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February 7th, 2022 | 10:13 CET

Shell, Saturn Oil + Gas, Gazprom: Oil price explosion to USD 120?

  • Oil
Photo credits: pixabay.com

Oil prices again rose sharply last week and once again reached multi-year highs. Most recently, a barrel of Brent North Sea crude cost USD 92.80. That translates to an increase of approximately USD 13 since the beginning of the year. The price for a barrel of the US variety West Texas Intermediate (WTI) rose to a high of USD 92,20; thus, the spread between the oil variants is again historically low. Both grades rose at times to their highest level since autumn 2014. The triggers for the current bull market are primarily the Ukraine crisis and the cold snap in the US state of Texas. This has fueled concerns about production losses in the Permian Basin, the largest US shale oil deposit. Which oil stocks are now under the spotlight of investors?

time to read: 5 minutes | Author: André Will-Laudien
ISIN: Shell PLC | GB00BP6MXD84 , Saturn Oil + Gas Inc. | CA80412L8832 , GAZPROM ADR SP./2 RL 5L 5 | US3682872078

Table of contents:


    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] 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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    Shell PLC - Strong figures and positive analyst comments

    One of the largest private oil companies is the British-Dutch Royal Dutch Shell (Shell after the name change). The oil company published strong annual figures last week. Shell reports adjusted EBITDA of a staggering USD 16.4 billion for the fourth quarter, while consensus was only USD 15.3 billion. In terms of adjusted profit of USD 6.39 billion, the Company topped estimates by 22%. The sharp rise in oil and gas prices provided the surprise.

    In the first half of 2022, Shell now plans to buy back a total of USD 8.5 billion worth of shares, which is more than double the amount in 2021. The quarterly dividend is up 4% to USD 0.25, bringing the payout back up to a solid 4.7%. Worldwide, the Group has become the market leader in the LNG and service station business. In addition, there are sophisticated plans on how the green transformation will be continued, so the oil stock will also appear on the buy list for funds investing sustainably.

    The analyst comments read consistently positive: DZ Bank maintains its Buy recommendation, the price target was raised from EUR 26 to EUR 28. Jeffries votes Buy, and Barclays maintains its Overweight rating. Shell shares rose sharply by 20% in January. The value was in good demand in 2021 with a plus of 25%. As a participant in the oil and gas supercycle, profits should continue to explode. With the good prospects, the oil standard has a 2022 P/E ratio of 8.3, and the profits should again reach the top pre-Corona levels in the current year. There, it was rarely below USD 20 billion per year. Overall, Shell's strong balance sheet makes it suitable for a dividend-oriented long-term investment.

    Saturn Oil & Gas - The profit margin is expanding

    In recent months, we have repeatedly pointed out the outstanding position of Canadian Saturn Oil & Gas. Up about 67%, the Saskatchewan oil producer is one of the best performing oil and gas stocks in 2021. Following the Oxbow deal in mid-2021, the stock doubled from pre-transaction levels as the promising asset deal increased production twenty-fold to nearly 7,000 barrels per day.

    With WTI prices above USD 90, the effect on the balance sheet is not long in coming. The high cash flow means that Saturn can repay all outstanding loans by mid-2023. There are hardly any oil companies in North America that operate virtually debt-free. Compared with the Company's last profit calculation at around USD 60, the market price has increased by over 50%. If it remains at this level or even higher in 2022, this should lead to corresponding forecast increases. Goldman Sachs estimates the oil price to reach USD 100 as early as Q3-2022, but production from shale capacity will then gradually increase.

    Meanwhile, the integration of the acquired Oxbow infrastructure is going smoothly for Saturn. The Company is aligning itself in a very sustainable way through AFTI's watchdog technology, as active wells are now monitored at all times by a LIVE webcam, and the installation of electronic sensors provides real-time information on well conditions. As a result, the response time to any problems that arise is reduced, and environmentally compliant production is ensured.

    Experts from analysis house GBC were on site and found Saturn Oil & Gas' properties to be very well managed. Oil production is running smoothly and under high environmental standards. On the earnings side, around CAD 1.01 per share is expected for 2023, providing a current 24-month P/E ratio of 3.5. There are unlikely to be any cheaper oil stocks on the price list. The recommendation to buy was renewed again, and the price target was raised analogously from CAD 9.20 to 12.17. Thus the value has a 12-month potential of a good 250%. One hears such prospects gladly - Buy!

    Further information on the Company and the current developments in the oil market are expected during the International Investment Forum (IIF), which opens its virtual doors on 17.02.2022. (Registrations for free at www.ii-forum.com)

    Gazprom - Ex-Chancellor Schröder nominated for the Supervisory Board

    Tensions between Ukraine and Russia continue to rise. As Russia is a major crude oil producer, oil traders are currently calculating a risk premium in the event of an escalation of the conflict. Gazprom is a clear winner from the high oil and gas prices.

    For some time now, representatives from politics and business have been complaining that Gazprom is supplying too little gas to Europe, thus deliberately fueling both skyrocketing energy prices and emptying gas storage facilities. The Russian state-owned Company has only ever claimed to fulfill all contractually agreed delivery volumes. Many observers see the Nord Stream 2 pipeline as an ongoing bone of contention between the EU and Russia.

    The political level is now getting a new face, as former German Chancellor Gerhard Schröder is to get another job in the Russian gas business. Last week, the energy giant announced that the SPD politician and friend of Russian President Vladimir Putin had been nominated for the supervisory board of state-owned Gazprom. The final decision will be made at the next annual general meeting on June 30. The 77-year-old is already chairman of the board of directors at Nord Stream 2 AG. The second Nord Stream pipe has been completed but is still not in operation. The EU's dependence and skyrocketing energy prices should force politicians to reach an agreement, but that is likely to fail because of those currently in charge.

    Gazprom shares were among the winners of 2021, with a gain of more than 50%. Compared to the start of the year, they are currently consolidating a bit due to the ongoing Ukraine crisis. For the intrepid long-term investor, a 5% dividend and expected earnings growth of over 17% in the current year are a good incentive to buy.


    The oil market is bullish again. Given neglected investments during the pandemic, there are too few new projects to meet the high demand on the world markets. Shell and Gazprom are already supplying huge quantities, but the much smaller Saturn Oil & Gas, with its undeveloped oil fields, can pump much more oil out of the ground - and at rising sales prices!


    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
    For this reason, there is also a concrete conflict of interest.
    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    André Will-Laudien

    Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.

    About the author



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