ARKAY Arkema (PK)

Industrial gas giant Air Products and Chemicals Inc. (APD) has announced the launch of Phase One of its two-stage carbon capture project in Port Arthur, Tex. Phase One has been designed to capture carbon dioxide (CO2) from one of the company’s steam methane reformers (SMR) located in the Valero Port Arthur Refinery. The Phase Two of the project, which involves a second SMR at the location, is expected to be completed by Apr 2013.

The project is estimated to capture roughly one million tons of CO2 annually. The captured carbon dioxide will then be restored, purified and transported by Air Products through a pipeline to an oil recovery project (West Hastings Unit) in Texas operated by Denbury Onshore.

The Port Arthur project came into existence with the initiation of the Industrial Carbon Capture and Storage (ICCS) program by the U.S. Department of Energy (DOE). The program was introduced mainly with an aim to mitigate the effects of climate change through carbon capture, utilization and storage.

The DOE has financed roughly 66% of the over $400 million carbon capture project. Air Products received $253 million from DOE in Jun 2010 under the ICCS program, which is funded by the American Recovery and Reinvestment Act (ARRA). The company has also received an additional $30 million funding for final engineering, design, construction and project operation through Sep 2015. The company is expected to help in the recovery of 1.6 million to 3.1 million of additional barrels of domestic oil annually.

A few days ago, Air Product came out with its first-quarter fiscal 2013 (ended Dec 31, 2012) results. The results were impressive as both revenues and adjusted earnings outpaced the Zacks Consensus Estimates. The company’s adjusted earnings from continued operations of $1.30 a share beat the Zacks Consensus Estimate by a penny. Consolidated net income from continuing operation increased 22.6% year over year to $276.9 million

Revenues rose 10.4% year over year to $2,562.4 million, beating the Zacks Consensus Estimate of $2,471 million. Sales were aided by higher volumes in the Tonnage Gases, Equipment and Energy divisions and acquisitions.

For fiscal 2013, Air Products plans to take a number of steps including cost control measures, restructuring actions, price improvements and volume growth. The company expects that its recent strategic moves will position it for future growth and profitability despite the modest economic backdrop.

Air Products retains a short-term (1 to 3 months) Zacks Rank #2 (Buy).

Other companies in the chemical industry worth considering are Arkema S.A. (ARKAY), BASF SE (BASFY) and E. I. du Pont de Nemours and Company (DD). While Arkema retains a Zacks Rank #1 (Strong Buy), both BASF and DuPont hold a Zacks Rank #2 (Buy).

 
AIR PRODS & CHE (APD): Free Stock Analysis Report
 
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BASF SE (BASFY): Free Stock Analysis Report
 
DU PONT (EI) DE (DD): Free Stock Analysis Report
 
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