March 25th, 2021 | 08:15 CET
Gazprom, BP, Saturn Oil + Gas: Which oil stock is the best?
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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.
Gazprom: The gas is flowing, one way or another
When investors think of energy stocks, the first names that come to mind are the big ones. BP is a familiar name, and so is Gazprom. Both stocks have already been able to profit in the wake of rising oil prices. Gazprom, in particular, also came through the phase well, in which oil prices were meager, and many market participants were already talking up the bankruptcy of many small companies. Currently, Gazprom is making a name for itself above all because of the North Stream 2 pipeline, which connects Germany directly with the production sites in Siberia and has become a political issue. Most recently, the new US Secretary of State called for the project to be stopped. Even if the construction stop would be a billion-dollar grave, Gazprom can get over such a development. The Company is already eyeing China and could simply deliver to the east instead of the west.
Both deliveries to China and sales to Europe have been going well for Gazprom recently. Rising energy prices should also continue to support the business. Gazprom has traded at a valuation discount for years and offers an attractive dividend - the stock currently yields around 6.6%. The share is and remains a standard stock, which nevertheless promises an above-average yield. However, investors should be aware of the deficits around sustainability and ESG criteria. Gazprom has some catching up to do in terms of transparency and environmental issues.
BP has sustainability fantasy - but not much else
BP, on the other hand, is somewhat further ahead. The Company, which still has to pay more than EUR 1 billion every year for the oil catastrophe in the Gulf of Mexico, has long since given itself a green makeover. The oil multinational now also offers wind farms. BP continues to try to divest business units that generate little revenue. This strategy is now bearing little fruit. Over one year, the share price has risen by 15%. In addition, the dividend yield is currently more than 5%. The BP share reflects the development of the oil market and has a little sustainability fantasy. However, the stock remains a rather dull standard stock.
Saturn Oil & Gas: The oil stock of the future
The Canadian oil producer Saturn Oil & Gas proved years ago that the oil business could also be a high-growth business. At that time, the Company was the most profitable oil company in Canada and showed strong organic growth. The reason: the Company operates in the Canadian province of Alberta, where it focuses on light oil from areas that have proven past productivity. Until the oil price crash more than a year ago, the Company grew rapidly because virtually every well was crowned with success. During the oil price crash and pandemic, the Company benefited from its high hedging ratio - Saturn had sold forward about half of its production by February 2021, securing an attractive pre-crisis price.
Saturn has since regained market competitiveness but is already looking to the future. Saturn has discovered sustainable oil production for itself and is pushing ESG criteria within the Company as well. Saturn wants to be a pioneer in environmental, safety and social issues. To ensure that more women have access to the oil industry in the future, the Company offers internships for female students only. However, the most significant step into the Company's future is likely to be the consistent implementation of the growth strategy announced months ago. Saturn intends to grow primarily inorganically and to buy existing projects.
Valuation of EUR 23 million as an opportunity
If an acquisition of significant size succeeds, the experienced team will turn a much more giant wheel overnight. The Company is currently valued at around EUR 23 million, is pursuing a clear growth strategy and understands its business. While stocks like BP or Gazprom are conservative, Saturn Oil & Gas offers considerable growth. Simultaneously, the risk is low: the team knows the local oil market, pursues a clear strategy around expansion and sustainability, and has long been profitable again at current oil prices.
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