Energy & Materials Sector

• TotalEnergies’ robust hydrocarbon production in Q2 2024 will be offset by lower gas realizations and refining margins.
• Higher utilisation rates are expected to partially mitigate reduced refining margins in Europe and the Middle East.
• Seasonal factors are expected to lower the Integrated Power segment’s adjusted net operating income by 18.2% QoQ to USD 500 million.

• The Cement Industry is an essential activity with an attractive growth perspective since cement is one of the most relevant commodities worldwide, especially for emerging economies.
• Cement companies such as CEMEX and GCC are well positioned to continue capturing the potential growth in their markets through differentiated products and clear targets to reduce CO2 emissions.
• Although we expect 2Q24 quarterly results to be weaker, with total EBITDA +1% YoY, any weakness in results is more than priced in at current prices, in our view.

• New Fortress Energy (NFE) reported a solid set of financial results for the first quarter of 2024, reflecting strong operational performance and strategic growth initiatives.
• The company reported EBITDA of $340 million, aligning with management’s expectations and consistent with the company’s guidance for the year.
• This performance indicates a robust financial framework and clear visibility into the company’s path forward for the remainder of the year.

• We are updating our estimates to reflect actual 2Q24 NYMEX reference prices of $80.66/bbl for oil and $2.32/MMBtu for natural gas.
• We have also increased our 2Q24 lease operating cost estimate to reflect workover activity and bumped our DD&A estimate.
• Talos’s latest guidance and our updated estimates are outlined in Figures 1 – 4.

• Our updated estimates include the impact of the Svenska acquisition, which closed on April 30, 2024, and was included in management’s latest guidance update following the release of 1Q24 financial and operating results.
• The acquisition added a 27.39% non- operated working interest in the CI-40 license located offshore Côte d’Ivoire.
• On May 7, 2024, management increased the midpoint of FY24 working interest (WI) production guidance to ~25.0 MBOE/d from 22.1 MBOE/d.

• On 17 July, SK Innovation (096770 KS) officially announced a merger with SK E&S. The merger ratio between SK Innovation and SK E&S has been set at 1 to 1.1917417.
• We believe this is the wrong timing for this merger from SK Innovation’s point of view. SK Innovation is trading at near three year lows.
• This merger is likely to generate backlash from KKR which holds SK E&S redeemable convertible preferred stock (RCPS) worth 3.1 trillion won.

• Premier Energies Limited (0377949D IN) is looking to raise US$300m in its upcoming India IPO. It is a manufacturer of solar photovoltaic (PV) cells, and solar modules. 
• It also executes engineering, procurement, and construction (EPC) projects and provides follow-up operation and maintenance (O&M) services. 
• In this note, we talk about the company’s historical performance.

• Mount Gibson Iron (MGX AU) reported a disappointing Q4 FY24 production report. Volumes were inline, but provisional pricing impacts of ~20% brought a quarterly cash outflow of one mn AUD.
• Volume guidance for FY25 was light at 2.7-3 mn tons (vs. 4.1 mn in FY24). Net Cash rose to 436 mn AUD (excluding Fenix Investment), almost equaling the market cap. 
• FY24 results are due on 21st August 2024, when the board will recommend a dividend. Net cash and future cash flows should support the share price in the long run.  

• US crude oil inventories fell by 4.9 million barrels in the week ending 12/Jul, marking the third consecutive weekly decline.
• As of 12/Jul, US natural gas inventories were up 8.4% YoY and 16.9% above the 5-year seasonal average.
• UBS expects Chevron’s Q2 earnings to fall short of expectations due to LNG project downtime and lower international refining margins.

• RaaS Research Group has produced an update report on niobium-focused Globe Metals & Mining (ASX:GBE).
• GBE has continued metallurgical work for their chlorination process with results (20 March 2024) demonstrating the ability of the process to produce high purity Nb205 at a lab scale.
• The results showed an extraction and separation rate of 99% for niobium and tantalum as well as 94% for rare earth elements (REEs).

• We are updating our 2Q24 estimates to reflect actual oil and natural gas prices.
• Our reference oil price averaged $80.66 during 2Q24, and our reference natural gas price averaged $2.33/MMBtu.
• For 2Q24, we estimate total revenue of $139.1 million based on estimated average production of ~35.0 MBOE/d, including ~14.1 MB/d of oil. 

