August 10th, 2021 | 12:45 CEST
Nordex, Saturn Oil & Gas, BP - Pressure on the pipeline
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 - Secured for the future
Saturn Oil & Gas, which has risen to become one of the most important oil suppliers, can relax about a possible oil price correction. In the course of the giant acquisition announced in May, which lifts the oil producer into much higher valuation territory, 85% of production was hedged at a price levels of up to USD 65 for the next four years. For CAD 93 million, the Canadians took over assets in the Oxbow area in southeastern Saskatchewan, one of the economically best oil deposits in North America. The purchase price of the approximately 280,000 net acres acreage was 1.4 x cash flow, or only about CAD 14,000 per flowing BOE. Industry peers paid more than CAD 30,000 per flowing BOE in comparable transactions.
As a result, daily oil and gas production increases by more than 2,000%, and PDP reserves increase by an exorbitant 1,300% compared to the Company's year-end 2020 reserves. The debt is then expected to be completely paid off in just under 2 years. Daily production will also increase tenfold to now 7,500 BOE/day of current production volumes. As a result, Saturn Oil & Gas is expected to generate around CAD 160 million in sales and CAD 60 million in profits per year. Converted to the current stock market value, this would result in a price-earnings ratio of 1 at the current level of CAD 0.12!
Thus, the potential of the transaction has not yet been rudimentarily perceived by the stock market. The analysts of GBC see the fair value at CAD 0.46.
BP - Strong quarter
Oil and gas is still part of the core business. However, the long-term plan is to transform from an oil giant to a green power producer. BP wants to cut its oil and gas production by 40% over the next ten years and at the same time expand its renewable energy business. The British Company is currently benefiting from the rising oil price due to the global economic recovery and presented excellent figures for the third quarter. In addition, an increase in the dividend and the share buyback program of up to USD 1.4 billion was announced.
The British Company intends to pay 5.46 cents per share for the past quarter. In previous quarters, shareholders had to settle for 5.25 cents per share. Due to the strong figures, the major Swiss bank UBS raised its price target for BP from 380 to 410 pence. The oil and gas Company exceeded expectations, raised oil price estimates and raised the bar for the future.
From a chart perspective, the stock is currently stuck at a broad resistance at EUR 3.60. Keep BP on the watch list. A possible setback due to the correcting oil price is definitely within the realm of possibility.
Nordex - Is this the bottom?
Despite orders on the assembly line, the share of wind turbine manufacturer Nordex fell since the beginning of April from EUR 29.20 to the correction low at EUR 15.30. A bottom is now forming in the EUR 16 range in the run-up to the figures expected on August 12. A sustained breakout above the EUR 17 mark would now be significant. The next prominent resistance would then be found at EUR 20.
Even if the oil price corrects, analysts expect significantly rising prices in the long term due to the emerging supply shortage. As a result of the acquisition, the Saturn Oil & Gas share is strongly undervalued compared with the industry average, with a price/earnings ratio of just over 1. In addition, a large part of the oil production has been hedged. The Nordex share is also a speculative buy, whereas BP only belongs on the watchlist.
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