19. January 2021 | 09:01 CET
Gazprom, Saturn Oil & Gas, Exxon Mobil: The cards are being reshuffled in the oil sector
The oil price reflects the state of the real economy. After the first Corona lockdowns last spring caused the prices to plummet - ultimately bringing economic activity to a complete standstill - oil has now stabilized significantly. Since the beginning of November, Brent crude has gained around 50%. In the wake of the futures exchanges, the shares of production companies have also performed well. But here, too, there is light and shade - we look at three stocks between dull and highly speculative.
time to read:
ISIN: CA80412L1076 , US3682872078 , US30231G1022
"[...] Recovery rates of more than 90% rare earths are another piece of the puzzle on the way to the economic viability of our project. [...]" Craig Taylor, CEO, Defense Metals
Gazprom: Nord Stream 2 and no end in sight
If you look at Gazprom's share price over a one-year period, it still shows a loss of around 25%. But that is only half the truth. During the past three months, Gazprom shares achieved a return of almost 50% and followed the rally in the oil price almost one-to-one.
Gazprom is a solid Company, which was demonstrated during the pandemic's peak phase last year. Although the oil business came to a standstill, the gas division remained comparatively robust. Despite lower sales, the selling price even increased slightly. In recent months, the oil business has returned to normal and Gazprom is seen as a promising Company once again.
Russian oil producers have always had a reputation for paying high dividends. Gazprom is no different. While the recent rise in the share price has made the old record highs a bit of a distant memory, the stock still offers a dividend yield of more than 6%. Even though there has been some back and forth about the Nord Stream 2 pipeline in recent weeks and months, the conflict seems to have calmed down on a geopolitical level.
Most recently, however, environmentalists filed an appeal against the construction permit. What the future holds for the share remains to be seen. While Gazprom is also well positioned to sell its energy sources to Asia, the conflict surrounding Nord Stream 2 could continue to weigh on the share price.
Saturn Oil & Gas: What is management pulling out of the hat?
The small Canadian oil producer Saturn Oil & Gas's share price also came under pressure a little less than a year ago. The Company had grown organically in the previous years and had slowly but surely become the most profitable oil producer in Canada. But then came the pandemic and the collapse in oil prices. The Company decided that instead of tapping oil wells, it would be better to search for acquisition targets. Simultaneously, it announced that it had hedged significant parts of its production against fluctuations in the oil price. So even though oil went into a dive, Saturn has been achieving a price of CAD 65.30 for 400 barrels a day since February 2020. CEO John Jeffrey proclaimed that being able to respond appropriately to changes in the market was key to the Company.
In the meantime, the hedging deal, which closed for 1 year, is about to end. Investors are wondering what the future holds for the Company. Looking at some of the Company's publications over the past few months, you will notice, on the one hand, the clear commitment to sustainable oil production and, on the other hand, Jean-Pierre Colin. He has been a consultant to Saturn Oil & Gas since November. Colin is a specialist in all aspects of financing takeovers in the energy sector and has accompanied several of these transactions himself.
If Saturn Oil & Gas wants to live up to its announcements, details of the announced inorganic growth strategy should be announced in the coming weeks. The share price has recently been cautiously moving upwards. The share is interesting also against the backdrop of the impending return to normality after the pandemic.
Exxon: Top dividend, dull stock
While for Companies like Saturn Oil & Gas, where any corporate news can completely change the business model, the situation is different for industry heavyweights like Exxon. While Exxon's stock has produced a 35% return over the past three months, it also has an equally large loss on the price sheet over a one-year period. Exxon does about a third of its business in the United States. There, President-elect Joe Biden may have just declared a "green wave," but industry experts stress that the traditional energy business will continue to be an important one.
Exxon may not be the darling of all sustainably-minded investors, but the Company has raised its profile in this area. Also, Exxon offers a high dividend of more than 7%, making it a solid value. Beyond the EUR 47 mark, the share price could pick up speed again. With stocks like Gazprom or Exxon, conservative investors, in particular, are well served. However, Saturn Oil & Gas offers significantly higher leverage on the oil price and, above all, some potential for surprises.At current oil prices, the Company is profitable even with its existing production facilities. Also, there is the fantasy of possible takeovers. The Company is currently valued at around EUR 18 million.