news/ENPH/2023.02.09/Fantasy league matchmaking between oil majors and t...txt

LITTLETON, Colo., Feb 9 (Reuters) - This weekend's Super
Bowl is the annual showpiece for American football's top
professional teams, and marks the end of the fantasy league
season where amateur fans select their own configurations of
players that compete on virtual fields.Fantasy footballers deploy their own optimal mix of
real-life players from different teams, and compete with other
fans for team scoring totals and bragging rights.In a similar spirit, it's possible to fantasize about
optimal corporate match-ups on the energy field, pairing up the
financial heft and business savvy of established giants with the
entrepreneurial zeal of start ups and speciality players.While no trophies will be awarded in this power sector
showdown, the accelerating consolidation trend across the energy
landscape means plenty of real-life company hook-ups are likely
anyway, and so it can be instructive to dream up potential
pairings.$200 BILLION SEASONThe West's largest oil and gas producers raked in nearly
$200 billion in profits in 2022, a testament to the enduring
profitability of the oil and gas sector even as global efforts
to phase out fossil fuel extraction and sale stepped up a gear.The record profit haul - which came on top of massive
dividends and share buybacks that delighted shareholders - lured
praise from investors.But the eye-catching headline numbers also drew scrutiny
from climate trackers and policymakers anxious to see fossil
fuel majors show leadership in the renewable energy field.Some of so-called Big 5 majors, especially Europe-based
firms BP, Shell and TotalEnergies,
already boast major business segments tied to renewable energy.But the most profitable of the big western firms were U.S.
giants Exxon Mobil and Chevron which raked in
roughly $92.5 billion in profits between them in 2022, or 47% of
the Big 5's total haul.Big exposure to U.S.-based production assets, along with
lucrative export streams of oil, gas and fuel were key drivers
behind the outsized earnings of U.S. firms.But Exxon and Chevron were also aided by relatively smaller
investments in renewable energy businesses compared to their
European peers, which allowed the U.S. firms to devote most of
their efforts to maximising returns from traditional fossil fuel
businesses.That has brought the firms into conflict with the U.S.
government, which has laid out bold ambitions tied to the energy
transition away from fossil fuels, and has been critical of
energy companies "padding the pockets of executives and
shareholders."Even so, the profit pile earned by Exxon and its rivals
clearly presents each firm with expansion opportunities in all
areas of the energy sector, including the clean and green space.POTENTIAL MATCH UPSWhile the oil and gas majors were busy making bank, niche
firms specialising in accelerating the energy transition - from
upgrading transmission networks to developing smart grids - have
faced mounting pressure to scale up operations and product lines
to meet surging demand.On paper, the two sets of companies seem primed for a bout
of matchmaking, with the hefty war chests of the majors
seemingly ideal for funding the capital-intensive expansions
planned by the firms engaged in energy transition efforts.Firms such as Quanta Services Inc, a contractor
specialising in repair and maintenance of renewable networks,
and Itron Inc, which uses Industrial Internet of Things
(IIoT) capabilities to help utilities monitor energy flows, have
both seen strong growth in sales and interest in recent years.But both also face margin pressure from rising operating and
financing costs, as well as significant investment needs to
scale up and refine product offerings.The market capitalizations of both U.S.-headquartered firms
are miniscule compared to Exxon and Chevron, with Exxon's market
cap at the end of 2022 nearly 200 times larger than Itron's and
22 times larger than Quanta's.Other relatively small firms deployed in the renewable space
include NV5 Global, a technical engineering and
consulting firm, and Stem Inc, a digital smart network
and energy storage system provider.Both firms operate at the front edge of the energy
transition in different sectors, and present potentially
appealing entry points for majors seeking access to fast-growing
specialist areas.Beyond possible David and Goliath set-ups, there are also
some larger firms that may be on the radar for oil majors
looking to quickly beef up their presence in the green energy
and electrification spaces.Enphase Energy Inc, a supplier of microinverters to
the solar and battery storage industries, had a market cap of
more than $30 billion at the end of 2022, so is already an
established entity.But the firm also derives a majority of its revenues from
the United States, and so may need a helping hand from a larger
firm to extend its global reach.Chicago-based Exelon Corporation may be another
intriguing addition to a potential fantasy energy team.As the largest utility company in the United States, the
firm is already in the starting line-up for any energy sector
discussion.But along with hefty annual revenues comes substantial grid
investment needs that may strain the company's coffers in the
years ahead.In real life, the utility sector is so heavily regulated
that a pair-up with an oil major is unlikely.But for a fantasy league exercise, the partnering of an
established utility needing to upgrade electric grids with a
cash-rich oil and gas giant could make a tough team to beat.(Reporting By Gavin Maguire
Editing by Marguerita Choy)