September 16th, 2021 | 13:17 CEST
FuelCell Energy, Saturn Oil + Gas, Gazprom - The Renaissance of fossil fuels
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.
Saturn Oil & Gas - Profiteer from scarce supply
All the world should be green, and climate change accelerated. For this reason, in addition to climate activists, politicians are putting pressure on major oil companies to curb their production due to environmental, social and governance concerns. This is certain to lead to a significant supply shortage in the coming years. In contrast, the growing world population is creating an increasing demand for raw materials for energy production. Since the infrastructure of renewable energies is far from being developed and the capacities for supply by water, wind, or sun are not sufficient, the global economy will have to rely on oil for a long time to come.
This fact will play into the cards of the still existing oil producers. High demand and scarce supply promise high margins and substantial profits. The beneficiary of this scenario is the Canadian oil producer Saturn Oil & Gas, which, unlike the big oil giants, has not retreated but taken the path forward through a major acquisition. With the acquisition of light oil deposits in the Oxbow area in southeastern Saskatchewan, Saturn Oil & Gas advanced at a stroke to become one of the largest oil producers in North America. The production volume alone has now increased twenty-fold to 7,000 barrels per day. That translates into a free cash flow of CAD 265,000 for the up-and-coming company per day.
The deal cost CAD 93 million in a combination of debt and equity capital. By selling large tranches of production for the next four years, the repayment of the debt burden by the end of 2023 is already secured. Moreover, Saturn Oil & Gas has the potential to generate further cash flow through the optimization and completion of over 550 existing wells.
Although the calculation is relatively simple, the good news presented on the occasion of the Q2 figures is not yet fully appreciated by market participants. After all, if one only calculates the secured cash flow of around CAD 80 million for the full year, the current price of CAD 0.17 results in a 2022 price-earnings ratio of ONE. Compared to the industry, investors are paying valuations with a factor of 5 to 10, so there is still an opportunity for interested investors to participate in the continued upward trend of the oil market.
FuelCell Energy - Explosion after figures
The fuel cell company from Danbury, Connecticut, posted a gain of over 27% at times. The reasons were solid figures for the third quarter, which even eclipsed analysts' estimates. In addition, FuelCell Energy reaffirmed its outlook. Revenue increased 43% year-on-year to USD 26.82 million, and net loss narrowed to USD 11.99 million from USD 15.33 million in the same period last year.
The targets of doubling the power generation portfolio and double-digit revenue growth compared to 2019 revenues of USD 60.8 million remain in place. Subsequently, the share price gains could not be maintained. Investors should wait for the price to calm down. In the area around USD 5.70, the paper becomes interesting.
Gazprom - It is on
The long-awaited and criticized Nord Stream 2 pipeline has been completed, and oil and gas prices are rising. Reason enough for the share price of the Russian state-owned company to climb to a new multi-year high and thus generate a new buy signal. It is now essential that the title does not fall below the renewed support. Interested investors should wait until the overbought situation has eased. In the long term, the title is more than interesting.
Climate change is underway, but there is still a long way to go before we have the renewable energy capacity to abandon fossil fuels entirely. Saturn Oil & Gas became one of the largest oil producers in North America through the acquisition made in May and is currently cheap compared to industry peers with a P/E ratio of 1. FuelCell Energy and Gazprom are promising long-term investments.
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