• The merger ratio, not as unfavorable to SK Innovation as feared, shows SK Group acting cautiously amid political and regulatory scrutiny.
• SK Inc.’s stake will drop to mid-60s; the 1.2x merger ratio for SK E&S could positively affect SK Innovation’s stock price short-term.
• Persuading KKR is crucial. SK E&S won’t convert ₩3T in RCPS or grant appraisal rights, potentially leading KKR to consider litigation, a significant risk to the merger.

• Recent changes in Canada’s M&A rules have restricted critical metal companies from selling to Chinese investors
• Chinese investors have played a key role in funding the exploration and development of copper porphyries, which are vital for global production
• The uncertainty caused by these rules may lead companies to relocate outside of Canada, potentially harming the country’s mining industry and economy

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Halliburton forecasts low double-digit revenue growth from its international business and flat revenue growth from North America in 2024.
• Management expects sequential margin growth of 25-75 bps in its Drilling & Evaluation and Completion & Production segments in Q2 2024.
• Halliburton expects its FCF to rise 10% YoY in 2024. The company returned nearly 60% of its FCF to shareholders in 2023.

• Alcoa Corporation recently reported its first quarter 2024 earnings, delivering a mix of strategic developments and financial results that reflect the company’s evolving business landscape.
• The company announced a significant transaction, the acquisition of Alumina Limited, which is expected to consolidate its ownership in the Alcoa World Alumina and Chemicals joint venture.
• This all-stock deal, valued at approximately $2.2 billion, aims to provide a streamlined corporate structure and enhance shareholder value.

• Kinder Morgan reported a robust performance for the recent quarter, indicating positive trends in several key areas, while also outlining challenges and broader economic impacts that could shape future operations.
• The company demonstrated a healthy financial position with a 13% increase in adjusted earnings per share (EPS) and a 7% rise in EBITDA.
• The enhanced financial metrics were primarily driven by strong contributions from the Natural Gas and Refined Products segments.

• • The YE23 SEC net 1P reserves in Cote d’Ivoire are estimated at 16.9 mmboe; which compares very favorably with the previous estimate for the WI 1P reserves of 13 mmboe (as of 01/10/2023).
• • The YE23 WI 2P reserves are now estimated at 22.5 mmboe.
• Adding back production over November and December 2023 (assuming ~5 mbbl/d production), the new estimate represents an increase of ~1.1 mmboe vs the previous estimate of 21.7 mmboe at the end of October 2023.

• With nearly 80% of the review period complete, there could be 28 adds/deletes across the S&P/ASX family of indices in September.
• There is a lot of stocks for passive trackers to trade on the index changes with the largest impacts on the potential changes to the S&P/ASX 200 (AS51 INDEX). 
• The potential adds have outperformed the potential deletions by a LOT over the last few months and continued positioning could lead to further gains.

• Following the iron ore rally at the start of the month, prices have corrected sharply lower owing to downbeat economic data and an inventory buildup.
• Option activity over the past week was notably skewed towards put options suggesting a negative sentiment. Weekly options volume was sharply lower WoW.
• Recent bearish sentiment has been accompanied by a decline in IV. Outcome from the plenary meeting is likely to reignite volatility in the coming weeks.

• Matador Resources Company has reported a promising start to the first quarter of 2024, with significant advancements in operational and financial aspects.
• The company has successfully enhanced its infrastructure, expanded financial capacities, and is preparing for substantial well completions, indicating a robust growth trajectory.
• From an operational perspective, Matador Resources has effectively integrated a significant pipeline system totaling 595 miles.

• We are initiating coverage on Cemex with a preference for CX 5.20% 2030 bonds. 
• Cemex’s business position, favorable market trends within its key markets, commitment to further strengthening its credit profile, and credit-positive strategic priorities support our optimistic view on the name.
• For EM investors, we prefer CX 5.20% 2030, considering these bonds are trading wide to the Mexican Sovereign, the EM BBB Index, and the LatAm BBB Index.

