May 14th, 2021 | 15:56 CEST
BYD, Saturn Oil + Gas, Varta - Now the lid is flying off!
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.
Prepared for transformation
At the end of last year, one could read the intentions of the CEO of Saturn Oil & Gas, John Jeffrey, in several media outlets. The Company, which operates oil fields in the province of Saskatchewan in Canada, was planning to acquire larger competitors or projects that fit the Saturn Oil & Gas strategy and immediately provide noticeable scalability to sales and cash flow. It was the only way to take advantage of the unique situation.
After months of due diligence, the acquisition of assets in the Oxbow area of southeastern Saskatchewan, one of the best economic areas in North America, has now been announced. The purchase price was valued at approximately CAD 93 million and consists of a long-term loan of CAD 82 million, a brokered private placement of CAD 6 million and an unbrokered private placement of CAD 15 million. Thus, after the contribution, the number of shares will increase from currently 234.57 million shares to approximately 410 million shares, plus new warrants.
Enormous economies of scale
Saturn Oil & Gas plans to be debt-free within 24 months. The acquisition of the Oxbow assets will increase daily production to 7,500 BOE/day, a factor of more than 10. The new acquisition is expected to generate CAD 65-70 million in net operating revenues over the next 12 months - secured by oil price hedging. The low purchase price is particularly attractive, with Saturn paying only 1.4 x cash flow of the approximately 280,000 net acres, or only about CAD 14,000 per flowing BOE. In normal times, prices were even closer to CAD 100,000 per BOE.
Saturn's production will increase by more than 2,000%, with PDP reserves rising by a whopping 1,300% compared to the Company's 2020 year-end reserves. For the next three years, the Company has identified the potential to generate annual free cash flows by optimizing and recompletion of more than 500 existing wells.
With this acquisition, Saturn Oil & Gas moves up several leagues to become a major publicly traded producer of light oil in North America. The market capitalization before the announcement of the acquisition was EUR 17.6 million. Based on the numbers presented, this makes the stock a candidate for a multiple. Put simply; production will increase tenfold. The number of shares will roughly double, so the share price should move swiftly in the direction of CAD 0.50 following the lifting of the trading suspension from the most recent level of CAD 0.12, which is expected today.
Tesla rolls over
The sales figures for April were positive for the Chinese electric car manufacturer BYD. It was even able to outpace US giant Tesla in total sales of new energy vehicles. In April, BYD sold 16,114 BEVs, up 62% from April 2020, and added 8,920 plug-in hybrids, a huge jump of 288% from the same period last year, resulting in NEV sales of 25,662 electrified vehicles. That's an increase of 97.5% from April 2020 and 6% from the previous month.
Enormous imagination through spin-off
The timing couldn't be better. Due to the current global chip shortage, the "Build Your Dream" Company plans to take its proprietary chip division, BYD Semiconductor, public after the spin-off is complete. BYD Semiconductor Co. Ltd specializes in the development of chips for the electric car industry. The spin-off company will be listed on the Growth Enterprise Market of the Shenzhen Stock Exchange.
After the planned IPO, the parent Company still intends to hold around 72.3% of the shares, or 325,356,668 shares. BYD Semiconductor's most recent valuation was USD 1.44 billion. The news brought only short-term enthusiasm to the BYD share price, resulting in a share price of USD 15.11. At the USD 15 mark, broad support should hold. Otherwise, a further slide into the area around USD 12.50 threatens.
Things are looking up in the e-car market
The figures for the first quarter are out. Sales were slightly less at battery manufacturer Varta, but the business was more profitable. EBITDA rose by almost 16% to EUR 59.9 million. The Company's goal is to further increase profitability in all segments. The forecasts for the year as a whole also point to a rosy future. The Company anticipates sales of EUR 940 million. In addition, the margin is expected to increase by around 2.5%. Following the announcement around 8 weeks ago that Varta intends to enter the production of batteries for electric cars, Varta announced on Wednesday that it had found a first customer for its V4Drive lithium-ion batteries. It also said it would continue to focus on developing larger lithium-ion round cells in the future. However, the name was still kept secret by management.
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