July 7th, 2021 | 13:21 CEST
Gazprom, Saturn Oil + Gas, BP - First-class trading opportunities: dispute in OPEC causes prices to fluctuate
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"[...] 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
GAZPROM PJSC ADR - Price doubled
Just a few days ago, Brent oil was trading at USD 77. Thus, the black gold increased by 80% within the last 12 months and is trading at its highest level since October 2018. In the long term, crude oil prices will rise mainly due to increasing global activity in the real economy and thus based on increasing demand. However, the oil production levels of major countries may significantly impact the price level of the commodity in the short term, as is happening at the moment. Now the markets are playing the fear card.
In OPEC, the Saudis are setting the tone. Another heavyweight is Russia, which leads several cooperation partners. There were recent discussions about increasing daily production by 400,000 barrels per month starting in August to reflect the strengthening global economy. The talks failed because the United Arab Emirates demanded a higher production quota, and this was rejected. Is the organization now threatening to break up?
Gazprom is a beneficiary of higher commodity prices. Shares in the world's largest natural gas producer have doubled since last fall. Even though natural gas is its primary business, a production volume of 41.6 million tons of crude oil in the past fiscal year is no small feat. The group currently has a market capitalization of USD 92 billion. Despite the strong share price performance in recent months, the stock is still moderately valued with a 2022 P/E ratio of 5. The projected dividend yield is an impressive 10%!
SATURN OIL + GAS INC - Good news!
Recently, the emerging Canadian oil and gas producer reported a series of good news. Saturn has begun field development in southeast Saskatchewan on the newly acquired Oxbow property. Two new non-operated wells are scheduled to be drilled this summer, with the first well to be drilled promptly. The acquisition of the Oxbow property takes the Company into new dimensions. Oxbow's facilities are located in southeast Saskatchewan and currently produce nearly 6,700 BOE per day. Other key aspects include that the Oxbow property has extensive infrastructure and facilities with direct pipeline connections to the global distribution network. The project covers 11,484 sq km of land. Saturn expects over 1,000 producing wells, 60 major facilities, 2,500 kilometers of connected pipelines and 244 wells ready to drill. From undeveloped land to multiple drill sites and pipelines, Saturn acquired assets with a replacement value of approximately CAD 1 billion at a fractional value.
To add personnel to further expansion and development, the Canadians also announced that Kevin Smith has been recruited as Vice President, Corporate Development. Smith has over 20 years of experience in the energy and financial services industries, most recently serving as Vice President of Business Development for Renaissance Oil Corp. - he built the first independent oil and gas producer in Mexico in over 80 years. In addition, Smith held leadership positions in investment banking.
The Company also announced that the conversion of the special warrants issued in the oversubscribed CAD 32.2 million private placement to acquire the Oxbow Property will now become freely tradable common shares and share purchase warrants. Each unit per special warrant will consist of one common share of the Company and one common share purchase warrant, with each warrant entitling its holder to acquire one common share of the Company at an exercise price of CAD 0.16 for a period of 24 months from the date of issuance of the special warrants. The share is currently quoted at CAD 0.135. The analysts of GBC are convinced of the prospects of the Canadians and formulate a price target of CAD 0.46.
BP - Analysts see almost 50% price potential
In a recently published study, the US bank JPMorgan raised its price target for the British crude oil company from 440 to 480 pence, or EUR 5.61, and confirmed its "Overweight" rating. That currently results in an upside of almost 50%! The experts refer to the good "ongoing capital discipline." High cash flows can be generated from this, which are also above the analysts' previous expectations, and allow the buyback of own shares to be significantly increased. In the short term, the experts believe that OPEC's rejection of higher production volumes will lead to rising oil prices and, as a result, stimulate positive share performance.
At the moment, there is a lot to be said for high volatility in oil and gas stocks. Although the economy is picking up and demand for the commodity is rising, the dispute in OPEC, excessively high oil prices and thus rising inflation are still a burden. It is a matter of taste whether investors invest in large companies such as Gazprom or BP or smaller emerging players such as Saturn Oil+Gas.
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