May 20th, 2022 | 10:31 CEST
Energy shares: Plug Power, Saturn Oil + Gas, Nordex, Siemens Energy: The race for our future
Table of contents:
"[...] 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.
Nordex - Siemens Energy wants to take over Gamesa completely
Europe's fatal dependence on Russian energy supplies fuels the political debate about alternatives that can be implemented quickly. Now that the EU wants to increase both the savings targets from 9 to 13%, the share of renewable energies is also to be raised from 40 to 45% by 2030. This will require huge investments.
The strongest leverage is currently seen in wind and solar energy because their installation can be implemented in 3 to 6 years with available technologies. Siemens Energy's plans to completely take over the problem subsidiary Gamesa and delist it from the stock market also fits in with this. The Spanish wind power subsidiary is currently beset by a wide range of problems. The Siemens Gamesa share, which was initially suspended from trading, shot up by 18% with the news. The shares of Siemens Energy also rose by around 12% in the past week. Siemens Energy already holds a good two-thirds of the shares in Siemens Gamesa, which now has a stock market value of around EUR 10.6 billion after the share price jump.
The movement in the industry also seems to give the completely punished Nordex air under its wings again. In the course of the major correction of technology stocks, the German GreenTech stock also lost more than 30%, but now the price is jumping again. Nordex announced at the end of January that it would cease rotor blade production in Rostock at the end of June. Negotiations are currently underway with the Federal Ministry of Economics and Technology regarding the reduction of 600 jobs. In fact, Germany as a business location needs more GreenTech instead of less. Perhaps the big EU energy pact will help compensate for higher costs in favor of faster production with subsidies.
Saturn Oil + Gas - Moving up into a new league
When it comes to energy security on this planet, Canada's Saturn Oil + Gas has recognized the signs of the times. After all, fossil fuels will remain in demand for decades to come, especially if Russia is eliminated as a contracting partner for Western buyers. In Saskatchewan, where the Canadians are based, things have been going well for the past two years. After a transformational rebuild of the Company, it is now pumping more than 7,800 barrels per day (boe/d) out of the ground. Output is expected to swing up to 8,800 boe/d by the end of the year. In parallel, free cash flow continues to increase.
On the investment side, the fully funded drilling program of approximately 40 net wells for 2022 is about 32% complete, with most of the remaining drilling activity scheduled to resume in June and run through December. Based on the strong economics of the recent drilling programs, Saturn's Board of Directors has increased the 2022 capital expenditure budget by CAD 6 million.
In light of the recent increase in global oil prices, Saturn is also increasing the oil price assumption for its 2022 reference price forecast for WTI crude oil from USD 75 to USD 95. The revised 2022 forecast includes average annual production of 7,950 to 8,350 boe/d, representing an annual production growth of 17% to 22%. EBITDA is expected to be in the range of CAD 90.0 to 94.5 million. Free cash flow is also expected to increase to between CAD 29.4 million and CAD 33.9 million. All in all, this leads to a decrease in projected net debt at year-end 2022 of between CAD 36.4 million and CAD 42.0 million.
A widely misunderstood variable is hedging, i.e., the timing of cash flows. An important comparison here is the expected 2022 cash flow per basic share of CAD 2.48, which is also very close to the expected hedging loss of CAD 2.47 per basic share. As a result, without hedging losses, the total cash flow per share would be projected at CAD 4.95. So after hedging, Saturn shares trade at a 1.1 times cash flow multiple, with a 19-year reserve life and drilling inventory capable of sustaining production for decades. Thus, one could argue that well-backed cash flow per share would justify a higher multiple rather than one that is well below the peer average of 3 to 4.
With the new guidance, Saturn is noticeably increasing its output for 2022, as increased capital expenditures change projected and expected cash flows upward. Current available research studies from Beacon, Echelon, GBC Research and Velocity, which apply cash flow multiple analysis and discounted cash flows to today's value, already arrive at fair price targets between CAD 7.00 and CAD 13.12. However, the share is still trading at around CAD 2.80. Investors will eventually realize that there is no cheaper oil stock in North America at this time.
Plug Power - The top dog shows strength
The hydrogen specialist Plug Power is well in the running among alternative energy companies. In addition to the EU's commitment to more hydrogen, H2 technology has long been an integral part of Joe Biden's investment package. In the first quarter, Plug Power expanded its sales from USD 70.2 to 140.8 million. In the full year, after several revisions by the analysis houses, it is now expected to be just under USD 920 million, with USD 2 billion already in the plans for 2024. In terms of profits, Plug Power could be the sprinter among the H2 specialists, as breakeven is expected as early as 2025.
The latest news underscores the positive trend, as the hydrogen company has received an order to supply an electrolyzer with one gigawatt (GW) capacity. The client is the Swiss hydrogen company H2 Energy, which plans to produce green hydrogen in Denmark in the future. With the help of green electricity from Danish offshore wind farms, the electrolyzer will produce up to 100,000 tons of green hydrogen annually. According to engineers' calculations, it is expected to be the world's largest green hydrogen production plant to date.
Plug Power's stock was unable to escape the general downward trend on the NASDAQ, plummeting another 50% in just 6 weeks. With a 2024 price-to-sales ratio of 4, the stock is no longer overpriced, considering its pole position in the promising hydrogen business. Collect!
Energy markets are tighter than ever. With global distortions and long-neglected investments during the pandemic, there are currently too few new projects to meet the high demand in world markets. Alternative energy producers are still in demand, but oil is not yet out of the picture. The Canadian producer Saturn Oil + Gas is far too cheap in valuation, so the stock could secretly develop into a shooting star.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
For this reason, there is a concrete conflict of interest.
The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.
Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.
The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.