April 25th, 2022 | 13:26 CEST
BP, Saturn Oil + Gas, Shell - Oil shares in focus after the French election
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"[...] 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 - Waiting for the numbers on May 3
An oil price of more than USD 100 should bring record results to oil majors like BP. But the stock is not doing so well compared to the other big players. This is mainly due to the abandonment of the Rosneft stake, in which BP held almost 20%. It is unclear how much money the Group will lose from the sale in the future. The stake has an estimated value of USD 14-25 billion. The 2021 financial figures show that the Russian stake was responsible for one-fifth of the total profit. May 3 is the day of truth, and shareholders will learn how many billions will have to be written off.
Revenue is expected to be USD 55.9 billion, with earnings of USD 1.37 per share. In presenting its latest quarterly results, the Company beat analysts' estimates on profit by USD 200 million and announced a USD 4 billion share buyback program. In addition, BP's transformation to a carbon-neutral company plays an important role. In late March, the Group announced plans to invest about USD 1.3 billion in electric fuel pumps over the next 10 years and has signed a contract to supply charging equipment with Australia's Tritium.
No matter what comes out of the numbers in early May, the increased oil price will absorb at least some of the losses. Analysts paint a mixed picture. While JPMorgan raised its price target to 500 pence, Deutsche Bank lowered its target to 450 pence. The share was quoted at EUR 4.686 at Xetra close. If the dividend remains the same as in the 4th quarter, there is about EUR 0.20 dividend in the year or 4.2% at the current price. Currently, the share is in an upward trend that will continue as long as the closing price does not fall below EUR 4.34.
Saturn Oil & Gas - Clear undervaluation according to 4 studies
The Canadian oil and gas producer Saturn Oil & Gas is significantly smaller than BP. Nevertheless, it offers greater opportunities than the oil multinational. After taking over the production of 6,700 barrels of light oil per day last year, another takeover of 240 barrels per day followed this year. At the IIF Industry Talk, CEO John Jeffrey indicated that average production of 8,000 barrels per day is planned for 2022. The high oil price will help pay down the Company's debt by the third quarter of 2023. After that, shareholders are expected to benefit in the form of dividends, share buybacks or new accretive acquisitions.
On April 12, the Company announced its independent reserves report. Year-over-year, audited and probable reserves grew 668% to 50.7 million barrels. That gives Saturn 8.7 years of production at worst and 19.2 years at best, even if no further acquisitions are made. In April, four corporate analysts from different analyst firms weighed in. GBC led the way, followed by Beacon Securities, Velocity Trade Capital and Echelon Capital Markets. All studies show Saturn as clearly undervalued compared to its peer group. The price targets range from 7.00 Canadian dollars (CAD) to CAD 13.12.
For more information, see the updated analysis on researchanalyst.com. Next up are the annual figures and the figures for the first quarter. The latter, in particular, may provide a more accurate indication of how the Company is performing with the high price of oil. Perhaps CEO John Jeffries can present the numbers at the next International Investment Forum on May 19. Registration is already open here, free of charge. With the analysts' studies, the share managed to leave its sideways trend between CAD 2.70 and CAD 3.08 to the upside and rose to CAD 3.56. Subsequently, the share fell again and is currently quoted at CAD 3.09. The upward trend remains intact as long as the closing price does not fall below CAD 2.82.
Shell - Diversified position
Shell has significantly outperformed its competitor BP this year. That is because Shell is not as heavily involved in Russia. According to the Company, it is only facing write-downs of between USD 4 billion and USD 5 billion due to its withdrawal from the Russian business. In addition, the Group focused on wind power early on to implement its transformation into a sustainable company. Now that many governments want to abandon fossil fuels even faster and rely on renewable energies, this step is paying off for the oil multinational.
On April 7, the Group provided an outlook for its first-quarter figures. Production is between 860,000 and 910,000 barrels of oil equivalent, and liquefied natural gas is between 7.7 and 8.3 million tons. For the first time, the renewable energy sector is reported separately. That shows that the transformation is slowly taking shape. On April 20, Shell published its progress report on the energy transition. By the end of 2021, the Group has reduced its emissions by 18% compared to 2016. Investments in low-carbon fuels, solar and wind energy or hydrogen are mainly responsible.
The reward for these efforts is a sharply rising share price. The share is currently trading at EUR 26.07. Due to the high oil price and the now increasingly important assets in the field of renewable energies, the Group is diversified and well-positioned for the coming years. In addition, of course, there is the large share buyback program of USD 8.5 billion. Investors who are not yet invested should wait for a significant setback before getting in. The dividend yield is also only around 2.8%.
The high oil and gas prices are helping all producers. While there is some uncertainty at BP due to the significant investment in Russia, things look much better at Saturn Oil & Gas. Canada is more crisis-proof for oil and gas producers. In addition, the value has the greatest potential. Shell is better positioned than its primary competitor BP, but the potential is lower in both price and dividend.
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