June 9th, 2022 | 11:19 CEST
Shares of Nel ASA, BP, BASF and Saturn Oil + Gas: Goldman bullish on oil price
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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
Saturn Oil & Gas: Entering new league with takeover
Saturn Oil & Gas has made another big splash. The Canadian company plans to increase its production by a further 50% through a takeover, which would put it in the league of the leading listed light oil producers. In addition, significant synergy effects are expected. Specifically, the Company wants to take over an oil production facility in the Viking area in west-central Saskatchewan with a production volume of approx. 4,000 barrels per day (boe/d of which approx. 98% is light oil and liquids) for approx. CAD 260 million. That is coupled with a high net cash flow and 140 new properties. Financing was secured within a few days. The area is one of the most attractive light oil resource areas in North America. Saturn is already active in Southeast Saskatchewan and can leverage synergies accordingly.
A report at researchanalyst.com sees the transaction positively. The acquisition will increase Saturn's daily production capacity at full load by more than 50% to approximately 11,400 boe/d. On the cost side, royalties are expected to drop from about 15% to 12% and operating expenses per boe are estimated to decrease by 16%. In addition, further cost savings are expected in the areas of transportation, labor and processing costs. "The growth strategy makes sense, especially from this point of view," researchanalyst.com said. Saturn expects to maintain Viking's production at a level of about 4,500 boe/d with 35 to 40 wells per year, which would include a free cash flow of more than CAD 85 million per year with upside potential. Once the transaction is completed, analysts will also have to adjust their studies. Meanwhile, the stock is covered by four research houses and recommended as a buy by all of them. GBC Research's target price for Saturn shares before the takeover was CAD 13.12, or EUR 9.75 - PDF, study. The share is currently trading at EUR 2.
Nel: When will the big order come?
The renewable energies sector also benefits from rising prices for fossil energies. On the one hand, the generally higher production costs become competitive more quickly. On the other hand, the pressure on governments to consistently fossilize the energy turnaround increases. Nel ASA is one of the profiteers. And the share of the Norwegian hydrogen specialist can currently use all the support it can get. After plummeting to EUR 1.15 in May, the share is not getting off the ground and is currently trading at EUR 1.40. The share price exceeded this level at the beginning of 2021 when it was over EUR 3. Even the latest order has not helped the share to break out. The Norwegian metal refiner Glencore Nikkelverk has ordered an electrolyzer for green hydrogen from Nel. The alkaline electrolyzer system is to be built in the middle of next year to supply green hydrogen for the production of hydrochloric acid in the future. The order volume is EUR 3 million. Investors are thus still waiting for a major order.
BASF: Can raw material and energy prices be passed on?
BASF will certainly not be jubilant about Goldman Sachs' oil price forecast. The business is too energy-intensive for that. As a reminder, BASF was mentioned as the big loser in the discussion about a gas embargo against Russia. The chemical group would have to shut down at least parts of its German production. Doing so would have a significant impact on the entire German economy. This horror scenario does not stop Bernstein Research from recommending BASF shares as a buy. On Monday, the price target was even raised slightly from EUR 87 to EUR 88. The analysts are confident that BASF will be able to pass on the rapidly rising raw material and energy prices to customers in 2022. Therefore, the Ludwigshafen-based group is Bernstein's favorite among industrial chemical groups, alongside Akzo Nobel. BASF shares are currently trading just below EUR 53.
Energy prices are keeping companies and capital markets on their toes. Oil producers such as Saturn Oil & Gas and Exxon are currently earning a pretty penny. If BASF can pass on the high purchase prices, the share is not expensive. Nel must finally announce a major order.
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