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December 30th, 2021 | 11:53 CET

Royal Dutch, Saturn Oil + Gas, Bayer: The oil price and the pandemic in 2022

  • Oil
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COVID-19 is a black swan for the economy, but does the pandemic favor lower or higher oil prices? Not an easy determination because, for one thing, the measures to contain the pandemic significantly lower economic activity. Production delays and supply chain failures occur, so oil demand should fall there. On the other hand, a shortage of inputs and constraints in logistics lead to higher delivery and waiting times, thus creating some hoarding pressure, which increases demand for the black gold. Due to the shortness of history, the actual connection is also little researched, i.e. how it really is could remain hidden from us for some time. Who benefits from the current cycle of price increases?

time to read: 4 minutes | Author: André Will-Laudien
ISIN: ROYAL DUTCH SHELL A EO-07 | GB00B03MLX29 , Saturn Oil + Gas Inc. | CA80412L8832 , BAYER AG NA O.N. | DE000BAY0017

Table of contents:

    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] 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

    Full interview


    Royal Dutch Shell - Good prospects for the oil multinational

    In the last week of October, the A-share of Royal Dutch Shell (RDS) marked a new high for the year at EUR 21.70, but the value went downhill significantly. The reason for this was the slightly disappointing quarterly figures and the trouble with a new major investor from the hedge fund scene, who would like to split up the British-Dutch group. However, the bottom line was still a solid 33% gain for 2021.

    The oil prices have turned since Christmas at USD 70 in Brent and stood yesterday again over USD 79. Where this extreme rise comes from in the short term, no one knows precisely. With up to 4 meters of snow in the Sierra Nevada, California has the largest winter onset for 25 years. Good for drinking water supplies, as extreme drought has plagued the state for years. At the end of November, concerns about the economic impact of the rapidly spreading new Omicron variant of the coronavirus had sent oil prices on another downward slide. However, Brent did not fall significantly below the USD 67 mark.

    Royal Dutch Shell can currently benefit from positive analyst comments. Shareholder approval for simplifying the share structure and moving the oil company's tax headquarters to London was overwhelming, wrote RBC analyst Biraj Borkhataria. January 28 is expected to be the last day on which the dual A and B shares will be traded, which would complete this process earlier than expected. In addition, the publication of the annual figures on February 3 will follow right after that. That puts management in a good position to announce plans for another large-scale share buyback.

    RDS stock is currently trading at a 2022 P/E of 7.6, with a dividend yield of 4.6%, making RDS stock one of the standard stocks for any risk-conscious portfolio.

    Saturn Oil & Gas - The scenario for 2022 is getting better and better

    The Canadian oil producer Saturn Oil & Gas from Saskatchewan is currently in a dazzling position. Saturn is now producing 6,970 barrels of WTI in its new set-up since Q3 2021, with daily sales of USD 487,000. That represents a 270% increase from the previous quarter. The Company's EBITDA was CAD 17.2 million in Q3, from which they generated CAD 9.5 million in free cash flow compared to CAD 0.3 million in Q3 2020. This cash will allow the Company to pay off debt from the acquisition by mid-2023.

    The WTI oil price has stabilized above the USD 75 mark, which brings a lot of calm to Saturn's operations. Far removed from the big political issues surrounding black gold, what matters to Saturn is its own performance in its properties. The maturity of the Oxbow asset and the low decline rate of 12% give Saturn Oil & Gas the flexibility for future investment. Currently, there are 370 remaining free drilling locations with proven reserves. The derivative hedge against the WTI spot price ensures debt repayment at the expense of limiting potential revenue growth and creating a stable future revenue situation.

    Saturn Oil & Gas is now ready for the next stage of development. In addition to organic growth, further acquisitions may well be considered in 12 to 18 months. With 25.1 million shares, the capitalization amounts to CAD 89 million, and the enterprise value is approximately CAD 140 million at year-end 2021. GBC analysts expect a net income of CAD 25.4 million in 2023, which would be a P/E ratio of around 3 if the share price remains unchanged. That makes Saturn Oil & Gas one of the world's cheapest oil producers on the price list, and the Saturn share has doubling potential.

    Bayer - Glyphosate and no end

    It has been one of the worst years on the stock market for Bayer. While the DAX gained a full 16%, Bayer shares lost almost 5% over the year. The ongoing glyphosate litigation in the United States remains a major burden. When will it be time for Bayer shareholders to breathe a sigh of relief?

    Although analysts are forecasting growth in both sales and earnings for the coming year, special charges resulting from the court rulings in the US could put a damper on the Company's fortunes. The experts estimate average sales of EUR 44.9 billion in the coming year, compared with just under EUR 43 billion in 2021. That is not much of an increase, but it is still in the region of plus 5%. EBIT is expected to be in the region of EUR 8.2 billion, resulting in adjusted earnings per share of around EUR 6.8 - a P/E ratio of just 7. Added to this is the expected dividend yield, which is currently a solid 4.3%.

    Moderate growth, low valuation and a reasonable dividend yield speak clearly for an investment in Bayer stock. Funds have certainly reduced the value before the end of the year in order to be able to show their investors better performing stocks at the end of the year. Long-term investors can now profit from this. Accumulate!

    Oil stocks were one of the winning sectors in 2021. Recovering from the COVID-19 shock in March 2020, they gained a good 50% across the board. Bayer was recently one of the losers; here, you should slightly increase your investment. The Saturn Oil & Gas share, on the other hand, managed a price gain of 72% this year, but here things are likely to get really exciting again in 2022/23.

    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") may in the future hold shares or other financial instruments of the mentioned companies or will bet on rising or falling on rising or falling prices and therefore a conflict of interest may arise in the future. conflict of interest may arise in the future. The Relevant Persons reserve the shares or other financial instruments of the company at any time (hereinafter referred to as the company at any time (hereinafter referred to as a "Transaction"). "Transaction"). Transactions may under certain circumstances influence the respective price of the shares or other financial instruments of the of the Company.

    Furthermore, Apaton Finance GmbH reserves the right to enter into future relationships with the company or with third parties in relation to reports on the company. with regard to reports on the company, which are published within the scope of the Apaton Finance GmbH as well as in the social media, on partner sites or in e-mails, on partner sites or in e-mails. The above references to existing conflicts of interest apply apply to all types and forms of publication used by Apaton Finance GmbH uses for publications on companies.

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    Der Autor

    André Will-Laudien

    Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.

    About the author

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