Saturn Oil + Gas - BP - BYD: Can hydrogen replace oil?

Saturn Oil & Gas - Above USD 60, one feels very comfortable

When debating climate goals, one always comes back to the point of setting the right course for the mobility of the masses. After all, it makes a big difference whether mobility on this planet in the future will still be predominantly fossil-fuelled or based on renewable energies. E-mobility and hydrogen are two technologies directly linked to renewable energy sources, as they are only relevant if green energy is widely available.

The Canadian Saturn Oil & Gas Inc. has been thinking about a sustainable future for a long time. It is currently one of the most efficient WTI producers in North America. Although Saturn, as a fracking oil producer, will never become a radiantly green company, those who organize their oil extraction process as cleanly as possible and develop sensible logistical concepts are in a much better position than many other well-known protagonists in the industry. Of course, it will only work out if the industry makes a strong case for sustainable standards.

In any case, strategy consultant Jean-Pierre Colin is thinking in all directions about how a small, efficient company can grow into something bigger. WTI prices above USD 60 play into Saturn's hands because they produce a barrel today at USD 12. Operationally, things are going well, so we are looking outside the box. When is the right time to expand? Now, because the industry is expecting even lower headline numbers in demand and sales. But this is only because the COVID pandemic refuses to go away and continues to send negative signals to the economy. However, when things get going again in late summer, everyone will pick up the pace again and the oil price will also be able to rise further. But then possible takeover targets will be too expensive again. It is time to look ahead; with a current share price of CAD 0.13 and a market value of EUR 20 million, the optimal entry point is now.

British Petroleum (BP) - Oil producer seeks green coat of paint

Since the Deepwater Horizon disaster, BP favors going green because they want to be climate neutral by 2050. Less CO2 emissions and more sustainable fuels are the perspective goal of the joint project of BP and Ørsted. A 50 megawatt (MW) electrolyzer is to be built in a first step, which could be supplied with electricity from an offshore wind farm operated by Ørsted. As a result, green hydrogen could be produced in Lingen starting in 2024, replacing some fossil hydrogen production at the BP refinery, which is used to produce more sustainable fuels.

An increase in electrolysis capacity in further steps can ensure that all hydrogen production, which is still natural gas-based today, is even operated in a greenhouse gas-neutral manner. In perspective, even the production of important synthetic, climate-neutral aviation fuels and a direct environmentally friendly use of hydrogen in road and marine transport is possible. The prerequisite for this is an increase in the electrolysis's power to well over 500 MW, which currently still has to be technologically developed. Thus, the project has the medium-term potential to combine the production and industrial acceptance of green hydrogen with the use of transport systems via several steps.

Against this background, the two companies have jointly submitted a funding application to the German Federal Ministry of Economics as part of the IPCEI program. The Lingen Green Hydrogen project is an excellent example of the ring closure that is to be demanded because fossil hydrogen is to be replaced by green hydrogen from offshore wind power. Refineries currently consume about one-third of all gray hydrogen produced in Europe and therefore have significant decarbonization potential. BP shares have settled at EUR 3.50, with a low of EUR 2.08 in 2020 - they are still 100% away from the all-time high.

BYD - Now it's getting exciting

We had last predicted a further decline of the BYD share at this point. It has now occurred, and it will be extremely exciting to see how the quarterly figures are received by the market today. However, after the relatively good February sales figures, the estimates for the technology group from China are quite high.

The analysts' average forecasts amount to an EPS of CNY 0.297 per share for the latest quarter of the year. A year earlier, BYD still had earnings per share of CNY 0.025 on the books. Sales are expected to come in at CNY 34.90 billion, representing a 12.8% increase over the same period last year. For the full year, the median estimates are for earnings per share of CNY 1.66, up from CNY 0.50 in 2019, and for annual revenue, the average expectation is CNY 147.22 billion, up from CNY 121.78 billion.

You can see that the expectations are very high in terms of profit. Still, it could be that the e-car deliveries do not yet allow a significant jump in profit, as the dealers certainly had better arguments about the COVID pandemic, which should reduce the overall margin in the Group. But let us be surprised.

Goldman Sachs, in any case, had already given its thumbs up before the figures; according to their estimate, global demand for batteries for electric cars could increase by about 30 times in the next 20 years. Well, from the current low level, that's not a daring estimate; besides, a new gigafactory is already announced almost every day. In any case, the BYD share has fallen further since our last discussion and stood yesterday at only EUR 18.60 - from a chart perspective, the correction could well run to EUR 15.00, at which point one should take hold.