BP, Saturn Oil + Gas, NIO - Energy transition: Will it all be different?

The market makes the price

Market participants see the lifting of the lockdowns in several countries as a sign of a possible return to normality. Economies around the world are freeing themselves from gridlock and ramping up production. Thus, on the one hand, more oil is needed, but on the other hand, there is still a supply gap due to the policies of OPEC member countries. In June 2000, shortly after the oil price crash, JP Morgan had predicted such a scenario. They foresaw that oversupplied oil markets could run into a "fundamental supply deficit" starting in 2022. An "oil supercycle" was possible, they said, in which oil prices could rise to USD 190 per barrel. According to Bloomberg, demand for call options on an oil price increase above USD 100 for the Brent contract expiring in December 2022 has surged significantly in recent days.

On the home stretch

The possible supercycle, which according to experts, should last until 2025, would, of course, be grist to the oil producers' mill. At such a price level, even heavyweights like Exxon Mobil, BP or Total should more than multiply. Smaller players promise even more leverage in an exploding market. Saturn Oil & Gas, for example, produces a barrel for USD 12, while the oil giants have to put USD 30 on the table. Saturn Oil & Gas wants to maintain this low-cost structure in the future.

According to management, this is easier to achieve, to take over larger competitors that went out of business during the Corona pandemic, than to drill on their own assets. The Company already made a start last year on identifying suitable takeover targets. Due diligence reviews have currently been underway for weeks, and an acquisition should be announced soon. The stock market value of Saturn Oil & Gas is presently just under EUR 22 million. Should the takeover go through, the share price level around EUR 0.09 would be considered favorable.

The search for alternatives

As mentioned above, industry leader BP already foresees the end of the oil age. Oil is to be followed by the age of decentralized power generation, in which energy is distributed with a smart infrastructure and fossil fuels are no longer needed. The energy and petroleum Group, together with subsidiary Aral, are sitting in the front row at the "Power Day" organized by Volkswagen. In 2020, the focus was no longer on black gold but on how the future of electromobility is to be shaped. Volkswagen wants to discuss the Europe-wide expansion of the public sales network for electric vehicles with the two companies.

The goal is also to install 18,000 new fast-charging points in attractive locations by 2025. The idea is to transform the gas stations that have been common until now into charging stations for electric cars. The current shortage of e-charging stations is to be supported by the federal government with almost EUR 2 billion until the end of 2023 to create 1000 new fast-charging stations. In an Allensbach survey, the lack of charging stations, along with low range and a high price, are the main reasons why the majority of Germans would still instead put a combustion engine in their garage.

Ready for the mass market

NIO, an electric car manufacturer from the premium segment, is planning to enter the mass market. Volkswagen AG's cooperation partner, the contract manufacturer JAC, is to help it succeed. The joint venture, named "Jianglai Advanced Manufacturing Technology (Anhui) Co. Ltd.," in which NIO will hold a 51% majority stake, involves cooperation in the manufacturing, services and supply chain segments related to intelligently connected NEV vehicles. The focus is to be on research and development of autonomous driving.

The Chinese automaker got a tailwind from major Japanese bank Mizuho. As a result, NIO was given an initial Buy rating. The analyst's optimism lies in the fact that the Group is a market leader and innovator in the world's largest car market, China. The shares of the Company were able to increase significantly. At the moment, the resistance area at USD 45 is acting as a brake. A sustainable overcoming would result in the USD 50 mark as a short-term price target.