A New Energy Revolution in West Texas

West Texas is known as an energy powerhouse of the United States… and for good reason.

The Permian Basin located there produces 48% of all U.S. crude oil. And since it was first tapped in the 1920s, it has pumped over 35 billion barrels of oil and 75 trillion cubic feet of natural gas.

These numbers are truly staggering. But I believe there is another energy revolution starting in the same area that could match the power of the Permian Basin. And it has remained almost completely under the radar.

It has nothing to do with oil and gas, and unlike the flurry of a drilling operation, it’s nearly silent.

Thanks to the small (but growing) coverage this new technology is receiving, we can still invest in the early stages.

The Early Days of ‘SMR’

The country’s first small modular reactor (“SMR”) is under construction at Abilene Christian University located on the edge of the Permian Basin. The university received the Nuclear Regulatory Commission’s first approval for construction in decades.

As the name suggests, these reactors use nuclear fission technology to produce power. But unlike conventional nuclear reactors, they are small – very small.

These SMRs fit on a large truck, are built in factories, and each one can power tens of thousands of homes. Almost everything people think they know about nuclear is now wrong.

Anyone interested in the future of energy needs to pay close attention to what’s going on in this rapidly evolving sector. It has the potential to change everything from our national energy infrastructure to what powers artificial intelligence.

Things are changing in Texas and elsewhere. Nuclear is back. And it’s hard to find better evidence than the project at Abilene Christian University. The $30 million in funding to the university to jumpstart this ambitious project wasn’t from the government, an environmental nonprofit, or a tech billionaire.

It was from Douglas Robison, a third-generation Texas oilman.

In today’s edition of the Wide Moat Daily, I’ve done your homework for you. I’ll walk you through the most critical facts about this nuclear renaissance and explain exactly who the key players are.

The Technology

There has been little improvement in nuclear power technology in the last 70 years. The basic physics and designs are from when the Manhattan Project was still active. That is, until recently.

Instead of 20 years, the traditional time it takes to build a conventional reactor, SMRs can be built, moved, and installed in as little as three to five years. Instead of gigantic and complex safety systems, SMRs use passive systems. That means it doesn’t require careful monitoring or even any staff on site. The most advanced SMRs even recycle their own spent nuclear fuel.

There are also new reactor types. The first is molten salt. This uses liquid salt instead of water to cool the reactor. It may seem bizarre at first, but it’s actually simpler and safer than water. Liquid salt operates at a lower, safer pressure. And since the salt is already molten, there are no core meltdowns like you see in the movies.

Fast-neutron reactors can use nuclear waste as additional fuel. This means huge efficiency gains, greater power production, and lower expenses.

So, what does all this mean in practice?

Old reactors use 5% of the costly nuclear fuel’s energy. Despite this, they are still among the cheapest sources for electricity. The new types can exceed 90% utilization of nuclear fuel, which is a complete game changer by itself. If we add up heat loss and other factors, the efficiency of the new reactors is 10 to 20 times better. This is all while generating 50% to 90% less nuclear waste, which can be costly and complicated to deal with. Not to mention, these reactors are far safer, simpler, and cheaper per unit of power generated.

The Players

Let’s talk about the companies you need to know about. Cameco (CCJ) is a $23 billion leader in uranium mining and production. If nuclear starts replacing other types of energy, demand for uranium should continue to rise. It’s not my favorite play, however, because the new hyper-efficient reactors also require a lot less fuel than traditional plants.

TerraPower is the leader in sodium-cooled fast reactors. It’s founded and backed by Bill Gates and is building a pilot project in Wyoming. This is a private company, but a good one to keep an eye on as it’s getting a lot of press and funding.

Oklo (OKLO) is a higher-risk, higher-potential-reward company that manufactures its own SMRs in Colorado. The problem is that its first reactor’s completion date keeps getting pushed back. It’s now 2028, which means the company won’t have much revenue until at least then. Oklo is also expensive at 40 times 2028’s projected sales, but with a market cap of just $5 billion, there is a lot of upside if things work out.

BWX Technologies (BWXT) is a proven company founded in 1867. It specializes in microreactors for the Department of Defense (“DoD”), like what power nuclear submarines. Its long and lucrative contracts with the DoD provide stability, while its long history of expertise with nuclear position it well for growth if the industry takes off.

Centrus Energy (LEU) is a niche player in the new nuclear ecosystem. It supplies a specialty low-enriched nuclear fuel called HALEU. Supported by the Department of Energy, Centrus is the only company with a license to produce HALEU. And this matters a lot because most next-generation SMRs and advanced reactors require HALEU. The only competitor globally is Tenex in Russia, but you can guess how much business Tenex is doing in the U.S. or Europe these days.

NuScale Power (SMR) is one of the most prominent early entrants in the SMR industry. It was the first to have its SMR design approved by the U.S. Nuclear Regulatory Commission, so that gave it a valuable head start.

NuScale’s reactors have all the benefits we talked about before, and its technology and engineering are top notch. But there are risks. Most of the company’s current revenue is from government grants and partnerships rather than from traditional customers. One of NuScale’s first clients, the Utah Associated Municipal Power Systems, canceled its project in 2023. This is another high-risk, high-potential-reward company betting on a bright future for nuclear.

Why This Is a Space You Need to Watch

There is a reason Amazon (AMZN), Microsoft (MSFT), Google (GOOG), Dow Chemical (DOW), Fluor (FLR), and many others have invested billions into next-generation nuclear power. That includes betting on many of the companies I listed before, like NuScale, Oklo, and TerraPower.

The potential of this industry is almost limitless, and it resonates with hardcore capitalists and environmentalists alike. We’ll continue to keep a close eye on its development and how it might impact other investments in your portfolio, like wind, solar, utilities, and oil and gas producers.

Regards,

Stephen Hester
Chief Analyst, Wide Moat Research