• DT Midstream reported a positive start to the first quarter of 2024, underpinned by advancements in strategic growth projects and stable financial metrics.
• The highlights from the results include an adjusted EBITDA of $245 million, marking an increase of $6 million from the previous quarter.
• These figures were attributed to a robust performance in the gathering segment and consistent results in the pipeline segment.

• Fortescue Metals (FMG AU) trades at a steady dividend yield of 9%, assuming a 115 USD/ton iron ore price and an 80% payout. 
• The payout risk lies in incremental capex spend on green energy in future years. For FY24, the company has committed USD 500 mn  (overall capex 3.0-3.2 bn USD). 
• We expect shipments of ~54 million tons for Q4 FY24 (in its production report to be released on 25th July) and 192 million tons for FY24 (flat YoY).

• Kinetik reported a strong start to the year, surpassing its own internal expectations and signaling robust growth prospects for 2024.
• In Q1, Kinetik recorded an adjusted EBITDA of $234 million, marking a 25% increase year-over-year.
• This positive performance was primarily driven by volume growth, leveraging contributions from the Permian Highway Pipeline (PHP) expansion, and the Delaware Link.

• Murphy Oil Corporation displayed a mixed performance in its first quarter of 2024, with several areas of strength along with areas requiring attentiveness.
• The company achieved a production output of 170,000 barrels of oil equivalent per day, operating at the upper end of its anticipated range.
• This was primarily driven by higher production in Eagle Ford Shale and Tupper Montney.

• Noble Corporation’s first quarter 2024 results reflect both strengths and areas of concern as they position themselves in a changing market landscape.
• One of the key highlights from the quarterly review includes an adjusted EBITDA of $183 million, illustrating a 32% increase on a year-over year basis.
• This growth primarily stemmed from solid operational uptime and a slight bump in marketed utilization.

• PBF Energy recently presented updates on its operational and financial performance for the first quarter of 2024, along with insights into future strategy adjustments.
• Reflecting a mixed performance during this period, the results demonstrate both challenges and strengths in PBF Energy’s operations.
• From a financial standpoint, PBF Energy reported adjusted net income of $0.85 per share and adjusted EBITDA of $301.5 million.

• SK Innovation (096770 KS) and SK E&S plan to hold a board meeting on 17 July to discuss the potential merger between the two companies.
• If this merger is successful, it would create the eighth largest company in Korea with a combined assets of 106 trillion won (US$77 billion). 
• Although the merger ratio is not yet available, we believe that this potential merger could potentially benefit SK E&S and SK Inc but could be negative on SK Innovation.

• BHP and Lundin rumored to be considering a joint bid for Filo Mining in the Vicuna district, an emerging copper super district in Chile and Argentina.
• Lundin Mining owns the most advanced project, Jose Maria, in the region which is permitted and fid ready.
• Argentina now has a supportive business regime, making it an optimal time for development in the region. Lundin Group retains a 33% stake in Filo while BHP owns a 6% stake.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• US oil and gas rig count fell by 1 to 584 for the week ending 12/Jul, after rising by 4 the previous week. 
• US oil rig count fell by 1 to 478, indicating 59 fewer oil rigs as compared to the same week last year. It is at its lowest since December 2021.
• Despite a decline in the US oil rig count, US crude oil production matched the all-time high production of 13.3m bpd for the week ending 5/Jul, according to the EIA.

• UAN is undervalued due to market volatility and has potential for future share price increases
• The company’s strategic location and cost advantages in production and distribution make it a strong player in the nitrogen fertilizer market
• UAN has a normalized FCF yield of 17% and offers a significant increase in share price, making it an attractive investment opportunity

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• It Got Quiet around Platinum and Palladium While sales of EVs around the world continue to surge, it kind of became obvious that BEVs or mild hybrids are the choice for many consumers going forward.
• Those systems offer people the option to drive fully electric within the city and use the combustion system for further destinations.
• If the demand for BEVs continues to surge, two metals could be supported by that fact which builds the investment case for platinum and palladium.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adani Ports & Special Economic Zone
• Vedanta Resources

• Friday post-close, MMG (1208 HK) released the results of its Rights Offering. 3.4654bn Rights Shares at HK$2.62 saw 98.18% take-up. New Rights Shares officially start trading on 16 July.
• The other 1.82% (63.1mm Rights Shares) saw 6.383bn excess Rights Shares applications. EAFs were allocated evenly, so applicants got 0.99% of what they bid for, but hey, free money?
• The new Rights Shares are expected to commence trading on 16 July. Even better, there was good fundamental news out late Sunday which should add to the general wellbeing.

