December 12th, 2022 | 11:21 CET
Oil price shock! Money is made here: Shell, Saturn Oil + Gas, Siemens Energy
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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
Shell: OPEC plays into the cards of oil companies
The OPEC+ production cut should be seen in the context of developments over the past few years. After the pandemic outbreak, OPEC+ quickly raised production quotas and reached 2019 levels. Therefore, the cut that has now taken place does not significantly tighten oil on the world market. In addition, the USA, for example, has announced that it will bring strategic oil reserves onto the market. The fact that prices on the stock markets reflect expectations rather than facts is also shown by the fact that the oil price and the prices of major oil stocks, such as Shell, have recently been reasonably stable again. The reason for this is the still historically high oil prices. Companies like Shell are still earning money at the current level.
Although Shell's production volume is also falling in the wake of the withdrawal from Russia, the Company is looking for alternatives in several areas: In addition to conventional oil, it has expanded its involvement in Brazil and is increasingly investing in renewable energy. At the end of November, Shell acquired Europe's largest biogas producer, Nature Energy Biogas, for which it spent around EUR 2 billion. However, oil still accounts for almost 70% of Shell's sales. Given the bubbling profits and the dividend of 2.8% measured against the current price, the share is attractive as a conservative investment.
Saturn Oil & Gas: When will the market reward the P/E ratio of 1.3?
If you like it more spectacular without relying on dubious business models, you can take a closer look at Saturn Oil & Gas, one of the little brothers of oil companies like Shell. Unlike Shell, Saturn does not stand for transformation and does not seek its salvation in renewable energy sources. Still, the Company offers excellent opportunities precisely because of its focus on the classic oil business. While the major players were already discontinuing their involvement in oil, Saturn, the local hero from the Canadian province of Saskatchewan, set out to find bargains. The enterprising Canadians bought two oil fields and multiplied their production. This lowers costs and allows the Company to manage its activities effectively.
In the past few weeks, several analyst comments provided encouragement: the experts at First Berlin see a price target of CAD 7 for Saturn Oil & Gas and are optimistic about the future: "We assume that Saturn will achieve a production volume of over 15,400 BOE/d by 2025 (approx.+ 50% compared to 2022) and that the current net debt of approx. CAD 220 million will turn into a net cash position of over CAD 200 million," said the analysts. Canadian analyst firms Canaccord Genuity (target price CAD 7) and Eight Capital (target price CAD 7.50) are also optimistic. Currently, the share is quoted at CAD 2.37. Because many traditional oil companies have neglected projects in safe jurisdictions in recent years, but fossil fuels will remain without alternatives for a long time to come, the market consolidation in Canada initiated by Saturn could pay off. For an oil multinational, Saturn Oil & Gas would be a bargain as an acquisition target at the current level - a market capitalization of about CAD 140 million and a price-earnings ratio of about 1.3 speak for themselves.
Siemens Energy: More shade than light
Those looking for opportunities around the current situation in the energy market could also take a look at Siemens Energy. The Company covers the entire energy value chain and stands for gas and steam turbines, generators, transformers and compressors. The end of Russian activities is still weighing on Siemens Energy. High material and logistics costs are also a burden. Rays of hope are the rising orders from Eastern Europe and the Middle East, which gave the Company a record order backlog of EUR 9.8 billion at the end of the third quarter. However, with the Company in the midst of a restructuring, the shares are not particularly compelling.
The OPEC+ production cuts come just in time for oil investors. Even rather sluggish multinationals like Shell are making good money in the current market environment. In the case of small, fast movers, such as Saturn Oil & Gas, there are also acquisition opportunities despite the stable oil prices, as oil multinationals are increasingly focusing on renewable projects. In recent years, this has ensured that Saturn has been able to acquire promising oil projects, including infrastructure, far below value. Today, analysts see exceptionally low valuation levels and the prospect of being debt-free and paying dividends as early as 2024. As soon as this realization hits the market and the first payout is really within reach, Saturn should appeal to new investors.
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.
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