October 10th, 2023 | 08:40 CEST
Exxon Mobil, Saturn Oil + Gas, Shell - Setback offers new opportunities
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.
Shell - Surprising results
Against the weak overall market, one of the world's largest petroleum and natural gas companies, headquartered in London, was able to hold its ground significantly last week. The political events over the weekend and a reinvigorated oil price caused the Shell share to level the high for the year at GBp 2,663. A sustained overcoming should thus herald an attack on the all-time high at GBp 2,845.50.
The reason for the positive mood among Shell shareholders was positive statements on the third fiscal quarter, which indeed contained surprises. For example, the British company stated that revenues from gas trading recovered in the third quarter after the slump in the previous three months.
In addition, oil trading results are also expected to be better than previously forecast. Royal Bank of Canada estimates that the division will add USD 200 million to USD 300 million compared to the previous three months.
The renewable energy and energy solutions sector is at least in stagnation. Under new CEO Wael Sawan, who has been in office since the beginning of the year, the focus is once again primarily on the core oil and gas business. In doing so, Shell is striving to generate optimal returns for its investors, thus narrowing the valuation gap with its peer group from the United States. The Company plans to present its final figures on November 2.
After the update, major Swiss bank UBS reiterated its buy rating and a price target of GBp 3,000. According to analyst Henri Patricot, Shell should have performed better than the consensus estimates suggest.
Saturn Oil + Gas - Analysts see doubling potential
The rapidly expanding energy company based in Calgary, Canada, also provided an update. Subsequently, the analyst firm Echelon Capital Markets commented and sees the emerging oil producer as a buy candidate with a price target of CAD 5.65. With the current price at CAD 2.61, financial experts believe there is a potential upside of approximately 116%. With a 1.4x enterprise value-to-discounted free cash flow 2024 ratio, there is a significant undervaluation compared to peer companies in the Junior Oil Peer Group, which are valued at a ratio of 1.9. According to analysts, this valuation gap is expected to narrow, especially by the end of the first quarter of 2026, when debt repayment is complete.
Better-than-expected initial drilling also went well, targeting the Spearfish area and including five horizontal wells in the Manor area of southeastern Saskatchewan. These showed an average initial production rate over 30 days of 102.5 barrels per day, exceeding management's expectations by 33%. By fiscal year-end, Saturn Oil & Gas plans to drill an additional 30 wells across its Cardium, Viking, and Montney land base through SE Saskatchewan.
Management, led by CEO John Jeffrey, expressed pride in Saturn Oil & Gas' achievement of 18th place in the 2023 ranking of "Canada's Top Growing Companies", which it secured with a three-year growth of 1,929%. The Company is presenting today at the 8th IIF - International Investment Forum. Registration is free of charge.
Exxon Mobil - Before the megadeal
The chart situation for the US oil company Exxon Mobil is not quite as positive. Although the oil multinational also benefits from the political unrest in Israel and started the trading session with a plus of over 2% to about USD 110.00, the title is close to its upward trend established since October 2020 at USD 99.85. Indicators such as RSI and the trend follower MACD have already delivered sell signals. A break of the important trend will likely result in prices in the range of the USD 90 mark.
A possible acquisition of the shale oil specialist Pioneer Natural Resources by Exxon Mobil for a volume of USD 60 billion caused a stir. According to the "Wall Street Journal", which refers to informed circles, the oil giant could significantly expand its activities in West Texas and New Mexico.
Exxon sees this area as a key growth driver. The deal would be Exxon's largest acquisition since its USD 81 billion takeover of Mobil in 1998, making it one of the leading producers in the lucrative Permian Basin, the largest shale oil field in the United States.
Hamas' attack on Israel abruptly ended the correction currently underway in the oil market. Shell is about to reach a new high for the year. Exxon Mobil wants to grow further through a mega deal. Saturn Oil & Gas offers new attractive entry opportunities after the setback. Analysts see a doubling potential here.
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