We are tracking trends and changes in grid development and the investment world, and I have several podcast guests lined up to discuss this significant shift in grid management, technology, and investments. One key issue we are asked about frequently is why you invest in privately held oil companies rather than publicly traded ones on the U.S. stock market. My answer is a combination of risk and reward evaluation. With over 50% of the oil in the United States produced by privately held companies, there is considerable room for upside. That is what my team at Sandstone does daily in evaluating oil and gas deals to determine viability and long-term wealth creation.
We also have a new podcast series on AI and Energy. This will be critical as the grid management is shifting, and we need to understand more about how and in what direction it is moving.
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Research suggests the electrical grid is shifting toward renewables, with increased demand from EVs and data centers.
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It seems likely that investing in electrical utilities and oil & gas companies can diversify portfolios, given their strong 2025 performance.
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The evidence leans toward energy stocks outperforming the broader market, with a 10.21% year-to-date return versus the S&P 500’s 4.27% decline.
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Leading companies include NextEra Energy and ExxonMobil, but risks like regulatory changes exist.
- Privately held oil companies offer greater risk/reward investments with tax benefits.
The Changing Grid and Investment Opportunities
The electrical grid is evolving, with a focus on integrating renewables like solar and wind, which now account for nearly 30% of U.S. electricity generation . This shift is driven by rising demand from electric vehicles (EVs), data centers, and industrial electrification, with projections of 4% annual growth through 2030. Electrical utilities are investing heavily in grid modernization and energy storage, while oil and gas companies are diversifying into low-carbon technologies like hydrogen and carbon capture.
Investing in these sectors can help your portfolio by offering diversification, high dividend yields (3-4% for energy stocks versus 1.5% for the S&P 500), and resilience against market volatility. Energy stocks have shown strong performance in 2025, making them attractive for long-term growth.
Growth of Energy Stocks Compared to the Market
In 2025, energy stocks have outperformed the broader market, with the S&P 500 Energy Index up 10.21% year-to-date as of April, compared to the S&P 500’s 4.27% decline . This is driven by rising natural gas prices and stable oil prices, with energy stocks offering a 11.08% CAGR over five years, highlighting their potential for growth and income.
Leading Companies
Electrical Utilities:
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NextEra Energy (NEE): World’s largest renewable energy producer, with a 2.5% dividend yield.
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Duke Energy (DUK): Focuses on grid modernization, offering a 4% dividend yield.
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Southern Company (SO): Expanding renewables, with a 3.8% dividend yield.
Oil and Gas Companies:
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ExxonMobil (XOM): Global leader with a 3.2% dividend yield, investing in low-carbon tech.
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Chevron (CVX): Strong balance sheet, 3.5% dividend yield, and renewable fuels focus.
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Shell (SHEL): Diversifying into renewables, with a 3.7% dividend yield.
Survey Note: Detailed Analysis of Grid Changes and Investment Opportunities
The energy sector is undergoing significant transformation, particularly in how the electrical grid operates and the strategic positioning of electrical utilities and oil and gas companies. This survey note provides a comprehensive overview, expanding on the direct answer with detailed insights from recent data and trends, ensuring a thorough understanding for investors and industry observers.
The Evolving Electrical Grid
The electrical grid is shifting from a centralized, fossil-fuel-based system to a decentralized, renewable-integrated network. According to the U.S. Energy Information Administration (EIA), renewables accounted for nearly 30% of U.S. electricity generation in 2024, up from 20% five years prior, driven by solar, wind, and hydropower . This shift is supported by global trends, with the International Energy Agency (IEA) forecasting renewables to meet about 95% of electricity demand growth through 2027, surpassing coal in some regions .
Key trends include:
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Energy Storage and Grid Modernization: Battery storage, particularly lithium-ion, is critical for managing renewable intermittency. Companies are also exploring flow batteries and smart grids enabled by IoT and AI, enhancing efficiency and reliability .
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Decentralization: Distributed energy resources (DERs), such as rooftop solar and microgrids, are reducing reliance on centralized power plants, improving resilience, especially in emerging markets like India, where grid integration challenges persist .
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Demand Growth: The rise of electric vehicles (EVs), data centers, and industrial electrification is driving demand, with the EIA projecting 4% annual growth through 2030. Data centers, particularly for AI, are exacerbating water stress in some regions, prompting utility collaborations .
Utilities are responding with record capital expenditures, expected to reach $174 billion by the end of 2024, with 42% allocated to transmission and distribution systems, according to Deloitte . However, challenges like supply chain disruptions for transformers and escalating costs from extreme weather events, costing $53 billion in the U.S. from January to August 2024, add complexity.
Investment Opportunities in Electrical Utilities and Oil & Gas
Investing in electrical utilities and oil and gas companies offers a balanced approach to capitalize on the energy transition. Electrical utilities provide stability through regulated business models, high dividend yields, and exposure to renewables, while oil and gas firms offer growth potential and resilience in a commodity-driven market.
Why Invest Now?
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Diversification: Energy stocks are less correlated with tech-heavy sectors, offering a hedge against inflation and market volatility. Their 3-4% dividend yields compare favorably to the S&P 500’s 1.5%, appealing to income-focused investors .
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Growth Potential: The IEA projects global energy demand to rise 50% by 2050, driven by electrification and population growth, creating long-term opportunities .
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Policy Tailwinds: Federal incentives like the Inflation Reduction Act are funneling billions into clean energy, supporting both utilities and diversified oil companies .
