October 21st, 2022 | 10:01 CEST
RWE, Saturn Oil + Gas, Shell - Accompany the energy turnaround with these shares
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"[...] 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
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RWE buys into US solar business
European energy companies like RWE and Shell are coming up with many ideas these days to expand their growth further. So it is no surprise that the group is beefing up its US business in the renewable energy sector. With the acquisition of Con Edison Clean Energy Businesses Inc. (CEB), RWE succeeds in entering the top positions of the clean energy industry.
Con Edison Clean Energy is the second largest owner and operator of solar energy in North America. The conglomerate owns and operates more than 4 GW of renewable energy projects in North America. Going truly clean requires reliable fossil fuel resources to bridge the gap. Oil and natural gas remain the most consumed energy sources in the US through 2050, according to EIA, the US Energy Information Administration. Still, renewable energy is the fastest-growing sector.
Government incentives through support programs in wind and solar are increasing the expansion of renewables on this continent. Renewable energy consumption for power generation is increasing in all cases, even as it balances out with nuclear, coal and natural gas. It is therefore essential for investors to look to the US and Canada for energy and commodity stocks.
Saturn Oil & Gas - A massive increase in production in 2023
Fossil fuels continue to be the fuel to keep the economy running. For example, the Canadian company Saturn Oil & Gas has managed to increase its commodity production by 5,000% in the past 18 months. This impressive figure can be explained as follows: Production output currently stands at 12,000 barrels per day, of which approximately 96% is light oil and liquids, and the remainder is natural gas. Compared to Q1 of last year, Saturn Oil & Gas was at 233 barrels per day of oil. Kevin Smith, VP of Business Development, recently announced this at the 4th International Investment Forum.
Therefore, the team is now focused on ramping up production through the end of the year to achieve an EBITDA of approximately CAD 250 million in 2023. They will also be returning cash flow to the drilling program. 50% will be used to repay net debt, which currently stands at CAD 230 million. The target for debt repayment at the end of the year is CAD 180 million. For the end of 2023, Saturn plans to repay the net debt of CAD 75 million.
The Company has 100% of its production wells in Canada in the province of Saskatchewan. This province has some of the lowest and most stable royalty rates. Before the Canadian government enacts more regulations to push for CO2 reduction in the country or the expansion of renewable energy, companies like Saturn Oil & Gas are needed to ensure the transition through their production. The Company has spent more than 15 years exploring its territories and is now reaping the rewards of its work. Because at its core, Saturn is succeeding in leveraging its existing production assets to mine its raw material treasures. Recently, Saturn rose to the list of Canada's top 10 oil producers. The market is highly volatile due to geopolitical circumstances, and companies like Saturn would do well to continue to increase production with existing assets.
Shell - Shopping around for fossil-free energy producers
Shell, like RWE, also has ambitions to increase its energy reserves. The Dutch oil company is still interested in the Danish biogas company Nature Energy. As Reuters reports, the Company has qualified for the second round of the bidding process, in which the group is to be sold to a private equity consortium. Nature Energy's current sale value is estimated at approximately USD 2 billion.
Nature Energy is the leading provider for converting biomass into green, CO₂-neutral gas. The Danish company collects biomass from businesses, agriculture and households and recycles the degassed biomass back into agriculture, which recycles the nutrients. Specifically, this amounts to 4.4 million tons of biomass per year, which is converted into 181 million m3 of green biogas. This amount is enough to run 8,000 buses that travel 30,000 km per year, or provide heat to 157,000 households. Nature Energy owns and operates 12 biogas plants in Denmark and 1 plant in France.
Biogas makes a meaningful contribution to reducing CO₂ emissions, especially when it comes from waste such as landfills and food waste, rather than crops grown specifically for fuel. Earlier this week, rival BP agreed to acquire Houston-based biogas producer Archaea Energy for USD 4.1 billion.
By 2050, the Dutch central government aims to reduce greenhouse gas emissions in the Netherlands to zero. By 2023, 16% of the energy consumed in the Netherlands should be sustainable. Shell is even more proactive. It has just signed an LNG liquefied natural gas partnership with the Japanese company Kansai.
Companies like RWE and Shell, which currently rely on fossil fuels, are eager to adapt to the energy transition. Solar energy and renewable natural gas are generally compatible with existing energy supply infrastructure, so direct profits can be made by operating them.
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