Close menu




November 1st, 2022 | 12:26 CET

Halloween of energy prices: Shell, BP, Saturn Oil + Gas, Nel ASA - Is this the peak yet?

  • Mining
  • Oil
  • Gas
  • Hydrogen
Photo credits: pixabay.com

It sounds ambitious! To completely transform Europe in terms of energy supply, the European Union would need to invest a good EUR 300 billion in alternative energy sources, infrastructure and raw material supply contracts by 2030. By 2021, Germany alone was importing 45% of its fossil fuel energy from Russia, its valued partner until then. After the invasion of Ukraine, this business partner will likely be taken off the list. But this also means that the very favorable sources for Central Europe will no longer be accessible. So prices for electricity, heating and mobility will remain high. Which stocks can benefit from this scenario?

time to read: 5 minutes | Author: André Will-Laudien
ISIN: Shell PLC | GB00BP6MXD84 , BP PLC DL-_25 | GB0007980591 , Saturn Oil + Gas Inc. | CA80412L8832 , NEL ASA NK-_20 | NO0010081235

Table of contents:


    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] 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

    Full interview

     

    Shell vs BP - Is the oil rally now over?

    The word "excess profit taxation" is making the rounds. Even if the oil multinationals will not like it, the public sees the current high energy prices as a "windfall profit" for the oil companies. While they keep raking in billions in profits, private households are being pushed to the limit of their financial capacity. Gas levy or not, even the price cap for households and businesses costs the taxpayer several hundred billion. So why not skim off the excess profits of oil producers? This undertaking is not easy because it has no basis in purely legal terms. In the opposite case, a state would have to share in the special losses suffered by the oil companies during the spread of the pandemic in 2020, when the oil futures price fell below zero in April. Of course, the oil multinationals are currently shining under sanctions against Russia.

    US President Joe Biden, like the EU Commission, is criticizing the current record profits of energy companies after Shell announced its second-highest profit ever while increasing its dividend. In addition, there are to be share buybacks instead of a much-needed price cut at the pumps. Biden's remarks were, of course, immediately rejected by oil industry leaders. All Democratic proposals to impose so-called windfall profit taxes on energy companies have repeatedly failed, even when the party controlled both chambers of Congress.

    Shell most recently announced plans to buy back USD 4 billion more of its stock over the next three months, bringing its total buybacks this year to USD 18.5 billion. The Company also plans to increase its fourth-quarter dividend by 15%. Chart technically, both Shell and BP are at their highs. Since the oil price should tend to fall slightly in the medium term, the lush profits should soon be history. Analysts rate both companies predominantly positive and see, on average, still up to a 20% price potential. Today BP reports on the third quarter. The figures should look similar to Shell.

    Saturn Oil & Gas - The picture is getting better and better

    No matter which economic picture you want to put first, the long-term geopolitical picture will keep energy prices up for a while. In this scenario, however, distortions and artificial shortages can always occur. The Canadian oil producer Saturn Oil was courageous and, in an uncertain time, expanded its production neatly through acquisitions in just two years. By mid-September, daily capacity had already reached 12,000 barrels (boe/d). Meanwhile, the Company can put 50% of its cash flow into paying off the loans taken out to acquire the additional Viking fields in Saskatchewan. That brings the current debt of about CAD 200 million to zero by 2024, assuming WTI prices remain at about USD 80 or above.

    Thanks to forward transactions, Saturn can already make its plans today with a high degree of certainty. That is because it was able to sell forward part of its expected production in the second quarter at spot prices between USD 95 and 115. What was intended as a means of securing income for servicing the loans is now proving to be a special profit in subsequent quarters. Currently, the Company is benefiting from the unhedged production shares that can be sold at high spot market prices. This brings the current surpluses to unimagined heights and, at the same time, frees up funds that can be used for further development.

    The present outlook could, therefore, not be better. Stable oil prices and rising production rates go hand in hand. The target for average daily recovery in 2023 is estimated at around 13,400 barrels (boe/d), generating full-year adjusted EBITDA of around CAD 252 million. With about 59.7 million shares, the current market capitalization is only CAD 170 million. For perspective, Saturn Oil is currently valued at only about 1.7 times 2023 free cash flow. VTC Research already estimates an operating cash flow of more than CAD 100 million for the second half of 2022 and consequently calculates a DCF price target of CAD 7.19 per share for the next 4 years. The technical breakout above the CAD 2.82 mark took place yesterday. The next quarterly figures will come on November 8th. The Company will present itself at the raw materials trade fair in Munich in the next few days and then go on roadshow in Europe. There is much to suggest that investors have still not internalized the excellent story.