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Valuation: Energy stocks are relatively undervalued, with an average P/E ratio of 12 compared to the S&P 500’s 20, offering value for long-term investors .
Oil and gas companies are adapting by investing in low-carbon technologies, such as carbon capture, hydrogen, and renewable fuels, to align with decarbonization goals. This diversification reduces exposure to fossil fuel decline and positions them for future growth, as seen in recent investments by Chevron and Shell .
Performance of Energy Stocks Compared to the Broader Market
In 2025, energy stocks have significantly outperformed the broader market. As of April, the S&P 500 Energy Index returned 10.21%, while the S&P 500 declined by 4.27%, according to U.S. Bank . This contrasts with 2024, where energy stocks lagged with a 6% decline versus the S&P 500’s 25% return, highlighting a turnaround driven by rising natural gas prices and stable oil prices.
Key drivers include:
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Commodity Prices: Oil prices stabilized at $70-$80 per barrel, and natural gas prices rose due to export demand, particularly from Europe, boosting sector performance .
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Long-Term Returns: Over five years, energy stocks delivered an 11.08% CAGR, compared to the broader market, underscoring their resilience and growth potential .
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Analyst Sentiment: Analysts are optimistic, with upgrades for companies like ConocoPhillips, reflecting confidence in 2025 prospects .
However, energy stocks remain volatile, moving in tandem with commodity prices, which can fluctuate due to geopolitical tensions and economic conditions .
Leading Electrical Utilities
Electrical utilities are pivotal in the grid’s transformation, with significant investments in renewables and grid infrastructure. Below is a table of leading companies, based on market capitalization and recent developments:
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Company
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Market Cap (May 2025, USD)
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Overview
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Dividend Yield
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Recent News
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NextEra Energy
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~$170 billion
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World’s largest renewable energy producer, serves millions via Florida Power & Light
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2.5%
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Announced $2B investment in solar and storage in Q1 2025, +15% capacity
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Duke Energy
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~$90 billion
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Serves 8.2M customers, focuses on grid modernization, net-zero by 2050
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4%
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Secured approval for 1,200 MW solar project in NC, operational by 2026
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Southern Company
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~$85 billion
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Serves 9M customers, expanding renewables, strong nuclear presence
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3.8%
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Completed 500 MW battery storage facility in 2025, one of the largest in U.S.
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These companies are part of a new generation of “green supermajors,” challenging traditional energy firms with large investments in renewable capacity .
Leading Oil and Gas Companies
Oil and gas companies are diversifying to stay relevant, with a focus on low-carbon technologies. Below is a table of leading U.S.-based companies, based on market capitalization and recent developments:
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Company
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Market Cap (May 2025, USD)
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Overview
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Dividend Yield
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Recent News
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ExxonMobil
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~$500 billion
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Global leader in exploration, refining, investing in carbon capture, hydrogen
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3.2%
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Acquired Pioneer Natural Resources for $60B in 2024, strengthening the Permian Basin
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Chevron
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~$280 billion
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Upstream and downstream, growing focus on renewable fuels, geothermal
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3.5%
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Launched 100 MW geothermal project in CA in 2025, powers 80,000 homes
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Shell
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~$200 billion
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Global energy company, diversifying into renewables, net-zero by 2050
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3.7%
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Announced $10-15B investment in low-carbon solutions by 2025, focusing on biofuels
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These companies are adapting to investor pressure and judicial rulings, increasing non-fossil fuel assets to align with decarbonization goals .
Risks and Considerations
While the energy sector offers opportunities, risks include:
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Regulatory Changes: Stricter environmental policies could impact oil and gas profitability, particularly under potential global trade wars .
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Commodity Price Volatility: Oil and gas stocks are sensitive to price fluctuations, exacerbated by geopolitical factors like OPEC+ production cuts .
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Technological Disruption: Rapid advancements in renewables could outpace traditional utilities’ adaptation, especially in grid integration and storage solutions .
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Geopolitical Factors: Global conflicts and trade policies can affect energy markets, adding uncertainty to investment decisions .
Investors should conduct thorough research and consult financial advisors to align investments with their goals, given these complexities.
Conclusion
The grid’s transformation, driven by renewables and rising demand, creates opportunities for investors in electrical utilities and oil and gas companies. With energy stocks outperforming the market in 2025 and strong long-term growth prospects, now is a strategic time to consider these investments. Leading companies like NextEra Energy, Duke Energy, ExxonMobil, and Chevron offer stability, dividends, and growth potential, but risks like regulatory changes and volatility require careful consideration.
As stated above, one key point we are seeing is that the risk-reward question arises frequently. Why do I want to invest in a private oil company vs. a publicly owned oil company on the stock market? To be perfectly honest, I do invest in the big oil companies when the stock charts say buy, but I have also lost money as the market is fickle, and can move counter to what financials show is a good buy. When we review oil and gas deals from the private sector, we have more access to data rooms, well logs, offsetting wells, prior payouts, and with our industry grasp on where energy prices are going, we have more insights into the private sector deals.
Yes, there is more risk, but there are also more rewards and a tax advantage to investing if done correctly. As always, ask your tax professional for advice on what is best for your portfolio.
Please reach out to us, and you can use any form on the site, or check out our Substack where we will be ansewering more questions and have more deal evaluation discussions here:https://theenergynewsbeat.substack.com/
Key Citations