Zefiro Methane: Turning Old Wells into New Business
Admittedly, there are more glamorous activities than filling in decommissioned oil and gas wells. However, on the stock market, a good business does not need a red carpet for investors. Abandoned wells can release methane and block construction projects. Companies that can professionally remove such legacies, like the North American environmental services provider Zefiro Methane, solve a tangible problem. Zefiro’s operating subsidiary, Plants & Goodwin, brings more than 50 years of experience to the table.
The state-funded contract worth USD 11.5 million from the Great Lakes region, announced on September 8, shows how strong demand is for these services. Work is scheduled to begin in November and run through June 2029. Approximately USD 3 million must be spent by the end of June 2027. This improves planning for the deployment of personnel and equipment.
Three additional projects in Ohio and Pennsylvania, funded by federal funds and also recently announced, are expected to generate an additional volume of approximately USD 1.9 million. In total, these projects involve 12 abandoned wells. Zefiro was the sole bidder on two of the contracts. Work is scheduled to begin in December or January. The projects can be flexibly scheduled within a twelve-month timeframe. This allows the company to bridge slower periods and fit in short-notice orders from private customers.
The figures show that what began as an interesting idea has now become a robust business. The company generated positive operating cash flow for seven consecutive quarters. In the first nine months of fiscal year 2026, Zefiro increased revenue by 36% to USD 33.2 million. Gross profit more than doubled to USD 10.7 million. Adjusted EBITDA came in at USD 4.25 million. All three quarters of the fiscal year to date were profitable on an adjusted EBITDA basis.
In the third quarter alone, revenue climbed 58% to approximately USD 11 million. Gross profit improved by as much as 153%. At the same time, total debt fell from USD 12.3 million to USD 8.2 million within a single quarter. Management expects full-year revenue to exceed USD 40 million. Zefiro achieved this progress despite one-time costs of USD 652,000 resulting from a dispute with the former management.
The equipment acquired from Viking Well Service in May could provide additional momentum. For USD 4.3 million, Zefiro acquired, among other things, five drilling rigs. Management expects this to generate approximately USD 10 million in additional annual revenue.
A new study by ATB Cormark Capital Markets dated September 9 illustrates just how much patience this might require. Analyst Nicholas Boychuk initiates coverage with an “Outperform” rating and a price target of CAD 1.00. Compared to the current share price of CAD 0.65, this represents more than 50% upside potential. For the fiscal year ending in June 2027, the research firm expects revenue of USD 53.3 million and adjusted EBITDA of USD 4.8 million. In the following year, these figures are projected to rise to USD 62 million and USD 12.2 million, respectively.
Boychuk therefore does not expect the major jump in earnings until fiscal year 2028. Among other things, the integration of the additional facilities will take time. The price target assumes that Zefiro will indeed achieve this operational improvement. Analysts see additional upside potential in emission credits from verified methane reductions. According to their analysis, the potential of these credits, as well as further acquisitions, is not yet factored into the price target.
A recent report on Zefiro Methane can be found here:
https://youtu.be/3MrjCUk5_QU
The Augsburg-based financial services provider GBC Research is also very optimistic and has rated the stock “Buy” with a price target of USD 1.50 or CAD 2.12, which mathematically corresponds to a price potential of over 200%. The idea that Zefiro’s stock could potentially triple in price sounds remarkable. However, if the company translates its recent momentum into sustainable growth and stable profits, such price surges would not be out of the question. The market would then likely completely reevaluate the stock.
There is a surprising connection to the boom in data centres .** In Pennsylvania, Zefiro plugged nine gas wells on the site of a former coal-fired power plant. A natural gas-powered site for large data centres is planned there. In Louisiana, Zefiro also completed an energy infrastructure project worth approximately USD 5 million three weeks ahead of schedule. Before building new infrastructure, teams sometimes have to eliminate old risks from the ground. This is precisely where Zefiro can generate revenue.
