Lizard King is trying to save the Universe.

music selection:“Misery Business” — Paramore

It’s true. I’ve been with the Living Universe Foundation (LUF) for many years. In that time, I’ve advocated for space development, and the environment. Today, I contributed to the LUF blog an article about a great investment with a green twist. And the green is in an unlikely place. Click here to read the article. You’ll be delighted to read about company that is going to plow billions into solar while returning 30 Billion a year in additional cash to shareholders.

Devour your prey raptors!

This recommendation is probably going to be a little controversial. I’ve found an oil company that sees the writing on the wall and is committing to tapering off its upstream oil exploration and production activities in order to fund green energy projects and transition to a green future. Purists will dislike that the company will remain a net emitter of carbon for decades. I see a pathway forward to a near term future where billions are spent by industry per year on green projects instead of the few hundred million we see now.

I intend to show that this transition essentially guarantees the company will earn a low risk 12.5% in share holder return per year for decades while deleveraging their balance sheet and reducing litigation and regulation risk. I suspect when the competition sees what this move does for their bottom line, there will be a rush to replicate the model. This is how we get trillions of dollars in investment capital redirected from fossil fuels to renewables.

I think it is also important to note that the abrupt death of the petrochemical industry would likely meant an equally abrupt end to modern civilization. The goal should be to stop burning carbon for energy, not to eliminate the many uses of oil such as: fertilizer, plastics, lubricants, waxes, advanced materials, napthenes, and more. I for one, don’t want to live in a world without propylene oxide.

Today’s recommendation is Royal Dutch Shell (RDS-B), herewith known simply as “Shell”. Shell is an integrated oil and gas major that has made a commitment from the most senior levels of management to cut exploration and production capex to, in part, fund green electricity generating projects. At the same time, the company will deleverage the balance sheet, reduce commodity pricing risk, and return cash to shareholders via dividends, and share buybacks. I will show here how this will realistically result in decades of shareholder returns greater than 12.5% per year.

All six of the oil majors have at least some green energy projects in the works. For five of the six, these efforts are just window dressing and marketing. For Shell, it is a material real money commitment to a greener (and more profitable) future. Traditionally, in the oil production game it is understood a company needs at least 10 years of reserves to sustain its market share. Shell has been letting reserves wind down and is now at about 8.5 years of reserves and still declining. This is not a matter of drilling dry holes. Management has committed to reducing capital expenditures on new exploration. The upstream oil and gas business is being left to dwindle away for strategic reasons. In 2018 new production consumed 51% of Shell’s capex. By 2025 it will only be 41%.

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