Royal Dutch Shell, BP, Gazprom, Saturn Oil + Gas - The oil rally is starting now!

Saturn Oil - A quantum leap in corporate strategy

Now it is known, and it sounds wonderful. Saturn Oil & Gas is becoming a completely different company because the current acquisition is a real quantum leap. For a total of CAD 93 million, they are acquiring all 450 assets of the Oxbow area in southeastern Saskatchewan, most of which are located in one of the most attractive oil areas in North America.

Financing for the deal is currently in full swing and will be finalized in the next few days. It consists primarily of a CAD 82 million senior secured term loan, a best-effort private placement for aggregate proceeds of CAD 12 million with an additional greenshoe of 15% led by Echelon Wealth Partners Inc. and a concurrent private placement for aggregate proceeds of CAD 18.4 million - a total equity injection of CAD 32.2 million is expected. The first tranche of the CAD 7.75 million equity financing has now closed.

A portion of the proceeds from the first tranche closing will be used to fund a down payment with the vendor. The Company expects to close the balance of the announced financing components by June 4, 2021. In our view, the deal is well negotiated and in the clear - the jump in the share price speaks volumes.

Saturn expects the Oxbow properties to generate an operating profit of CAD 65 million to CAD 70 million over the next 12 months. That would make the cost of capital easy to bear and also leave a lush net surplus. Forward sales were also stepped up again at the current level, ensuring the currently strong margin at the low production price of CAD 12 per barrel.

The stock market reacted to the news with a price jump of almost 100% from previously CAD 0.12 to now CAD 0.23. In our opinion, however, this should only be the beginning of a comprehensive revaluation.

Royal Dutch Shell - Getting geared towards climate change

A small revolution took place on Wednesday in the district courtroom of The Hague in the Netherlands. The district judge found that the British-Dutch Royal Dutch Shell, based in The Hague, is responsible for its CO2 emissions, thus contributing significantly to global warming. Furthermore, the mismanagement is said to have serious consequences for the inhabitants of the Netherlands, the inhabitants of the Wadden Sea area and the rights of the people in the Netherlands. A strong verdict!

Consequently, the Group must reduce its greenhouse gas emissions by 45% by 2030 compared to 2019. And not only within the Group but also with its customers. 17,300 citizens and 7 environmental associations had sued the Group for compliance with the climate targets of the 2015 Paris Climate Agreement. Now the implementation is getting serious; meaningless announcements are a thing of the past, now action must be taken!

Shell has its headquarters in The Hague and is therefore subject to Dutch jurisdiction. For the first time, a court wants to force an international oil giant to implement the targets agreed in the climate agreement and to do so worldwide. And: An appeal has no suspensive effect. Shell must therefore deliver with immediate effect because the right to climate protection has been placed above the interest of a final decision. The Shell share has moved slightly down again from its high of EUR 18.75. Fundamentally, the share remains a basic investment.

British Petroleum - New photovoltaic giga-plants in Europe

BP has been going green for quite some time. Now the Group has integrated more green power projects into its energy portfolio. British solar developer Lightsource BP (BP's stake is 50%) has teamed up with Portuguese Company Insun to build solar farms with a total capacity of 1.35 GW over the next 5 years.

In Greece, it plans to set up another 640 MW in cooperation with partner Kiefer TEK. Access in Greece is mainly based on tenders. More than 1 GW of wind and solar projects were submitted in the last tender, of which orders of up to 350 MW were awarded. With the entry of Greece, Lightsource BP is now present in 14 countries and has a project portfolio of 20 GW on three continents.

The Spanish projects are in the early stages of development and will be located in Moura, Castelo Branco, Mogadouro, Chamusca and Viseu. In total, these projects require an investment of approximately EUR 900 million. Lightsource BP has more than 2 GW under development in Spain; with this new transaction, the Company now has more than 3.5 GW of capacity across the Iberian Peninsula.

BP shares are stuck at around EUR 3.50 and have been little stirred for 3 months, but they are captivating with a dividend yield of over 5%.

Gazprom - Forecast raised despite the dispute over Nord Stream 2

The political dispute over Nord Stream 2 is turning into a farce. Only a few 100 km are still open and Europe has clearly declared its support for this project. The pipeline is intended to significantly increase the capacity for Russian natural gas deliveries to Germany. Some European countries, the USA and the Green Party are vehemently opposed to this project. However, US President Joe Biden wants to refrain from imposing sanctions against Nord Stream 2.

For Annalena Baerbock (German Party The Greens), the pipeline is a power-political basis for Kremlin-affiliated politicians, such as in Belarus. The German government, however, remains committed to the EUR 9 billion project. Gazprom itself, of course, wants to complete the pipeline to supply the European market with energy in the long term.

The Company has now raised its forecasts for the current year, despite the disputes over Nord Stream 2. Gas exports rose significantly in the first five months and the latest production figures also sound good. The Russian commodities giant expects to produce 506.5 billion cubic meters this year, up 11% from last year.

The Gazprom share is continuing to climb steeply, but the EUR 6 mark is taking its toll.