To ensure that its progress is more widely recognized on the stock market, Zefiro commissioned the MZ Group to handle investor communications in early September. Roadshows, conferences, and outreach to institutional investors are intended to raise awareness. This could help the stock and provide new momentum. Even though the stock has already gained more than 100% year-to-date, it could very well triple in value again in the coming months. However, the stock remains highly speculative. Nevertheless, the risk-reward profile is improving: revenue and gross profit are rising, EBITDA is positive, debt is declining, and the larger fleet is laying the foundation for the next phase of growth. For risk-tolerant investors, the stock remains an exciting addition to a portfolio.
Shell: Oil Prices Rise, Cash Flows Follow
While Zefiro is cleaning up the legacy of oil production operations, Shell is profiting from its ongoing business. In the second quarter of 2026, the oil giant posted an adjusted profit of USD 9.8 billion. Operating cash flow exceeded USD 21 billion. In addition to favourable price conditions, operational performance and the liquefied natural gas (LNG) business contributed to the results. Refineries operated at record capacity utilization with high margins. At the same time, net debt fell to approximately USD 42 billion. Shell announced a new USD 3 billion share buyback program.
However, investors should not extrapolate an exceptionally strong quarter to the full year. Oil prices and refining margins move in cycles. If the supply situation eases, profits could decline. Most banks and research firms, however, remain optimistic. Of the 21 analysts currently covering Shell, 11 recommend “Buy”, 9 recommend “Hold”, and only 1 recommends “Sell”. The median price target of GBP 4.05 implies a potential upside of just under 15%. At first glance, the valuation looks very attractive. The analyst consensus puts the current-year P/E ratio at around 9.8. For 2027, analysts expect a P/E ratio of 9.6. The industry median, however, is only half that high. The bottom line is that Shell remains an established cash flow stock, though it is also a bet on the profitability of the commodities business.
Siemens Energy: Full Order Books, Nervous Investors
At Siemens Energy, market sentiment and business performance have recently diverged. The stock has seen price declines amid new concerns about the pace of AI expansion. Fewer data centres could ultimately mean fewer power plants and grid connections. However, orders already placed paint a strong picture so far.
In the third fiscal quarter, order intake reached EUR 17.9 billion, and the order backlog rose to EUR 162 billion. Revenue increased by 18.5% on a comparable basis to EUR 11.4 billion. Even the long-troubled wind power subsidiary Siemens Gamesa delivered a positive quarterly result for the first time since fiscal year 2022.
Added to this is speculation about a restructuring. On August 25, Siemens Energy announced preparations to spin off Transformation of Industry. Possible options include external investors or a capital market transaction. The Group intends to retain a significant minority stake. An initial public offering (IPO) is thus an option, though no decision has been made yet.
In the short term, the stock is sensitive to doubts about the AI boom. In the long term, what matters is the execution of orders and the investment needs in power generation and grids. The well-funded balance sheet provides visibility but does not protect against cost overruns on major projects.
Analysts remain optimistic, however. Currently, 22 banks and research firms recommend buying the stock; only 4 analysts have a “Hold” rating, and just 2 recommend “Sell”. The median price target of just under EUR 194 implies approximately 37% upside potential. However, the stock is not cheap. For 2026 and 2027, the estimated P/E ratios are around 30 and 22, respectively. The industry median for the coming year is just under half that. Given the expected growth in operating profit, however, the higher valuation appears justifiable. For more conservative long-term investors, Siemens Energy remains an attractive portfolio addition.
Zefiro offers the most unconventional growth story, with new contracts and analyst price targets ranging from CAD 1.00 to over CAD 2.00. However, this hot stock also carries the highest risk of the trio. Compared to the speedboat that is Zefiro, Shell is the conservative tanker with plenty of depth, scoring points with strong cash inflows and share buybacks and promising stability even in rough seas. Its upside potential, however, is significantly more modest. Siemens Energy, meanwhile, offers investors a full order book and restructuring potential, but has already performed very well and is now quite highly valued.
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