August 25th, 2022 | 11:55 CEST
Saturn Oil + Gas, E.ON, BP - Share price explosion expected
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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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Saturn Oil & Gas - Analysts with a price target of CAD 8
Analysts at Velocity Trade Capital see Saturn Oil & Gas (ISIN CA80412L8832) as the obvious champion in the battle for the highly coveted energy supply. They predict a price target of CAD 8 for the stock. The share is expected to benefit from extensive and growing free cash flow (FCF). If June/July 2023 options are exercised, this may result in the Company being debt free in the next 12 months.
Saturn benefited from high crude oil prices in the second quarter, generating record quarterly cash flow of CAD 14.5 million - up 7% from the previous quarter and over 400% from the same quarter last year. As impressive as this growth is, it is just the tip of the iceberg: cash flow is expected to explode to over CAD 100 million in the second half of 2022.
According to analysts, the valuation is compelling. They said the Canadian company represents one of the sector's best value/growth opportunities. The Company is currently trading at an EV/EBITDA of about 1.0x based on 2023 guidance. Given the large hedge book, it offers a relatively high degree of cash flow certainty. The acquisition of Viking assets has also allowed the Company to take additional hedges, all of which will have a positive impact on future commodity price forecasts. Of particular note, for H2/2022, WTI hedging instruments were received for an average volume of 2,783 bb/d at an average minimum price of USD 102.65. For 2023, Saturn is entering into WTI hedging instruments for an average volume of 2,366 bb/d at a minimum average price of USD 92.02.
E.ON - Green hydrogen from 2025
Energy prices in Germany and Europe are rising again. Gas is according to European Energy Exchange EEX close to 280 EUR/MWh. The price of electricity on a one-year view will rise to over 600 EUR/MWh and more. For understanding, here we are talking about prices that electricity suppliers currently pay on the exchange to secure electricity for the coming year. Even if companies and private households are still getting electricity at a fair price this year, the electricity supplier is currently paying at least double that amount for the purchase. Everyone in Europe should therefore not only dress warmly but also look for alternative sources of electricity supply.
Representatives of E.ON SE (ISIN DE000ENAG999) are on an energy purchasing promo tour in Canada with Chancellor Scholz. As the leading operator of energy networks and energy infrastructure in Europe, the Company serves around 51 million customers. The Group is returning with a memorandum of understanding for green hydrogen and ammonia.
The partner is the Canadian company EverWind. EverWind Fuels LLC is an innovative producer of green hydrogen and ammonia. EverWind and E.ON intend to enter into an offtake agreement for up to 500,000 metric tons of green ammonia per year under the MOU. Point Tupper, a multi-stage green hydrogen and ammonia production and export facility, is in an advanced stage of development and is expected to begin commercial operation in 2025 - the first in Atlantic Canada. However, things look bleak for the coming years in terms of electricity prices on the exchanges.
BP - Full fuel speed ahead with BYD in the luxury sedan segment
The BP Group (ISIN GB0007980591) continues to strategically position itself through cooperations. The international petroleum company operates its businesses under the four major brands, BP, Aral, Castrol and ARCO, as well as the historic Gasolin brand. Castrol and the Chinese automaker BYD have joined forces to improve the supply and promotion of Castrol ON advanced EV fluids for zero-emission vehicles over the next three years.
BYD (China) will officially recommend Castrol ON EV Transmission Fluid for its Han Series luxury sedan. This decision was made after the Company reviewed the benefits of the Castrol lubricant.
Sumeet Wadhwa, EV and Growth Unit Marketing Director at Castrol, highlights, "This strategic cooperation agreement is an important milestone in introducing our advanced range of Castrol ON EV fluids. As the world shifts to electric mobility and a sustainable future, automakers like BYD and their customers must have access to high-quality fluids that improve the performance and durability of their electric vehicles."
BP Group seems to be doing everything right. In past times of crisis, sales of luxury items increased. The British oil and gas group is making a smart move now by using the Han luxury sedan series as a marketing platform for the new fuel.
The fastest horse in the race for energy supply is currently Saturn Oil & Gas. Already solid free cash flow is set to explode in the second half of this year. Much of the future cash flow is directed toward rapid debt reduction, which is expected to reduce net debt by 60% over the next 18 months. The Viking acquisition strengthens Saturn's existing light oil asset in west-central Saskatchewan with synergistic assets. Viking's 250% increase in drilling inventory further expands the size and scope of Saturn's growing operations in Saskatchewan and complements the Company's core acreage in the southeast of this region. Justin Trudeau is in the best position in his own country to win the battle for resources. E.ON, as a dinosaur, is expanding its green hydrogen business. A letter of intent is a breeze compared to the hurricane that Saturn can reach with its price target of CAD 8. Castrol, meanwhile, is expanding its strategic dominance on the Chinese sideline in the luxury sedan segment. As a member of the BP Group, it provides enough lubricant to position the Company as a pioneer in EV powertrains.
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