Drill Deep, Plug Wells, Manage Risk: How Daldrup, Zefiro and Munich Re Make Money from Climate Protection

Daldrup & Söhne: Legacy Liabilities on Its Own Doorstep

Some participants at the Equity Forum's autumn conference in Frankfurt could hardly believe their ears. Andreas Tönies, CEO of drilling services provider Daldrup & Söhne, introduced the company's latest business line: the professional plugging of old oil and gas wells. The technical term is Plug and Abandonment, meaning to plug off and leave behind. An audience member asked Tönies how many such wells existed in Germany. His answer: „Thousands.“

The United States' struggle to deal with the legacy of the oil barons has been reported several times. Methane continuously escapes from abandoned wells, known as orphan wells. Over 20 years, the gas is about 80 times as harmful to the climate as CO₂. But what about resource-poor Germany? According to Tönies, one key difference is that the former operators are well-known corporations such as ExxonMobil, Shell or the former BASF subsidiary Wintershall. They pay for decommissioning. In the fracking paradise of the US, by contrast, those responsible often can no longer be identified or have long since gone bankrupt.

Daldrup's core business, however, lies deeper. It has been drilling for 80 years, today primarily for geothermal energy at depths of up to 6,000 m. Other activities include resource exploration and scientific projects, infrastructure and the environment, as well as the newly reorganised Well Remediation & Decommissioning division. Since August, work there has included filling old wells in Lower Saxony for British oil group Harbour Energy, which acquired Wintershall Dea. But geothermal energy sets the pace. Support comes from the new Geothermal Energy Acceleration Act and a KfW promotional loan that covers exploration risk. This refers to the risk that drilling encounters too little hot water.

In the first half, Daldrup increased total output by 56% to EUR 32.3 million. Operating earnings before interest and taxes (EBIT) rose 29.3% to EUR 3.43 million. However, the margin fell from 12.8 to 10.6%. This was due to investments in equipment, including five used drilling rigs, and prudential deductions on outstanding final invoices. The bottom line was earnings per share of EUR 0.49, compared with EUR 0.41 in the previous year. The order backlog of around EUR 132 million extends well into 2027.

For 2026, the management board confirms its target of total output of around EUR 58 million with an EBIT margin of 11.5 to 13.5%. Analysts consider this very conservative. Holger Steffen of SMC Research expects total output of EUR 62.5 million and raised his price target from EUR 29 to EUR 30. Ralf Marinoni of Quirin Privatbank remains slightly below this at EUR 28.80. Both recommend buying. From the current share price of around EUR 23.20, the price targets imply upside potential of 24 to 29%. A major project in Pullach near Munich, whose drilling start has been postponed to the fourth quarter, could provide fresh impetus. From November, two deep wells in neighbouring Aschheim will follow for EUR 16 to 18 million. Management considers total output of EUR 100 million achievable by 2030.

Zefiro Methane: Cleaning Up on a Grand Scale

In the US, the motto is „think big“ – unfortunately also when it comes to orphaned oil wells. „Thousands“ may have caused astonishment in Frankfurt; across the Atlantic, however, it is more like thousands upon thousands. Around 2.2 million known abandoned wells there emit methane. And on the way to each recorded well, Luke Plants discovers others that appear on no map. His family business Plants & Goodwin in Pennsylvania, is the operational arm of the listed Canadian company Zefiro Methane. Unlike at Daldrup, the business here revolves almost exclusively around plugging wells.

The market is enormous. Plants and Zefiro CEO Catherine Flax even estimate up to 3 million abandoned wells. With the November 2021 Infrastructure Investment and Jobs Act (IIJA) legislation, Washington made USD 4.7 billion available for remediation. That is just a drop in the ocean: the think tank Carbon Tracker estimates the total costs at around USD 280 billion. By comparison, Zefiro is one of the industry's larger players and has a market capitalisation of around USD 46 million. At the same time, plugging is becoming more expensive. In New Mexico, the price per well rose from around USD 50,000 (before 2021) to about USD 250,000. Specialist providers are scarce, with equipment and skilled staff as bottlenecks. Alongside orders from public bodies and non-profit organisations such as the Well Done Foundation, new customers are emerging, such as data centre operators, for whom orphaned wells on their land can mean costly construction delays. Investors interested in the methane problem and Zefiro's business performance should watch the latest interview with Zefiro CEO Catherine Flax, conducted by IIF presenter Lyndsay Malchuk.

