Nordex, Saturn Oil + Gas, TotalEnergies - Good numbers, bad numbers

Optimal timing, perfect leverage

The timing for an acquisition could not have been better. In June, oil producer Saturn Oil & Gas secured the mighty Oxbow oil field in the southeastern province of Saskatchewan, becoming one of the leading producers in the region in one fell swoop. As described in a detailed report, the new acquisition alone increased production twenty-fold to 7,000 barrels per day. With the figures for the third quarter, the effects now became more apparent for the first time.

In the third quarter of 2021, Saturn generated revenues of CAD 48.5 million from the sale of oil and gas, compared to CAD 2.1 million in the same period last year. Production averaged 6,970 BOE per day (96% oil and NGLs) in the period, compared to 499 BOE per day (100% oil) in the third quarter of 2020. On balance, the Company generated an adjusted cash flow of CAD 13.9 million, or CAD 0.55 per share, in the three months ended September 30, 2021, compared to CAD 1.0 million in the third quarter of 2020, or CAD 0.09 per share. Revenue and cash flow per day were able to continue more or less as they had been for the last 23 days of the previous second quarter, since the acquisition of Oxbow. A promising sign for shareholders. Management clearly has a handle on the integration.

John Jeffrey, CEO of Saturn, commented, "The resumption of the Company's drilling program in the third quarter was an important step in continuing our growth strategy as a producer focused on light oil. The success of the Q3 2021 drilling program was accompanied by high oil prices, strong operating results and robust economic returns on invested capital. Saturn looks forward to continuing its drilling program and leveraging our extensive inventory of oil-focused drilling locations funded with internally generated cash flow." According to the release, the Company has continued increasing daily production to approximately 7,050 BOE per day.

Pressing high costs

Now it is final. The figures for the third quarter at wind turbine manufacturer Nordex are out and, as previously reported, they are anything but refreshing. Despite a high order backlog, the loss was significantly widened due to increased raw materials and logistics prices. Accordingly, the Hamburg-based Company increased its consolidated sales by 24.9% YOY to just under EUR 4.0 billion. However, this was offset by a loss of just under EUR 40 million, compared with just under EUR 73 million in the same period of the previous year. After the first months of the current fiscal year, the books even show a loss of EUR -104 million.

The forecast for the year has already been cut. The Company now expects consolidated sales of between EUR 5.0 billion and EUR 5.2 billion. According to management, increased external costs for raw materials and freight and disrupted supply chains only allow for an EBITDA margin of 1%. However, in the long term, the Company wants to return to its old strength and outlines operating margins of almost an astronomical 8% from the current perspective.

As the results were in line with the key data already published, the US investment bank Goldman Sachs reiterated its "neutral" rating with a price target of EUR 18.40. Jefferies set the Hamburg share at "buy" and left the price target at EUR 25. The analysts praised the continued solid order intake but said that profitability was suffering from higher logistics costs.

Analysts optimistic

The analyst community is far more optimistic about the petroleum company TotalEnergies. The major Swiss bank UBS upgraded the French Company, which recently posted strong third-quarter figures on the back of high oil and natural gas prices, from "neutral" to "buy". The price target was also raised from EUR 42 to EUR 50. Analyst Jon Rigby significantly raised his estimates for the oil price through 2025 in Monday's report. Thus, his earnings estimates for the oil company increase on average by 22%. Goldman Sachs is even more positive about the stock. With an increase in the price target to EUR 63, this is almost 30% above the current IPO.

In addition to the strong oil and gas business, TotalEnergies intends to invest further in renewable energies in the future. Thus, an agreement was signed with Daimler Truck, according to which the two companies want to increase their commitment to the decarbonization of road freight transport in the European Union. Together, the partners intend to cooperate on implementing a hydrogen infrastructure for heavy-duty trucks and highlighting the benefits of CO2-neutral road freight transport based on hydrogen.

While companies from the renewable energy sector are struggling with weak quarterly figures due to high commodity prices and disrupted supply chains, petroleum companies are shining with solid values. At Saturn Oil & Gas, the acquisition carried out in the middle of the year is coming into its own, and analysts see significantly higher prices at TotalEnergies.