Pacific Trader: A clean, green way to profit from the oil and gas gouge

Despite the swoon in its stock price, Greenlane Renewables has been racking up record sales.

Credit: Greenlane Renewables

In addition to producing biogas from landfills and stockyards, Greenlane Renewables sells gas upgrading technology

Despite the swoon in its stock price, Greenlane Renewables has been racking up record sales

The stock: Investors who have already decarbonized their portfolios find themselves standing uncomfortably on the sidelines as Russia’s invasion of Ukraine drives shares of oil and gas companies to levels not seen since 2014. But wait, there’s a way to capitalize on fuel supply constraints while eschewing the fossilized kind (and, while we’re at it, sticking it to Vladimir Putin). That would be by investing in renewable natural gas (RNG) companies such as Vancouver’s Greenlane Renewables (TSX:GRN).

The drivers: The sweetener? The renewable energy subsector is still pretty reasonably priced right now after a big correction in 2021. Greenlane is no exception, trading at $1.01 a share Tuesday, down from a speculative high of $2.41 in January 2021.

What the heck is RNG, you’re asking? It’s methane extracted from landfills and livestock operations that would otherwise escape into the atmosphere, making it at worst a neutral party in the war against climate change. In addition to supply contracts with the likes of FortisBC Energy (TSX:FTS), Greenlane has proprietary technology for purifying biogas that it has sold to fellow RNG producers in the U.S. It recently closed the acquisition of Airdep, an Italian developer of biogas desulphurization technology.

The company reported revenue of $17.1 million for the fourth quarter of 2021, almost double its sales from a year earlier, with a net loss of $1.2 million. Full-year revenue for 2021 was up 146 percent over 2020, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) has been positive for five straight quarters.

READ MORE: Pacific Trader: Old versus new energy—who won in ’21?

Word on the street: “With a robust backlog of sales and the potential for several catalysts in 2022, including M&A and an augmented business model that includes more significant recurring revenue, we continue to like the outlook for Greenlane and maintain it as a ‘Top-Pick,'” Haywood Securities analyst Colin Healey wrote after the earnings release on March 11. “We see the recent weakness in the stock as an opportunity for investors to increase exposure at bargain prices as the underlying business remains robust.” Healey has a “buy” rating and target of $3.75 on the stock. The consensus target among analysts is $2.68.

Coming and going: In a sign of further consolidation in the cannabis subsector, formerly Nanaimo-based Tilray Brands (TSX, NASDAQ:TLRY) has announced a tie-up with Hexo Corp. (TSX:HEXO) that will see Tilray acquire US$211 million worth of convertible notes entitling the company, now operationally headquartered in Leamington, Ontario, to a “significant equity ownership position” in Ottawa-based Hexo.