Daily Brief Energy/Materials: Emerald Resources Nl, INEOS AG, UPL Ltd, Baker Hughes, Cheniere Energy, Energy Transfer LP, Halliburton Co, Geopark Ltd, Hess Corp, Chariot Limited and more

• Shareholders have approved Invocare Ltd (IVC AU)‘s acquisition by TPG and IVC is expected to stop trading after the close on 3 November.
• Invocare Ltd (IVC AU) will be replaced by Emerald Resources Nl (EMR AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 3 November.
• Boss Resources (BOE AU) misses out this time but should be added to the index late November or at the regular rebalance in December.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Ineos’ ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

  Ineos AG was awarded another gold sustainability rating by EcoVadis in 2022, while Ineos Group Holdings received a low-risk rating from Sustainalytics and was ranked the third-best commodity chemicals company out of 234 rated by the agency.

UPL’s Q2/23-24 results were very weak, with revenues and earnings declining significantly and a deterioration in working capital. Our scepticism of the company has continued to deepen with the results. We are concerned about the lack of discussion on the huge debt reduction and unusual earnings call set-up in Q4/22-23, as well as the subsequent rebound in debt in Q1/23-24. We note that the pressure to reduce net debt to USD 2 bn in Q4/22-23 was to meet management’s aggressive guidance and rating agencies’ expectations. Management had released the Q4 results in early May 2023, almost halfway through Q1/23-24. Yet, there were few indications of very weak Q1 or H1 numbers.

In addition, we are sceptical of management’s guidance, even after it has been revised downwards. The new guidance implies c. 18% y-o-y revenue growth and a c. 28-30% increase in EBITDA in H2/23-24. That said, management does not expect y-o-y improvement in Q3. Hence, for UPL to meet the guidance, all the growth would have to be registered in Q4. We do not believe that the company will be able to meet the full-year guidance.

• This is our first report on energy equipments and services provider, Baker Hughes.
• Despite global economic uncertainty and fluctuating commodity prices, Baker Hughes remains optimistic about the outlook for the year, emphasizing a durable upstream spending cycle driven by international and offshore markets.
• Baker Hughes continues to optimize its corporate structure with a cost-reduction strategy and a focus on achieving higher margins and returns.

• This is our first report on energy infrastructure major, Cheniere Energy Inc.
• The company performed decently in the previous quarter as global inventory levels reached historic highs.
• The U.S.’s mild climate and increased production kept Henry Hub prices below $3 during the quarter, encouraging coal-to-gas switching and boosting power sector demand.

• This is our first report on Energy Transfer LP had a solid Q2 2023, characterized by robust performance in its base business, delivering record volumes in multiple segments, including intrastate and midstream operations.
• Energy Transfer remains optimistic about its industry’s future and achieving distribution growth targets while ensuring financial stability.
• Energy Transfer continues to prioritize the equilibrium between distribution growth, leverage reduction, and maintaining robust free cash flow for ongoing expansion.

• This is our first report on oilfield service major, Halliburton Company.
• The company delivered a mixed set of results for the previous quarter with revenues well below analyst expectations but managed an earnings beat.
• As Halliburton capitalizes on this extended upcycle, its strategic execution reaffirms its trajectory of sustained success in the oilfield services sector.

• • Current production stands at ~39 mboe/d including 7.1 mbbl/d at CPO-5 and 24.4 mboe/d at Llanos-34. • Following the recent exploration success at Toritos-1 and Saltador-1, Llanos-123 is now producing 2,140 bbl/d (1,070 bbl/d net to GeoPark).
• The company is now drilling the Bisbita Centro exploration well that could add further production at the block if successful.

• This is our first report on an independent energy sector, Hess Corporation.
• Net production averaged 387,000 barrels of oil equivalent per day.
• In the deepwater Gulf of Mexico, the second quarter reported net production of 32,000 barrels of oil equivalent per day, with the third quarter expecting an average of approximately 25,000 barrels of oil equivalent per day, considering scheduled maintenance and hurricane preparedness.

• • Chariot has received approval for its Environmental Impact Assessment (EIA) for the Anchois project. • The EIA covers all aspects of the development including future wells and offshore infrastructure, the onshore Central Processing Facility and the link to the GME pipeline.
• Positive news would also have a beneficial impact on the attractiveness of Morocco for the oil and gas sector.