• POSCO Holdings (005490 KS) announced a major shareholder return policy to buyback and cancel nearly 2 trillion won worth of treasury shares from 2024 to 2026. 
• The company will cancel 5.25 million treasury shares representing 6.2% of outstanding shares (about 1.9 trillion won). It will also repurchase and cancel additional 100 billion won of shares.
• POSCO Holdings has taken a major initiative to provide greater returns to its shareholders and this should have a positive impact on its share price. 

• While there may be still be some overhang once the rights shares start trading, this is a good entry point
• Applications for 6.4 Billion excess rights shares received from 11 applications
• Rights shares will start trading on Tuesday 16th of July

• Chinese lithium giant Tianqi Lithium Corp. (002466.SZ -1.01%) is forecasting a net loss exceeding $670 million for the first half of the year as plummeting lithium prices hurt the bottom line of producers of this essential battery raw material.
• Tianqi said Tuesday that it anticipates a significant net loss of between 4.9 billion yuan and 5.5 billion yuan ($674 million and $756 million) for the six-month period.
• This includes a projected net loss of between 983 million yuan and 1.6 billion yuan for the second quarter, which is narrower than the 4 billion-yuan loss reported in the first quarte

• Alamos Gold Inc. reported a robust first quarter of 2024, showcasing a mixture of operational excellence and strategic acquisitions that positioned the company for significant growth and enhanced value creation.
• The quarter was highlighted by a strong operational performance with a total production of 135,700 ounces of gold, surpassing the company’s quarterly guidance.
• This was primarily driven by record production from the La Yaqui Grande mine.

• Balchem Corporation’s first quarter of 2024 displayed commendable performance with a blend of robust financial metrics and strategic corporate initiatives.
• Revenues increased by 3.1% to $240 million, indicative of heightened product demand and expanded market reach.
• This was accompanied by an impressive 11.4% growth in gross margin dollars, with a significant margin expansion to 34%.

• Louisiana-Pacific Corporation showcased a robust performance in the first quarter of 2024, notably driven by strong outcomes from both the Siding and OSB (Oriented Strand Board) segments.
• The company recorded sales of $724 million, marking a 24% increase year-over-year, while adjusted EBITDA surged to $182 million, up $116 million from the first quarter of 2023.
• The growth in the Siding segment was particularly notable, with a 9% increase in revenue driven by a compound effect of increased net selling prices and higher volumes.

• Silgan Holdings reported their financial performance with results that lean into both the strengths and challenges faced by the company in its first quarter of 2024.
• The report demonstrated a mixture of developments across its key business segments highlighting how market dynamics and operational efficiencies intersect.
• Positively, Silgan reported strong operational execution and cost performance, which helped in achieving adjusted earnings per share at the high end of expected ranges.

• Interest in this merger is emerging from an unexpected angle, especially regarding the merger ratio’s fairness. There’s a risk it could unfavorably affect SK Innovation’s stock price.
• SK Innovation at ₩108,000/share; SK E&S at ₩290,000/share based on strong profits. SK plans ratios around 1.3x total value and 2.7x per share. SK Inc may reach mid-70% stake post-merger.
• SK Innovation’s stock may face short-term decline. Securing shareholder approval, with SK Inc at 36%, overseas investors 22%, local institutions 15%, local retail 20%, and NPS 7%, poses challenges.

• Currently, the share of natural gas in energy basket is just 6.7%, Which India is aiming for 15% by 2030.
• Capex in Place- expanding the Dahej Plant, Petchem facility(20000Cr) will be operational in 4-5 years, Kochi utilization will improve
• 20% Volume Growth expected by Management, with a rising LNG portion in overall Gas Consumption in India.

• Following the regulatory approval from the Government of Canada, Glencore’s cash acquisition of 77% stake in Teck’s Elk Valley Resources (EVR) is expected to close on 11 July 2024.
• The cash acquisition is forecasted not to cause any passive fund flows based on the deal structure.
• The potential demerger introduces the risk for Glencore approaching the exit threshold of STOXX Europe 50. This is yet undetermined due to the long time horizon.