    Nel ASA - More and more orders, but it takes time

    In competition with fossil raw materials, the subject of hydrogen is moving forward internationally. One of the protagonists in Europe is the Norwegian Nel ASA. While the previous quarters tended to disappoint, the Norwegians presented themselves confidently in the last report. Business is still sluggish, but under the new CEO, Hakon Volldal, the Company is landing one major order after another.

    On the whole, the last quarterly figures were still somewhat disappointing. The operating EBITDA loss increased from NOK -113 million to NOK -214 million in the third quarter. At the same time, the Company's revenues deteriorated from NOK 229 million to NOK 183 million; analysts had expected revenues of NOK 296 million in advance. However, in terms of order intake in Q3, NEL posted a 456% YOY increase to NOK 775 million, which should keep its still-scarce capacity busy for several quarters. Management repeatedly emphasized that they want more public support for the H2 climate offensive.

    The Nel share price reacted calmly to the figures, falling in the first few hours, but in the last few days, it has been able to climb again by over 13% to EUR 1.23. Current broker estimates see a wide range in the price targets between NOK 9 and 28, yet the short-term targets are currently lowered in favor of an improved long-term outlook. Investors should always pay attention to the momentum in the volatile H2 stock, which is currently pointing slightly upwards again. But not a single hydrogen stock in the world is cheap, as there are no assessable profits before 2025.


    Energy markets remain tight as demand for fossil fuels remains high. Shell and BP are profiteers from the current supply situation, while Nel ASA, the hydrogen expert, still has a long way to go to profitability. Saturn Oil & Gas from Canada boasts a 2023 P/E ratio of 1.5, provided management's estimates materialize.


    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
    For this reason, there is also a concrete conflict of interest.
    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.

    The acquisition of financial instruments involves high risks, which can lead to the total loss of the invested capital. The information published by Apaton Finance GmbH and its authors is based on careful research. Nevertheless, no liability is assumed for financial losses or a content-related guarantee for the topicality, correctness, appropriateness and completeness of the content provided here. Please also note our Terms of use.


    Der Autor

    André Will-Laudien

    Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.

    About the author



    Related comments:

    Commented by Fabian Lorenz on April 11th, 2024 | 07:30 CEST

    Panic at AIXTRON and NEL! Is Kraken Energy an AI beneficiary?

    • Mining
    • Uranium
    • nuclear
    • renewableenergies
    • AI

    AIXTRON shares lost more than 5% yesterday. In addition to the price slide on the NASDAQ, a negative analyst comment added to the negative sentiment. Both the rating and target price of the AIXTRON share were significantly reduced. The same applies to Nel. The hydrogen specialist's recovery attempt was mercilessly stifled, and the share lost over 15%. The lack of incoming orders, in particular, is making analysts nervous. In contrast, Kraken Energy could soon be seen as an AI beneficiary. After all, Elon Musk is not the only one warning of an energy crisis and calling for the expansion of nuclear energy. Voices are getting louder that the computing power required for artificial intelligence will cause energy consumption to explode. In order to prevent a blackout, many countries are turning to nuclear power.

    Read

    Commented by Fabian Lorenz on April 11th, 2024 | 07:00 CEST

    Out of defense, into gold!? Renk, Barrick Gold, Desert Gold

    • Mining
    • Gold
    • defense
    • armaments

    On Tuesday, German defense stocks were shaken briefly and sharply. In a flash crash, Renk, Rheinmetall and Hensoldt fell by more than 10%. This indicates that defense stocks have run hot. The future prospects for the companies are undeniably positive, but a consolidation is in order. Gold is an entirely different story. The price of the precious metal is at record levels, but the shares of gold producers are still a long way from their 2020 highs. This applies to the heavyweights like Barrick Gold and Endeavour Mining, but even more so to the explorers. One of the promising explorers is Desert Gold. The Company operates in an attractive region, is on the verge of becoming a Tier 1 mine producer, and is a takeover candidate. Barrick Gold is one of many companies that could make a move on Desert Gold.

    Read

    Commented by Armin Schulz on April 10th, 2024 | 07:30 CEST

    Nel ASA, First Hydrogen, Nikola - Hydrogen on the rise

    • Hydrogen
    • greenhydrogen
    • renewableenergies
    • fuelcell

    With the development towards a clean and efficient logistics industry, hydrogen is gaining importance as a forward-looking energy carrier. Continuous innovations in fuel cell technology and storage systems are making it increasingly competitive. This technological progress, coupled with government incentives to expand the necessary infrastructure, is paving the way for widespread adaptation in the logistics sector. Pilot projects are already validating the practical suitability and paving the way for more extensive implementation in the logistics sector. Recently, there have been positive signals from the three hydrogen companies we are looking at today.

    Read