Last Friday, I attended a Trans-Atlantic summit on hydrogen as a fuel of the future. I wasn’t aware at the time, but it was President George W. Bush who touted the potential success of this low-carbon fuel. I’m growing increasingly bullish about the fuel’s future. I know that Dr. Gregor Bauer has shared similar enthusiasm about the hydrogen fuel in his communications with you.
Over the weekend, Germany and Australia signed a new accord to boost hydrogen production and trade between the two nations. This is big news for German utility RWE and Uniper, which have been working to establish new trade routes for this alternative fuel. Germany launched a $10.9 billion hydrogen strategy in 2020. It’s working on getting other nations like the United States, Saudi Arabia, Canada, Chile, and Morocco on board for supply production.
Meanwhile, Australia is joining forwards with Japan to push toward net-zero emissions. A lot of people don’t know this, but Australia has been measured as the largest per-capita emitter of emissions, according to a recent report by Reuters.
I think this is a complicated number to quantify. Still, Australia sits alongside the United States and Canada as the worst per-capita emissions, just eyeing data from the World Bank.
It will be quite a process to shake out who will be the leaders in emissions reductions. How nations balance reductions in emissions without affecting economic growth is a great puzzle for the decades ahead.
I’m Still Long Oil Transportation
With that said, I’ve been drawn to a lot of midstream energy companies as the global economy reopens. It doesn’t matter how environmentally protective you are, there’s no magic bullet right now that will maintain economic growth and reduce emissions at scale, right now.
So, I’m expecting that pipeline, freight, and other industries in the midstream will thrive. For a quick reminder, there are three parts of the energy supply chain.
- The upstream companies consist of oil-and-gas producers that pull commodities from the ground.
- Downstream companies turn crude oil into gasoline, jet fuel, lubricants, and other products like plastics. They also might own gas stations across the nation.
- In the middle is the “Midstream.” These companies include pipeline operators, storage facilities, and groups that move oil and gas from Point A to Point B.
The company that has drawn my attention this week is KNOT Offshore Partners (KNOP). This company owns and operates shuttle tankers in the North Sea and Brazil. It helps move oil through time charters and bareboat charters. Rather than move crude through offshore pipelines, it acts as a ferry. This is a stock I’m adding to my watch list. I’m very intrigued by its 10.5% dividend when companies in the midstream benefit from higher oil prices.
Wall Street doesn’t provide enough coverage for this tiny company. It only has a market capitalization of $638 million. B. Riley Financial has a price target of $22.00 from earlier this year. The combined dividend and appreciation upside over the next 12 months is roughly 16.8%.