British energy giant BP P.L.C.BP recently entered into an agreement with U.S.-based Clean Energy Fuels Corp. CLNE . The deal will allow BP to acquire Clean Energy's upstream assets of renewable gas business. The deal is valued at $155 million and its closure is subject to regulatory approvals and satisfactory terms.
Per the deal, BP will take over Clean Energy's existing and two new biomethane production sites and will also receive supply contracts from third parties. Clean Energy has also inked a long-term supply contract with BP which will ensure a consistent supply of natural gas fuel for the Clean Energy's Redeem brand. Clean Energy would receive royalties and environmental credits on the purchased gas and will sell it to consumers.
BP's acquisition is in sync its strategy to explore new investment opportunities and support the growing demand of low carbon, renewable fuel. The deal will enable BP to augur its gas supply portfolio in the U.S. making a positive shift toward less carbon- intensive projects. Since biomethane is produced from organic waste, it would lower the greenhouse gas emissions by 70%. The transaction will also enable Clean Energy to expand its customer base and meet the increasing demand by providing environment friendly energy alternatives.
Zacks Rank and Key Picks
BP is one of the leading integrated energy companies in the world.
The company outperformed the Zacks categorized Oil & Gas Integrated International industry over the last one year. During the aforesaid period, shares rallied 10% while the broader industry gained around 9%.
However, the oil spill incident of 2010 in the BP-operated Macondo Prospect is still affecting the company. Although BP has cleared the huge litigation expenses related to the spill, it had to divest some of its best operating properties. The asset sales might hinder BP's future cash generating opportunities going forward.
As a result, the company currently carries a Zacks Rank #3 (Hold).
Some better-ranked players in the same industry include Repsol SA REPYY and Royal Dutch Shell PLC RDS.A . Both these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Repsol SA reported positive average earnings surprise of 46.34% in the trailing four quarters.
Royal Dutch Shell is expected to post year-over-year growth of 110.46% in its earnings in 2017.
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