• 2Q24 production of 18,290 bbl/d was very near our forecasts of 18.5 mbbl/d but marginally below the company target of ~19 mbbl/d.
• A brief river blockade impacted production but production in June was 20,555 bbl/d.
• • Well 19H has achieved production rates of ~8.5 mbbl/d during the initial 7 days of production.

• WA gold explorers and developers are struggling in the market compared to producers
• Value gap between explorers/developers and producers has widened, with little progress in projects
• Cash balances are dwindling for many companies, raising questions for investors about the incentive to fund them

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Entree Resources (ETG CN) has been in an arbitration proceeding against Rio Tinto PLC (RIO LN) since April 2024.
• After initial hearings earlier in 1H24 we expect final arguments next week. The arbitration committee verdict should come by late 3Q24.
• At stake is the relationship and ownership arrangement between ETG and RIO’s in Oyu Tolgoi, one of the world’s largest copper mines. Just concluded Mongolian elections clear the last hurdle.

• Packaging Corporation of America reported its first quarter 2024 results, including a net income of $155 million, or $1.72 per share, and a total net sales of $2 billion.
• While these figures show a decrease from first quarter 2023 results of $198 million net income, or $2.20 per share, and the same $2 billion net sales, they still mark a significant achievement for the company.
• To tackle inflation, Packaging Corporation of America has been focusing on cost management and improving process efficiencies across its manufacturing and converting facilities.

• 2Q24 production was 21.1 mbbl/d, which was very close to our expectations (21.3 mbbl/d).
•  Production is expected to increase in 3Q24 with the start-up of production at Nong Yao C.
• Half of the planned drilling targets have already been drilled.

• The initial 1.1 km 2D seismic sweep survey shows a seismic reflector at the same depth where gas was intersected at the Jetstream #1 well.
• This is important as it supports the contingent resources estimated in the Competent Persons Report published at the time of the IPO.
• These resources had been estimated with limited reservoir and seismic data.

• On July 8, 2024, Ring increased its 2Q24 production guidance to 13.5-13.7 MB/d of oil (19.5-19.7 MBOE/d) from 13.0-13.4 MB/d of oil (18.5-19.1 MBOE/d) reflecting the continuation of outperformance exhibited in 1Q24 (Figure 1).
• Production volumes are benefiting from outperformance in Ring’s development program and increased operational efficiencies in the company’s base production.
• The midpoint reflects gains of ~2% Q/Q and 15% Y/Y. The Y/Y gain partially reflects the addition of assets acquired in the Central Basin Platform from August 2023.

• Sealed Air Corporation has disclosed its financial outcomes for the first quarter of 2024, presenting mixed results amid shifting market conditions and ongoing strategic adjustments.
• Revenue for the quarter reached $1.33 billion with an adjusted EBITDA of $278 million, indicating robust performance despite the challenging dynamics, particularly in the Protective segment.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Kolibri Global Energy (KEI) has provided an update on operations and revised guidance. It now guides to FY24 revenue of US$57–62m and EBITDA of US$43–48m on average production of 3,200–3,700boepd. KEI plans to start drilling its next three wells in the first half of August. These wells will have longer lateral lengths, which should result in better well economics. We have revised our estimates to reflect the latest guidance and operational update. Our valuation of KEI falls slightly to US$6.8/share. The announced intention to initiate a share buyback, as well as the recent inclusion in the Russell Microcap Index, should provide additional support to the shares.

• FMC Corporation delivered mixed first-quarter results for 2024, characterized by solid EBITDA that met the higher end of the company’s guidance and significant improvement in cash flow, yet facing a notable decline in revenue and volume.
• During this period, revenue decreased by 32% compared to the previous year, with a 27% drop in volume primarily attributable to ongoing channel destocking and delayed purchasing behavior by growers, aligning with the trend observed over the past year.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• We are updating our estimates to reflect higher expected interest expense in 2Q24.
• On the May 3, 2024, earnings call to discuss 1Q24 results, management indicated that 2Q24 interest expense would be ~$8 million.
• Our previously published 2Q24 interest expense estimate was $7.1 million.