The push for a decarbonized world has dramatically altered investors’ views of the future for energy companies, in addition to how they are being reshaped by Covid-19 and the oil price collapse. The past decade experienced the worst period of investment returns for energy stocks in the Standard & Poor’s 500 index in its history. Can that change? Will it change?

The energy business experiences long business cycles, driven by commodity price fluctuations. The cycles impact investment returns. The past decade’s dismal performance was caused, not only by the boom-bust of oil prices, but by the failure of shale producers to generate profits. It was a classic case of capital misallocation, largely due to cheap money.

The era of cheap money arose from the economic rescue actions of the Federal Reserve, as it dealt with the 2008 Financial Crisis. The policy of near-zero interest rates forced investors, often those retired or nearing retirement, to reach further out on the risk curve seeking to replace the income lost by low interest rate bonds. That stretch coincided with the height of the shale boom when producers were offering high yields on debt and inflated prospects for equity returns. The 2014 oil price collapse, and again in 2020, has destroyed any hope of investors earning any returns, let alone outsized ones, from their energy investments.

Investor support for energy companies was eroded by its poor investment returns, which is now being compounded by younger investors committing their money to companies helping, rather than hurting, the environment and society. The moniker of ESG (environmental, social and governance) has become the litmus test for companies seeking to attract investment funds and recognition. Fossil fuels, dangerous extraction equipment, and operating in politically challenging locales characterizes the energy world, and how energy companies are perceived. These qualities are preventing investors and financial institutions from committing funds to the energy business, critical for its long-term success. However, despite the idealism of environmentalists, oil and gas will continue to supply a significant share of the world’s energy needs for decades.

Embracing operating strategies and techniques that reduce environmental damage from greenhouse gases is required of energy companies if they wish to access capital markets. Companies need to lower their carbon footprint. That means using environmentally-friendly products and equipment emitting less carbon, as well as reducing the number of people involved in operations. By embracing such steps, companies will improve their ESG ratings. Products and services helping energy companies raise their ESG ratings will be in demand. This trend is irreversible, and it offers an attractive market opportunity for companies.

For this Company Spotlight, we interviewed Locus Bio-Energy CEO, Jonathan Rogers, about how their biosurfactant technology provides better performance and less environmental risk than conventional surfactants utilized in the energy industry. Locus Bio-Energy offers patent-pending, award-winning biosurfactant treatment programs that are cost-competitive, biodegradable, and safer than current chemical and traditional treatments. For more information on Locus Bio-Energy, please visit locusbioenergy.com.

Background: In 2014, Locus Fermentation Solutions (“LFS”) began R&D on innovative fermentation technologies to produce biosurfactants at an exponentially lower cost than conventional methods. Since then, LFS has filed for over 630 patents (over 100 specific to energy applications), as it developed technologies that brought the cost down to as low as 5% of traditional biosurfactant-producing technologies. With the enhanced oil recovery (“EOR”) and oil production chemical market being a prime candidate for these cost-competitive biosurfactants, Locus Bio-Energy was formed and commercialized a product for the energy industry in 2017.

Value Proposition: The EOR and oil production chemical market is currently dominated…..READ MORE

Greentown Labs is a startup incubator that connects climatetech and cleantech entrepreneurs with the resources needed to grow. Greentown Labs’ expansion to the energy capital of the world hopes to serve as a catalyst for the clean energy transition.

Related Press Release: Greentown Labs Announces Expansion to Houston

Kahuna Workforce Solutions helps companies maximize their workforce’s capability and talent. Kahuna’s automated skills platform allows DCP Midstream to equip its employees with the training necessary to develop a more efficient workforce and serve as a differentiator to attract human capital and with its customers in the marketplace.

SparkCognition and Siemens announced a new collaboration on a cybersecurity system, DeepArmor Industrial, which is designed to protect endpoint, or remote, operational technology (OT) assets across the energy value chain by leveraging artificial intelligence (AI) to monitor and detect cyberattacks.

Enview’s technology digests data from various sources including LIDAR, photogrammetry or satellites to model a 3D picture (digital twin) of critical infrastructure. The ability to quickly process 3D data enables governments and energy companies to rapidly identify change providing enhanced asset management capabilities with less personnel.

Related Press Release: Enview Raises $12M in Oversubscribed Round of Funding

As the energy industry continues to digitize, SecurityGate.io helps companies more effectively and efficiently protect their operating assets and infrastructure (operational technology) from cyberattacks. Already serving large clients, such as Shell and Enbridge Energy, the capital raised will be used to further accelerate customer adoption.

Energy Technology Musings

The Challenge of ESG for Energy Companies