In the 2025/26 financial year ended in late June, Zefiro increased revenue by 31.1 % to USD 42.5 million. Adjusted operating earnings before interest, taxes, depreciation and amortisation (EBITDA) swung from minus USD 4.0 million to plus USD 3.8 million. The net loss shrank by more than two-thirds to USD 3.5 million. For 2026/27, the target is „over USD 50 million in revenue“, while analysts at GBC Research even expect USD 57.9 million. The order situation is also healthy: in late September, an emergency assignment in Michigan worth USD 500,000 and a first carbon storage project in Indiana worth USD 750,000 were added. Plants & Goodwin also completed its second project in Cuyahoga Valley National Park in Ohio. In 47 national parks alone, an estimated 1,800 orphaned wells await plugging. To cope with the growing flood of orders, acquisitions could be an option, as Flax hinted at an investor meeting in Munich. In May, Zefiro acquired Viking Well Service equipment for USD 4.3 million. This added five additional drilling rigs – and new business contacts with clients in five more US states.

CEO Flax, who previously held senior positions at J.P. Morgan and BNP Paribas, has set further changes in motion since taking office in June 2025, alongside organic and inorganic growth, to transform Zefiro into a highly profitable industry heavyweight. A second source of income is carbon credits. The company has already sold certificates for 92,956 t of CO₂ equivalent, including to commodities trader Mercuria. The American Carbon Registry, which is responsible for the credits, is currently revising its calculation methodology. Afterwards, management intends to sell directly to major data centre operators such as Alphabet or Amazon, which should generate more income than selling through intermediaries. GBC analysts Cosmin Filker and Matthias Greiffenberger recommend buying. They set a price target of CAD 2.12 or USD 1.50. That is more than three times the current price of around USD 0.41 (currently EUR 0.35 on German trading venues).

Munich Re: Backing for Geothermal Energy

DAX heavyweight Munich Re has also long since discovered carbon credit trading. Through its subsidiary TreeTrust, the group has been arranging certified reforestation projects since 2022, for example in Costa Rica. However, its connection to Daldrup is closer than to Zefiro, through geothermal energy. Together with KfW and the Federal Ministry for Economic Affairs, the group has been offering exploration risk insurance since the end of 2025. If a well turns out to be dry, insurance and KfW debt relief step in. This alone makes many projects financeable for municipal utilities and banks. Drilling companies such as Daldrup benefit directly from this.

The core business has performed well recently. In the first half of 2026, Munich Re earned EUR 3.93 billion, more than ever before. The second quarter alone accounted for EUR 2.2 billion, while analysts had expected only EUR 1.8 billion. This was made possible primarily by unusually low major loss burdens. The profit target of EUR 6.3 billion for the full year remains in place. By contrast, the management board lowered its revenue forecast from EUR 64 to 62 billion because reinsurance prices are weakening. At contract renewals in July, they fell by 5.5%.

In the long run, however, the Munich-based company will not play this game. Chief executive Christoph Jurecka set the direction: „We deliberately forgo business for which we do not receive risk-adequate prices“, he said at the half-year results presentation. The stock market nevertheless reacted with disappointment. On the day the half-year report was published, the share fell by almost 3% to EUR 508.40 at one point and was among the weakest DAX stocks. The record profit could not reassure investors amid price concerns. Whether the earnings forecast will be raised further depends on how the hurricane season unfolds through November.

At the current share price of EUR 523.80, the average analyst price target of around EUR 550 is only slightly higher. The range extends from EUR 500 at RBC to EUR 598 at Barclays. At the end of September, Jefferies lowered the target from EUR 600 to 550 because reinsurance prices are falling faster than expected. The share nevertheless remains attractive for dividend investors. According to consensus estimates, the dividend of EUR 25.71 per share expected for this year corresponds to a yield of 4.9%. Added to this is a share buyback programme of up to EUR 2.25 billion.

Methane, Geothermal Energy, Insurance: Three Paths, One Goal

Orphaned wells are a largely overlooked climate problem, but for specialists, they represent a growing market. Two trends are working in their favor: remediation needs far exceed the funding available. Because equipment and skilled workers are scarce, per-well prices are also rising. Zefiro Methane shares offer the purest way to invest in this market. The business model relies almost entirely on plugging abandoned wells, supplemented by carbon credit sales. The operational turnaround has been achieved, and GBC's price target suggests considerable upside potential.

Daldrup & Söhne is more broadly positioned. Decommissioning old wells is a promising addition here, but geothermal energy sets the pace. An order backlog extending well into 2027, political tailwinds, and conservative forecasts favour the share, while reduced margins and delays such as those in Pullach require patience.

Munich Re helps insure the geothermal boom on which Daldrup depends. The reinsurer is the trio's solid anchor: Falling prices in the core business dampen expectations, but record profits, a dividend yield of around 4.9% and share buybacks make the share interesting for investors with staying power. Anyone wishing to invest in this theme has a choice of different risk profiles, from a solid core holding to speculation with considerable potential.