19. May 2021 | 12:27 CET
Royal Helium, Royal Dutch Shell, Gazprom - These commodity stocks are stepping on the gas
Commodities are currently on everyone's lips again: energy transition, electromobility, medical progress. All of these require resources that, as always, have to be laboriously extracted or produced. Corona has made the situation even worse: people are currently feeling the pain of global production shortfalls. Semiconductor chips are currently in short supply, and copper prices are rising. What this means for the manufacturing industry and the end consumer, however, is reflected in the profits of the raw material producers. Time to take a closer look at them and profit from the development!
time to read: 4 minutes by Carsten Mainitz
"[...] We expect the first three wells to be drilled, cased, completed and tested by the second week of March [...]" Andrew Davidson, CEO, Royal Helium Limited
Royal Helium Ltd. - Gas sample tests confirm economic helium concentrations in Climax projects
Helium is a sought-after noble gas, essential for numerous applications due to its outstanding chemical and physical properties. It is used as a non-conductive, non-reactive coolant in medical laboratory equipment and also in space rockets. On Earth, this element occurs only in very low concentrations in the atmosphere due to its high volatility. However, it is the second most abundant element in the universe after hydrogen. Since we cannot produce helium by the fusion of two hydrogen nuclei, as happens on stars, the element must be obtained elsewhere. It was discovered long ago that helium is also produced during the radioactive decay of some elements in the Earth's mantle and accumulates in sealed deposits, often in combination with oil or gas deposits.
Thus, helium is often a byproduct of oil and gas production. However, Canada's Royal Helium, which specializes exclusively in helium production, takes a different approach. The Company owns a land area of around 400,000 hectares in the province of Saskatchewan in Canada, which is well developed in infrastructure and known for its helium deposits. Some time ago, the Company had begun initial test drilling following a CAD 6.16 million capital increase. At the beginning of April, Royal Helium reported its first successes: Test drilling in the Climax I to III projects confirmed a commercially viable helium concentration. Here, the Company can now go directly into production.
The cash flow generated is to be used to finance further test drilling. To accelerate this process, the Company has decided to conduct another capital round. Thereby, the Company will issue 30 million new shares in combination with 15 million warrants at a price of CAD 0.50. Thus, half a warrant will be added per share, and a full warrant will entitle the holder to subscribe for one additional Royal Helium share at a price of CAD 0.75. The offering is scheduled to close on June 8. This threatened dilution for existing shareholders then put some pressure on the Royal Helium share price initially, but the prospects of an imminent start of production have already caused the curve to rise again. Investors who would like to add some speculative stocks to their portfolio now have the opportunity to jump on a moving train at a reasonable price.
Royal Dutch Shell Plc. - Oil producer wants to deliver hydrogen from offshore plants in the North Sea to land with partners
After the French and Spanish competitors Total and Repsol recently announced to shift their business more into the field of renewable resources, the Dutch-British oil and gas producer Royal Dutch Shell seems to have slowly woken up too. The Company recently announced plans for a project called "AquaDuctus." Together with the energy Company RWE and the gas grid operators GASCADE and Gasunie, the Company plans to lay and operate pipelines to the offshore wind farms in the North Sea in order to deliver the green hydrogen produced directly on-site to a hub near Helgoland and distribute it from there.
It is expected that a large proportion of this "green" hydrogen will be purchased by the steel and chemical industries. Annual production is expected to be around 1 million tons per year from 2035. The production and distribution of green hydrogen is one of the priority issues in the energy transition and is explicitly mentioned in the German government's "National Hydrogen Strategy." Funding of EUR 9 billion is being provided for this purpose, of which EUR 7 billion is earmarked for domestic projects and EUR 2 billion for cooperation projects with foreign project partners. It can be assumed that Royal Dutch Shell is also speculating on a share of this pie.
Be that as it may, it is right and essential for the Group to address this sustainability issue. Those companies that address these issues early on will be ahead of the game for quite some time. In any case, the topic of hydrogen is one without which the climate neutrality targeted by policymakers through the decarbonization of our industry by 2045 will not be possible. We think that a corresponding commitment by Royal Dutch Shell at this point is a smart move. The Company's shares will benefit from it in the future - provided that no unforeseen incidents occur with the project. The analysts see it that way too, the average price target for the share is around EUR 25.60.
Gazprom - The Russian bear finds old strength
February 2020 was a turning point for many companies. Gazprom also had to accept a share price loss of almost 40%. In addition, the back and forth regarding Nord Stream 2 weighed on the stock, which temporarily lost another quarter of its value. Since then, the stock has been making a second attempt to return to its former level. Two things are probably helping at the moment: 1. Nord Stream 2 is currently no longer so prominent in the media and 2. Sober facts. Yesterday, the Company announced its figures for the opening quarter of 2021: the quarterly surplus of around 362.6 billion rubles was the highest in nine quarters. Gas production increased by about 15% (exports to non-CIS countries: +28%).
Analysts expect a sharply increased dividend of the equivalent of EUR 0.53 per ADR traded in Germany (comprises two regular Gazprom shares) for the full year. The dividend yield would thus reach a lush 10%. Analysts also expect a similarly high dividend for the next few years. Concerning the differences surrounding Nord Stream 2, it remains to be said that Russia is currently not dependent on the project and can adopt a wait-and-see attitude in this regard, while European gas reserves in the North Sea are declining. In the end, it will become clear how the EU intends to secure its gas supply. Gazprom is a very interesting dividend stock that is still favorably valued for people who are not intimidated by political risks.