October 8th, 2024 | 09:30 CEST
Rio Tinto, Saturn Oil + Gas, BP - Insiders are taking advantage of the commodities correction
Concerns about the economy and even fears of a recession have caused the prices of most commodities to collapse in recent months. The price of lithium, a critical metal for the energy transition, dropped by around 90%. The oil market also saw drastic price declines despite geopolitical uncertainties in the Middle East. Insiders agree that demand for both critical metals and black gold should pick up again, and they are going on a buying spree to be prepared for the subsequent upturn.
time to read: 3 minutes | Author: Stefan Feulner
ISIN: RIO TINTO PLC LS-_10 | GB0007188757 , Saturn Oil + Gas Inc. | CA80412L8832 , BP PLC DL-_25 | GB0007980591
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Author
Stefan Feulner
The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
He is passionate about analyzing a wide variety of business models and investigating new trends.
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Rio Tinto reaches for lithium pearl
The price of lithium, a metal that is essential for the energy transition, has been in freefall since its peak in December 2022, losing around 90% of its value. However, after weeks of sideways movement, the indicators are already showing signs of a possible turnaround. There is no question that the demand for this raw material is constantly increasing due to its use in batteries for renewable energies and electric vehicles. Only the Chinese oversupply is still preventing an upward surge.
Australian mining giant Rio Tinto has recognized the signs of the times and, according to experts, is making a move at the low point with the acquisition of producer Arcadium Lithium. This deal would position Rio Tinto to become one of the largest global lithium suppliers. Through this acquisition, Rio Tinto would gain access to lithium mines, processing facilities, and deposits in Argentina, Australia, Canada, and the United States, driving growth for decades to come. Additionally, Rio Tinto would gain a customer base that includes Tesla, BMW, and General Motors.
As reported by Reuters on Friday, both parties are discussing a purchase price between USD 4 and 6 billion. Arcadium Lithium's Australian shares subsequently exploded to AUD 6.29, up 50%.
Saturn Oil & Gas – Finally in the Spotlight
The expanding energy company from Calgary has been actively acquiring assets for several years. Since its latest acquisition in May, Saturn Oil & Gas has multiplied its daily production in southern Saskatchewan to over 39,000 barrels of oil equivalent. This achievement earned the Company, led by experienced CEO John Jeffrey, 4th place in the 2024 "Canada's Top Growing Companies" ranking by the magazine "Report on Business." In addition, Saturn Oil & Gas was named the fastest-growing oil and gas company for the second consecutive year.
In addition to the acquisitions made, the Canadian company announced another compelling purchase argument for investors. The Company plans to buy back up to 10% of the current free float over the next 12 months. The analysts at Ventum Capital Markets view this step positively, as Saturn Oil & Gas finally demonstrates the Company's free cash flow potential.
So far, the focus has been on debt repayment. In addition, the oil producer has cash and cash equivalents of around CAD 81 million, which almost covers the debt repayment for the full year. Overall, there is still CAD 100 million in free cash flow available.
Analysts see a significant undervaluation compared to the peer group. The enterprise value to the discounted cash flow for 2025 stands at 2.3, while similar companies have a value of 3.6. The experts set the price target at CAD 7.50, with a "Buy" investment recommendation.
Saturn Oil & Gas's management will present the Company at the virtual 12th Investment Forum, IIF, on October 15. Registration for the free event is available here.
BP with strategy change
The green wave and the target to cut oil and gas production by 2030 seems to be history for the British energy giant BP. Initially, the plan was to reduce production by 40% by 2030 while rapidly expanding renewable energies. However, this target was already scaled back to 25% at the beginning of the year, corresponding to a production volume of 2 million barrels per day by the end of the decade.
If the new CEO Murray Auchincloss has his way, the production target for 2030 will be scrapped altogether, and the focus will be increasingly on returns and investments, particularly in the oil and gas sectors, based on profitability considerations.
According to sources, BP is currently in talks to invest in three new projects in Iraq, including one in the Majnoon field. BP holds a 50% stake in a joint venture that operates the giant Rumaila oil field in the south of the country, where the Company has been active for a century.
In August, BP signed an agreement with the Iraqi government to develop and explore the Kirkuk oil field in the north of the country. The agreement also includes the construction of power plants and solar capacity. The British company has also announced that it will push ahead with the development of Kaskida, a large and complex reservoir in the Gulf of Mexico.
Major players like Rio Tinto and BP are taking advantage of low prices in the resource sector to expand their portfolios, positioning themselves for the next upturn. As a result of the acquisitions already made, analysts see significant potential for multiplication at Saturn Oil & Gas.
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