaner bridge fuel that gets from where we are now to a zero-emission world without lowering the global standard of living.
Natural gas is abundant all over the world and is the lowest emissions hydrocarbon fuel source. It can be used in partnership with renewables to power the world and dramatically reduce emissions.
That's the perfect opportunity for Shell.
Shell is a leader in liquidized natural gas. In fact, it was involved in the very first liquified natural gas project in Algeria back in 1964. LNG takes natural gas and cools it to make a liquid that shrinks its volume and makes it easier to store and ship overseas.
Pipelines are not always a practical solution for moving natural gas, so LNG is the best answer to the delivery problem.
When the tanker reaches port, the LNG can be turned back into natural gas and shipped to the homes, factories, and power plants that need fuel.
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How RDS Stock Is a Clean Energy Investment
Shell is also investing in renewable energy projects like wind and solar power all over the world. It is converting many of its own facilities over to solar power and is getting involved in using solar power for residences.
Here in the United States, it uses Silicon Ranch as its platform for delivering solar power to utilities, military and defense facilities, industrial facilities, and commercial businesses. The company has grown into one of the largest solar power companies in the United States.
Shell is also heavily involved in wind power with large offshore wind operations around the world. In the United States, it is partners in the Atlantic Shores project that will operate a wind farm off the coast of New Jersey and the Mayflower Consortium that plans to operate off of Massachusetts.
Shell is also involved in land-based wind power farms with U.S. operations in California, Texas, and Wyoming.
The court cases and protests by the climate change activists make for entertaining soundbites, but they don't really have much to do with the day-to-day operations of Royal Dutch Shell. Shell is an energy company that understands that it needs to transition from oil and gas to renewable and lower-carbon fuels over the next few decades. It has plans in place to do precisely that at a measured pace.
Shell is also aware that we will need oil and gas for a long time, so it is not making any dramatic moves to shut down those facilities just yet.
At eight times earnings with a 3.51% dividend yield, Shell is an excellent way to profit not only on the energy needs of today but the changing world that will lead to the energy needs of tomorrow as well.
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