June 15th, 2021 | 09:23 CEST
Palantir, Saturn Oil + Gas, RWE - Attention: 200% for your portfolio!
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.
Lack of investment as leverage
Speculation that demand will boom as the global economy recovers from the aftermath of the coronavirus pandemic is giving crude oil a further boost. North Sea Brent crude price is up 0.6% to a two-year high of USD 73.12 per barrel. Even in the long term, we will not be able to do without oil despite the energy transition. Instead, Rosneft CEO Igor Sechin warned that "the world risks an oil shortage as climate concerns hurt fossil fuel investments."
Saturn Oil & Gas set an example for the entire petroleum industry last week. The Company confirmed the completion of its previously announced transformative acquisition of light oil assets in the Oxbow area of southeastern Saskatchewan. Most of which is located in one of North America's most economical oil areas, making it one of North America's most significant oil producers. The total cost of the acquisition was USD 93 million. It was financed through a combination of proceeds from the previously announced senior secured term loan, a brokered private placement and a concurrent non-brokered private placement. As a result, the Canadians are acquiring approximately 280,000 net acres for just 1.4x cash flow, or only about CAD 14,000 per flowing BOE. Recent competitors were putting more than CAD 30,000 per flowing BOE on the table.
Production increased tenfold
Saturn Oil & Gas previously produced only 500 to 700 barrels of oil per day. With the acquisition, this will now be expanded by a factor of 10 (!) to up to 7400 barrels per day. At the same time, Saturn Oil & Gas ensured that the repayment of the loan plus debt service is fully secured until summer 2023 by selling large parts of the oil production for the next two years. For the next three years, the Company also identified the potential to generate annual free cash flow by optimizing and re-completing more than 500 existing wells.
Revaluation not perceived
After a brief jump to CAD 0.21, the Saturn Oil & Gas share price started to retreat again and is currently trading at CAD 0.15. Due to the reported secure earnings from hedging, this is not understandable. Analysts at GBC Research highlighted the potential in a recent study. By optimizing process flows and new wells, the Company's net amount will increase to CAD 65 to 70 million per year within 12 months. Converted to today's market capitalization of CAD 83.8 million, it would raise the potential return to 78 - 84% per year. As a result, a price target of CAD 0.46 has been announced, up 200% from the current price.
Is the breakout coming?
Meme stocks are all the rage right now. One of the most popular since the hype began has been the stock of Palantir Technologies. In January, the Reddit sub-community, WallStreetBets, managed to drive the price of the data analytics specialist from USD 26 to USD 45 within a few days. Since then, the stock has weakened in the wake of disappointing annual figures and the end of the lock-up period for existing shareholders, reaching a low for the year of USD 17.06 in mid-May.
Due to solid figures for the first quarter and the announcement of several prestigious orders, Palantir pushed back towards the breakout level at around USD 24.70. The share price then fell to a low for the year of USD 17.06 in mid-May. At the end of May, it was announced that the US company is expanding its cooperation with the US Special Operations Command (USSOCOM). The contract is worth a total of USD 111 million, including an option to extend, with USD 52.5 million accruing directly when the contract is awarded. A breakout above the mark would mean upside potential initially to USD 30.
Starting signal at RWE
Sideways has been the direction of the energy group RWE for more than a year. In a corridor between EUR 31 and EUR 35, the share oscillates relatively untouched by the considerable hype around renewable energies. Now, wind could come into the chart in the truest sense of the word. RWE has launched a multi-billion wind power project off the British North Sea coast. However, it will take up to 5 years before the Sofia wind farm on Dogger Bank is completed. A total of 100 turbines, with a combined capacity of 1.4 gigawatts, will be installed around 195 km off the northeast coast of the UK. The cost of the wind farm is around EUR 3.5 billion. From a chart perspective, the share should break through the resistance zone at EUR 35. On the downside, there are interesting entry opportunities at the current level.
Conflict of interest
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