15. July 2021 | 17:29 CET
BP, Deutsche Rohstoff, Encavis - Is that it?
Nothing works without energy. But the world also needs to keep an eye on resource extraction and climate protection. ESG is a big investment topic. Even if the ideal target includes primarily renewable energy, that is simply out of touch with reality. Oil and gas producers are an attractive investment due to the high prices of the extracted raw materials. When will the next price jump come?
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ISIN: BP PLC DL-_25 | GB0007980591 , DT.ROHSTOFF AG NA O.N. | DE000A0XYG76 , ENCAVIS AG INH. O.N. | DE0006095003
"[...] The Oxbow Asset now delivers a substantial free cash flow stream to internally fund our impactful drilling and workover programs. [...]" John Jeffrey, CEO, Saturn Oil + Gas Inc.
BP PLC - In the wake of oil price fluctuations
As one of the world's largest players, the British oil company naturally cannot escape the general conditions driven by supply and demand, among other things. That is where the Opec+ oil association comes into its own. According to media reports, while the association of oil-producing countries recently broke off talks on higher production volumes in a dispute, there is now a new attempt to reach an agreement. In connection with these developments, the BP share naturally fluctuated. But the simple formula that rising demand for oil, or again coupled with a supply shortage, is good for oil companies only applies with secondary conditions. Because the joy about higher oil prices and bubbling profits at the producers lasts only so long, until the market, in view of "too high" prices, becomes afraid once again of strongly rising inflation and effects damaging the economy. Roughly speaking, the current oil price level is very comfortable to generate more than adequate returns for all producers. Shareholders should undoubtedly be pleased with that.
DEUTSCHE ROHSTOFF AG - Profit explosion in the first half-year
Deutsche Rohstoff AG identifies, develops and sells raw material deposits in North America, Australia and Europe. For some time now, the development of oil and gas deposits in the USA has been the main focus of business activities. Business is booming. According to preliminary figures, the Mannheim-based Company increased its consolidated net income to an incredible EUR 17.5 million in the first half of the year! In the previous year, a consolidated loss of EUR 13.4 million had to be accepted. On the sales level, the Company advanced to EUR 38.3 million (previous year: EUR 26.1 million). Still, the major change occurred on the operational level with an EBITDA increase to EUR 39.9 million (previous year: EUR 15.8 million).
As a result of the figures for the first half of the year, which were well above expectations, and the continuing favorable underlying conditions and strong production, the Executive Board recently increased the forecast for the current fiscal year and 2022. In particular, the advised operating profit in 2021 is impressive at EUR 57 to 62 million (previously EUR 42 to 47 million). But the outlook for 2022 is also strong, with EBITDA of EUR 47 to 52 million (previously EUR 40 to 45 million).
The forecast is based on an expected average oil price of USD 70 in Q3 2021, USD 65 in Q4 2021 and USD 60 in 2022 as a whole. Previously, the Mannheim-based Company had assumed USD 60 for 2021 and 2022. For the gas price (Henry Hub), the assumptions provide a price of USD 3.0 in 2021 and USD 2.75 in 2022. The EUR/USD exchange rate is assumed unchanged at 1.22.
At prices around EUR 17, the Company is valued at just EUR 85 million. That means that investors are not even paying two times the expected EBITDA. The P/E ratio should then be a very moderate 4 in the current year. Such valuation ratios can otherwise only be found in a few emerging market stocks. For a company with projects in established jurisdictions, one can only conclude that the share is highly undervalued.
ENCAVIS AG - Buy recommendation by analysts
Encavis AG is an MDAX-listed producer of electricity from renewable sources. The Hamburg-based Company is one of Europe's leading independent power producers (IPP). Enacvis acquires and operates solar parks and (onshore) wind farms in ten countries. The sustainable power generation assets generate stable income through guaranteed feed-in tariffs (FIT) or long-term power purchase agreements (PPA). Total generation capacity currently exceeds 2.8 gigawatts (GW). Within the Encavis Group, Encavis Asset Management AG specializes in the institutional investor segment. From an ESG perspective, i.e. whether the Company meets principles such as environmental, social and governance performance, the Group is well ahead.
Most recently, Warburg Research raised its price target for the shares from EUR 18.80 to EUR 18.90 and reaffirmed its "Buy" rating. The analysts conclude that after the weather conditions had spoiled the first quarter for the provider of renewable energies, there are now signs of stabilization for the second quarter. The share is currently trading at around EUR 16, giving the Company a market capitalization of EUR 2.2 billion.
One can always argue about valuations and potential. Only a look back provides clarity. BP is certainly a good opportunity to profit from the high oil price. For us, the Deutsche Rohstoff share represents a crystal-clear undervaluation. Investors should position themselves before the final half-year figures in mid-August. But Encavis also offers attractive potential, according to analysts.