CDZI: Cadiz Inc is a land and water resource development company in California. Its primary business is to acquire and develop land with water resources for various uses, including groundwater supply, groundwater storage, and agriculture. The company focuses on the development of the Cadiz Valley Water Conservation, Recovery and Storage Project which will capture and conserve native groundwater currently being lost to evaporation from the aquifer system beneath the property of Cadiz and Fenner valleys of eastern San Bernardino County, and deliver it to water providers throughout Southern California. The company operates in two segment- Land and Water Resources and ATEC Water Systems LLC.
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Our Analysis
Posted: 5Â months, 3Â weeks ago // April 6, 2023 1:21 p.m. UTC
By all accounts, the sheer amount of snowfall and rain in the western United States has reached historic proportions, with parts of Utah incurring more than 700 inches of snow so far this winter. This record snowfall is in stark contrast to previous years in which much of the same region has undergone drought conditions, prompting governments to put in place steep water usage regulations.
However, in an ironic twist of fate, cities and counties now have more water than they know what to do with. Aquafers and levees have begun to reach their breaking point, putting millions at risk of potential flooding. Additionally, governments are scrambling to find new methods to store this water for future use.
As a result, certain companies might benefit significantly from this new push for water infrastructure by governments. Recent examples of government initiatives include Governor Gavin Newsom, who has begun to roll back various water regulations that would otherwise inhibit water storage, and transport. Other actions include Utah, which notably awarded a $10 million contract to Cadiz Inc. (CDZI) in March for a groundwater filtration system.
While this contract is undoubtedly good news for Cadiz, which has been struggling to commercialize its groundwater storage technology in recent years, upon further research, it might just be the tip of the iceberg.
When looking at Cadiz Inc's recent lobbying disclosures, we can see an unusually high amount of expenditures pertaining to public land use, or more specifically, the Northern Pipeline Project, which, if approved, would allow Cadiz to finish converting hundreds of miles of oil and gas pipelines to water pipelines instead. If approved, this project would undoubtedly make Cadiz one of the largest water utility companies in the South-West United States overnight. However, due to environmental concerns, this project was flagged in 2021, prompting Cadiz to go on a lobbying spending spree to fight the ruling.
By all accounts, just a few months ago, this approval would seem like a pipe dream, however given the recent change in the political climate towards water transport and storage, as well as the pressing need for more water transport and storage facilities, this project could very well be approved sooner than anticipated.
In addition, recent insider trading disclosures seem to point towards Cadiz insiders being optimistic about the company's future, with more than $14 million in shares bought by insiders so far this year alone. All of this points towards a significant opportunity for Cadiz, and we’ll continue monitoring the company going forward to see how this situation plays out.
Disclosure: The content is for informational purposes only; you should not construe any such information as investment, financial, or other advice. I/We have no business relationship with any company whose stock is mentioned in this article.
