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Why Saunders International (ASX:SND) is in box seat to reap benefits of buoyant oil market   

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Highlights

  • The WTI benchmark crude oil is trading around US$100/bbl.
  • Global inflation and the ongoing war between Russia and Ukraine are creating pressure on fuel prices.
  • Higher oil prices could fire up oil & gas projects that were either lying dormant or waiting for the price to reach this level.
  • Saunders International provides expert services to upstream as well downstream sectors of the industry.
  • Innovative and cost-effective solutions have enabled Saunders to maintain a clientele of several oil majors since the 1960s.

Soaring crude oil prices are giving nightmares to all oil-importing countries. The concerns over supply shortages amid the Russia-Ukraine war recently pushed crude oil prices to a 10-year high. As of 13 April 2022, crude oil was trading around US$100/bbl.

Crude oil price chart for 10 years (Image source: Refinitiv; Analysis: Kalkine Media)

Related read: What is powering Saunders’ (ASX:SND) bullish outlook for 2022 and beyond?

Rising crude oil prices tend to affect the prices of several commodities, including natural gas. Meanwhile, inflation figures are scaring major economies, including the US, which saw its inflation cross the 40-year high mark in February.

Surging crude oil prices are expected to crank up the pace of new projects in the oil & gas industry. This will also have a trickle-down effect and result in several opportunities for service providers like Saunders International Limited (ASX:SND).

Saunders catering to O&G space for over seven decades

The ASX-listed company has been active in the Australian industry for the last 70 years. The engineering and construction firm has managed to retain several of its oil major clients, including Mobil, BP, Shell, Caltex, and others since the 1960s.

Related read: What sets Saunders International (ASX:SND) apart from other contractors?

Saunders is known for its innovative and cost-effective solutions that support several industries in Australia. The country may not be a prominent player in the oil industry but is the largest exporter of LNG globally. 

Floor repair and roof installation work for BP (Image source: Company website)

Saunders caters to the greenfield and brownfield projects. Its services range from complete engineering, procurement and construction (EPC) of new terminals to long-term service agreements to support the productive capacity of its customer assets.

The company is engaged in the storage of crude and refined products, terminals for import and distribution, and associated civil, structural, mechanical and piping works.

‘Boosting Australia’s Diesel Storage Program’

The Australian Federal Government has launched a long-term fuel security goal to boost the country’s domestic fuel storage. This move by the government looks more relevant in the current scenario as fuel prices are on fire.

This also acts as a shield against higher fuel prices as the fuel (including gasoline and diesel) could be stored when prices are nominal and used when prices are flying higher.

Related read: Saunders International (ASX:SND) strengthens NSW foothold, wins $17M in infra projects

Yarraville Supply Optimisation Project for Mobile Oil (Image source: Company website)

The diesel storage program includes grants of AU$260 million, which is expected to translate to AU$600+ million in construction works during FY22-24. Saunders maintains a strong relationship with all the recipients of the federal grant.

Related read: Saunders International beefs up balance sheet, provides H1 guidance

Saunders provide a range of reliable, innovative and cost-effective solutions using its significant knowledge and experience. Over its last 70-year-expreince of working over an extensive portfolio of projects, the Company has transitioned to delivering large and more complex solutions for its clients. 

Stock Performance

SND shares traded at AU$1.17 with a market cap of AU$126.02 on 12 April 2022. In the last 52-week period, the shares have delivered a handsome return of over 62%.


 


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