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Phillips 66 (PSX) Scores Deal to Supply SAF to British Airways

·4-min read

Phillips 66 PSX signed an agreement to provide sustainable aviation fuel ("SAF") produced at its Humber refinery to British Airways.

Located in North Lincolnshire, U.K., the Phillips 66 Humber refinery will be the first to significantly produce SAF. It currently produces about 132,000 gallons per day of renewable waste feedstock.

The refinery uses sustainable waste feedstock to produce SAF, which can reduce more than 80% of carbon emissions compared with fossil jet fuels.  Phillips 66 will deliver the fuel through its existing pipeline infrastructure that supplies British Airways.

British Airways will be the world's first airline to use SAF, aiming to achieve net-zero emissions by 2050. The airline is purchasing enough fuel to reduce emissions that will power the equivalent of 700 net-zero flights between London and New York, which is still a lower fraction of its total carbon footprint.

The U.K. has the resources and capabilities to be a global leader in the development of SAF and increase production. International Airlines Group (“IAG”), which combines leading airlines in Ireland, Spain and the U.K., is investing $400 million for the next 20 years to develop SAF. British Airways established partnerships with various technology and fuel companies to develop SAF facilities and purchase the fuel.

The latest agreement with British Airways fits well with Phillips 66's strategy to produce fuel from wastes, which will reduce the carbon intensity of its processes. The deal reflects the importance of SAF for the aviation and energy industries, as markets for low-carbon products are growing.

Company Profile

Established in Houston, TX, Phillips 66's operations involve refining, midstream, marketing and specialties, and chemicals.

Zacks Rank & Other Stock to Consider

Phillips 66 currently sports a Zack Rank #1 (Strong Buy).

Investors interested in the energy sector might look at the following companies that also flaunt a Zacks Rank #1 at present. You can see the complete list of today's Zacks #1 Rank stocks here.

PDC Energy PDCE is an independent upstream operator that engages in the exploration, development and production of natural gas, crude oil and natural gas liquids. PDCE, which reached its present form following the January 2020 combination with SRC Energy, is currently the second-largest producer in the Denver-Julesburg Basin. As of 2020-end, PDC Energy's total estimated proved reserves were 731,073 thousand barrels of oil equivalent.

In the past year, shares of PDCE Energy have gained 150.6% compared with the industry's growth of 85.4%. Moreover, PDCE's 2021 earnings are expected to surge 271% year over year. In the past 60 days, the Zacks Consensus Estimate for PDCE's 2021 earnings has been raised by 26%. PDC Energy beat the Zacks Consensus Estimate in the last four quarters, with an earnings surprise of 51.06%, on average.

Centennial Resource Development, Inc. CDEV, based in Denver, CO, is an independent oil and gas exploration and production company. It primarily develops unconventional hydrocarbon reserves in the Delaware Basin, part of the prolific Permian Basin. CDEV's net production in 2020 was recorded at 67,161 barrels of oil equivalent per day, of which oil contributed 53.7% and natural gas and natural gas liquids accounted for the rest.

In the past year, shares of Centennial Resource have gained 294.5% compared with the industry's surge of 85.3%. CDEV is expected to see earnings growth of 127.6% in 2021. CDEV has witnessed three upward revisions in the past 30 days. In third-quarter 2021, CDEV's constant focus on cost reduction helped it generate net cash of $153.5 million from operating activities compared with $45.7 million in the year-ago period. The free cash flow generated during the quarter was $77.2 million, significantly increasing from $10.5 million in the year-ago period.

TotalEnergies SE TTE is among the top five publicly traded global integrated oil and gas companies based on production volumes, proved reserves and market capitalization. At present, the company has more than 12 years of proved reserves, and more than 20 years of proved and probable reserves. Of the proved reserves, 60% is gas and 40% is oil. TTE is also committed to developing renewable energies as part of its upstream activities.

TotalEnergies is expected to see earnings growth of 354% in 2021. TTE witnessed two upward revisions in the past 60 days. In third-quarter 2021, TotalEnergies acquired $126 million worth of assets and sold assets valued at $1,084 million. In the quarter, TTE acquired a 10% interest in the Lapa block in Brazil.

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