07. October 2020 | 12:24 CET
BP, Royal Dutch Shell, Saturn Oil & Gas: The rebound with an announcement!
When someone talks about the largest commodities market in the world, they mean the oil market. Every day, almost 100 million barrels of black gold are produced and delivered worldwide, even though Elon Musk adamantly claims "Oil is out!” - He would be particularly well advised to find out how many oil products are used in a Tesla. More than 300 components are made of oil derivatives. According to British Petroleum, undoubtedly one of the major players in the industry, the global oil demand peaked in 2019. In its annual energy outlook, the energy company predicts a global decline in oil demand but a strong gas demand until 2050. Renewable energies are the fastest-growing energy sources over the next 30 years.
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ISIN: CA80412L1076 , GB0007980591 , GB00B03MLX29
"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
British Petroleum plc (BP) - Who is correct with the forecast?
It is sometimes not decisive whether BP has miscalculated by 10 or 20 years. At its core is the opinion that large oil producers, in particular, must now look for alternatives to their outdated business model. For years now, they have been investing free cash flows in alternative energy production, primarily regenerative. BP, in particular, needed a greener coat of paint after the Deepwater Horizon disaster, and the latest company policy indicates that this mindset is being reinforced.
With a balance sheet total of just under EUR 300 billion, BP is one of the 10 largest oil and energy companies in the world. Its net profit in 2019 was EUR 16.7 billion and has fallen to around EUR 4.5 billion in the current year, which is an even quarter. Although the share price was able to stabilize after the March sell-off, it recently fell back to below EUR 2.50. The high in the last 3 years was 6.75 EUR - a 65% loss. However, the dividend yield is still just under 8% even after the two-time reduction. Goldman Sachs sees a 70% chance in the BP share for the next 2 years.
Royal Dutch Shell plc - Under the wheels!
Industry colleague, Royal Dutch Shell, has not fared much better. The British-Dutch oil company is one size bigger than BP. Shell has total assets of over EUR 360 billion and a result of EUR 25.5 billion in 2019. Here, too, earnings are expected to be averaged to around EUR 8 billion, and the dividend yield will drop to around 5%. The share price has fallen just as sharply as at BP, a full 65% to the 3-year high of EUR 29.70.
Shell plans to lay off a total of up to 9,000 employees as part of a major overhaul to shift the focus to low-carbon energy by 2022. This will affect a good 11% of the total workforce of 83,000. Shell expects the reorganization to bring annual cost savings of up to EUR 2.5 billion by 2022. The shareholders will be happy, but the employees will have to tremble for the time being as to whether these steps will mean the end of the banner. There have been a lot of buy recommendations recently, but this is probably because the share price is well below the long-term average prices of all oil giants. The oil price will be important; it shouldn't see the lows of May 2020 again anytime soon.
Saturn Oil & Gas: Small but nice.
A real alternative to the oil giants is the small Saturn Oil & Gas from Canada. The company produced 1,400 barrels a day at peak production before Corona and is looking for expansion opportunities. The production price is around 12 USD operationally, which still provides a nice margin on current levels production. Of course, the company also conducts forward business and tries to stabilize its income via the forward curve. This increases planning reliability for future cash flows from oil sales and serves to service all financial liabilities.
The company's largest properties are located in West Central Saskatchewan. The oil fields offer good access to the underground deposits of Viking light oil. We also consider the regulatory environment to be "oil-friendly" - this means that production here will last several years until new developments are made to renew or expand the portfolio of deposits. The falling US oil price of WTI has put many local companies in financial difficulties, which puts the management of Saturn Oil & Gas in an acquisition role. If demand remains at a low level worldwide due to the COVID pandemic, there will be good buying opportunities among competitors.
Conclusion: with 234.6 million shares outstanding and a price of CAD 0.10, the company is currently valued at just under EUR 15 million, while the share price was already at a high of CAD 0.30. Jim Payne, the CEO of dynaCERT with whom we are familiar, recently bought shares. One may expect that in the event of a general market turnaround in the oil sector, very rapid upward price movements will take place, as the stock is tight and hardly any shares are available at the current level. With some nerves and timing fortune, the time is ripe for a speculative entry. Goldman Sachs blows with the oil multinationals to the attack. Of course, we are actively watching this.