April 20th, 2022 | 12:57 CEST
BP, Saturn Oil + Gas, Deutsche Rohstoff - Continued clear dependence
Table of contents:
"[...] 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.
Oil price below zero
Can you remember the historic oil crash in March 2020, when oil futures were trading in negative territory? At that time, few market participants believed that the energy carrier could recover to USD 100 per barrel. The major exception were the analysts of JPMorgan. Even before the historic oil price collapse in March, Christyan Malek, head of oil and gas research in Europe, the Middle East and Africa, had proclaimed a target of USD 190. Malek reasoned that severe oversupply in the oil market had resulted in a production cut. Thus, oversupplied oil markets would fall into a "fundamental supply deficit." "The deficit speaks for itself. That means oil prices will go through the roof," he said about 24 months ago.
Sanctions add to the pressure
Whether the analyst had a crystal ball was not conveyed. In any case, he was spot-on in his assessment of the situation. His targets would probably have been even higher if he had known at the time about the sanctions against Russia that had been imposed and were still planned. These are now creating further pressure and exacerbating the shortage on the supply side. Shares in BP and Shell are booming and are already trading well above their levels before the Corona pandemic. For BP, the US bank JPMorgan sees further price potential and raised the price target from GBX 480 to GBX 500. The verdict was reiterated at "overweight". The above-mentioned analyst Christyan Malek remains optimistic for oil and oil stocks and expects the beginning of a multi-year supercycle. In addition to BP, Shell, Eni, Neste and Repsol are the expert's other favorites.
Saturn Oil & Gas with significant reserves
In addition to the major players in the oil market, the analyst community is also euphoric for emerging producers from the second tier. Saturn Oil & Gas is a Canadian exploration and development company that holds licenses for oil and gas exploration in southeast Saskatchewan and west-central Saskatchewan. Both analyst firm GBC Research, with a price target of CAD 13.12, the equivalent of EUR 9.41, and Beacon Securities, with CAD 8.50 (EUR 6.23), see multiplication potential for the Company. After markets yesterday, 'Velocity Trade Capital' came out with an initial research report and rated the stock as 'Outperform' with a price target of CAD 7.00.
In their latest study, the analysts at GBC AG assume an average production of 8,000 boe/d in 2022. That should lead to massive revenue growth of an estimated CAD 287.1 million. In addition, experts Julien Desrosiers and Felix Haugg believe that given the current oil price, the Company will accelerate its debt repayment and reduce net debt by 80% by the end of 2022 and could be 100% debt-free as early as the third quarter of 2023.
Increase of 668%
Recently, Saturn Oil & Gas released the results of the independent reserve evaluation of the Company's oil and natural gas assets as of December 31, 2021, in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook. The reserves report, prepared by Ryder Scott, evaluated the Company's assets and showed the tremendous growth that the Canadians have put in place since the transformative acquisition last June. Thus, the year-on-year increase is 668%. The work relates to 351 locations booked for drilling, 85% of which are at the Oxbow asset alone. In the oil to gas mix, samples are 96% oil to natural gas liquids and 4% natural gas.
In March 2020, at the outbreak of the Corona pandemic, a Deutsche Rohstoff AG share cost EUR 6. Two years later, investors had to pay five times that amount. EUR 31.10 represented a new all-time high after Russia's invasion of Ukraine. Currently, the stock is consolidating at a high level in the EUR 27.00 range. Mainly responsible for the excellent development of the last years was the still acting CEO, Dr. Thomas Gutschlag. On June 28, however, he is to call it a day. At the virtual Annual General Meeting, the Company's leader intends to move to the Supervisory Board. The current CFO, Jan-Philipp Weitz is already in the starting blocks as his successor.
Operationally, the revenues in the recent past consisted of the oil and gas business. In order to be prepared for the future, the Mannheim-based Company wants to evaluate early-stage lithium exploration projects in the state of Western Australia together with the Australian Company SensOre. Deutsche Rohstoff AG announced, "The binding term sheet provides for eight targets identified by SensOre's technology to be jointly explored initially and acquired if appropriate."
The dependence on oil and gas is likely to remain in the coming years. In addition to the big players such as BP, up-and-coming and comparatively undervalued producers such as Saturn Oil & Gas will also benefit. If the price continues to rise, Deutsche Rohstoff AG will also remain interesting.
Conflict of interest
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