3 Energy Titans Adopting AI… and Why They’ll Make You Richer
The energy sector isn’t the first industry you might think of when you hear the term “artificial intelligence.” Oil and natural gas companies aren’t exactly hotbeds of technological innovation.
The energy industry is the king of what I like to call “boring but important” companies. They’re the businesses that never make the headlines. They never become media darlings. But our modern economy is completely dependent upon them.
Most of the stocks in this sector are stable blue chips you buy and hold forever while they send you fat dividend checks every quarter.
But AI is having an impact even in the most established companies in the energy sector.
AI technology is quickly on its way to becoming ubiquitous. And it’s only just beginning. It will have as much of an impact – on every industry – as the invention of computers and the proliferation of the internet.
And right now, I’m convinced the best way to profit from AI is to invest in the boring but important companies taking advantage of it at this early stage.
The three companies in this report are big. If their AI initiatives fail, they’re able to absorb the loss (and so will investors).
But AI technology stands to revolutionize them so dramatically that you’ll profit handsomely if their efforts are successful…
I, Petroleum
Based in London, BP (NYSE: BP), formerly British Petroleum, is a $101 billion titan of the energy industry. Through its oil and gas production network that includes land-based drilling and offshore oil rigs, the company produced 2.3 million barrels of oil equivalent last year.
Once refined, that gas was sold at the company’s 20,650 retail sites in 62 countries around the world.
But BP isn’t some one-trick pony…
In recent years, the company has pivoted toward green energy initiatives like offshore wind farms, as well as hydrogen and carbon capture and storage. Last year, BP generated 5.8 gigawatts of renewable energy. It also operates about 22,000 electric vehicle charge points around the world – nearly double the 13,100 charge points it operated at the end of 2021.
And for a large, stable blue chip, BP is demonstrating some serious growth potential. In 2022 it brought in $241.4 billion in revenue, up 53% from $157.7 billion in 2021. With that cash influx, the company has raised its dividend by 21% (it now yields 3.95%), reduced its debt and announced $11.25 billion in share buybacks since the end of 2021.
The third quarter of 2023 saw BP bring in $4.8 billion in revenue, a considerably better result than the $2.1 billion loss it posted in the third quarter of 2022. The company also saw operating cash flow surge to $8.7 billion and net debt fall to $22.3 billion in the quarter.
Despite the media’s claims about the future of fossil fuels, we will be an oil-driven society for the foreseeable future.
And BP is turning to AI to locate and access new sources of that black gold…
In 2019 BP Ventures invested $5 million in Belmont Technology to bolster its capabilities through AI. The producer of this project, a program called Sandy, aids BP’s subsurface engineers in learning more about potential oil reservoirs and their surrounding geology so they can establish new production operations faster and expand existing facilities in the most effective way.
The implementation of AI will allow BP to capture the growth of a much smaller company and keep raising its dividend to your benefit.
Big Profits From Big Tech
The next oil company profiting from the use of AI is a hop across the pond from BP. Dallas-based Exxon Mobil (NYSE: XOM) is an even larger oil giant than its British competitor. It has a market cap of $411.47 billion and 2022 sales of $398.7 billion.
While BP is investing in smaller AI developers, Exxon has partnered with one of the biggest names in the space: Microsoft.
Exxon Mobil’s XTO Energy subsidiary implemented Microsoft Dynamics 365, Microsoft Azure, machine learning and the Internet of Things to boost its production capabilities in the Permian Basin back in 2019.
The basin is one of America’s richest oil fields and sits near Texas’ western border with New Mexico. Microsoft’s systems could help Exxon produce an additional 50,000 barrels of oil a day by 2025. Right now, that’s worth $3.75 million per day and $1.37 billion annually…
And by the end of 2022, it seems that those efforts had already paid off handsomely. The company saw 30% growth in the Permian Basin as well as in its operations in Guyana.
Cash flow in 2022 totaled $77 billion, earnings came in at $56 billion and the company managed to cut costs by $7 billion. It also grew its dividend (like it has done each year for the last 40 years), and it now yields 3.5%.
In the third quarter of 2023, the company brought in $9.1 billion in earnings, up $1.2 billion quarter over quarter. Cash flow from operations and free cash flow surged $6.6 billion and $6.7 billion, respectively, quarter over quarter.
AI has already had a tangible impact on Exxon’s bottom line as well as its competitors’, and that will only encourage the company to expand its use of AI technology.
One of those competitors is already using AI to mitigate one of the major environmental costs of the oil industry…
Altered Carbon
Shell (NYSE: SHEL) is another oil giant implementing AI… but it’s doing it to a very different end compared with its peers.
Shell has partnered with Space Intelligence, a U.K.-based startup that uses computer vision technology on images from satellites and social media to assess and predict how well ecosystems will absorb carbon dioxide.
The insights generated by Space Intelligence will aid Shell in its nature-based solutions, or NBS, projects. The company is investing $100 million per year in those projects to reduce atmospheric carbon dioxide levels and avoid new carbon dioxide emissions.
Space Intelligence will help Shell with the restoration and preservation of various biomes impacted by its oil production operations.
Its ecological goals aside, Shell is a solid investment. For the fourth quarter of 2022, the company brought in adjusted earnings of $9.8 billion with adjusted EBITDA of $20.6 billion despite oil and gas prices dropping over the prior year. Full-year earnings for 2022 came in at $39.87 billion, up 106.6% over 2021’s number.
In the third quarter of 2023, adjusted earnings topped $6.2 billion, up 21.5% quarter over quarter. The company increased its dividend twice in 2023, and it now yields 4%. It also announced $3.5 billion in share buybacks in the third quarter of 2023.
And while Shell’s environmental efforts are the most publicized application of AI in its business, you can be sure the company is also using the technology to become a more effective oil producer.
The Profit Singularity
The media is buzzing about ChatGPT. And while it’s true that AI is incredible technology and will change a lot of things, the true power of the latest AI developments will come from big companies adopting it early.
This technology won’t just write better movie scripts (yawn)… it will boost efficiencies and enhance profitability across the economy.
And as usual, the bigger a company is, the more it will be able to leverage the technology… and the more profits it will hand to shareholders. And the three companies in this report are prime examples.
There’s opportunity in the companies bringing AI to the market…
But the real spoils will go to the traders who seek out the under-the-radar AI users that will see booming margins because of what’s happening.
The energy sector and its record-shattering profits from the development and use of AI technology just proved it. You’ll want to add one or all of these companies to your portfolio as soon as you can.