Daily Brief Energy/Materials: Indocement Tunggal Prakarsa, Medco Energi, Equinor ASA, Seadrill Ltd and more

• Indocement Tunggal Prakarsa (INTP IJ) released solid FY2022 results despite inclement conditions for the industry, as it utilised more low CV coal and alternative fuels and raised prices.
• The company now has much better access to cheaper DMO coal, which accounted for 60% of requirements in 2H2022, which provides a lower and more sustainable cost base for 2023.
• Indocement has continued to aggressively expand its distribution footprint across Indonesia in 2022, allowing it to access regional areas of demand. Valuations are attractive versus history.

Medco Energi’s FY 2022 results were strong, in line with expectations. This was supported by increased production following the ConocoPhillips Indonesia acquisition in March, as well as the high oil-price environment. Moreover, copper and gold mining JV AMNT has started to mature, generating healthy dividends. Leverage improved to a healthy level, with Debt/EBITDA at 2.1x and Net Debt/EBITDA at 1.6x.

We expect Medco’s earnings to increase slightly in FY 2023, assuming oil prices are maintained at current levels, as ASP from its fixed-price contracts is likely to rise from a low base. In addition, the company should deleverage further going forward, supported by strong OCF generation and debt repayments. Management said that Medco intends to acquire more assets in future, although there are no imminent plans currently.

• This is our first report on an international energy major, Equinor.
• The company delivered a mixed operational performance for the fourth quarter with below-par revenues but managed an earnings beat.
• Equinor improved security for its assets and cyberspace by enforcing tougher security rules, providing more training, and collaborating more closely with law enforcement.

• SDRL reported its long awaited fourth quarter results after the Company consummated the purchase of Aquadrill.
• It was in the Q123 when SDRL was able to generate revenue from its new Brazilian contracts making it more likely investors would minimize their interest on the Q4 results
• The purchase of Aquadrill provides scale to SDRL’s operations through a larger fleet size and being able to internally manage the Aquadrill fleet as contracts begin the expire