Daily Brief Energy/Materials: LG Chem Ltd, CPMC Holdings, Crude Oil, Anton Oilfield, Arrow Exploration , New Fortress Energy LLC, Tata Steel Ltd and more

• On 29 August, LG Corp announced that it plans to purchase about 200 billion won worth of LG Electronics and about 300 billion won worth of LG Chem.
• After these share purchases, LG Corp’s stake in LG Electronics will increase from 30.47% to 31.59%, and its stake in LG Chem will increase from 30.06% to 31.29%.
• LG Corp plans to purchases these shares starting 1 November 2024. The share purchases will be conducted in two stages and will be completed by 31 March 2025. 

• ORG Technology Co., Ltd. A (002701 CH) has received SAMR clearance, the key regulatory hurdle, for its HK$7.21 voluntary offer for CPMC Holdings (906 HK).
• SAMR approval paves the way for the ORG precondition to be satisfied in September. Changping Industrial’s HK$6.87 offer first close is on 3 September.
• Changping Industrial has little choice but to revise its terms. It has a short window to seize the initiative by bumping its offer before ORG’s competing and higher offer opens. 

• LG Corp has announced it will buy ₩300B of LG Chem shares during trading hours, marking the first use of the new 30-day advance notice rule.
• LG Corp will buy LG Chem shares in two stages with 30-day advance notices. So, today’s announcement is a preliminary notice ahead of these 30-day advance notices.
• This transaction’s flow impact on LG Chem doesn’t seem substantial. But this first two-stage advance notice could provide key insights into price impact patterns.

• For the week ending 23/Aug, US crude inventories fell by 846k barrels, while analysts expected a 2.7 mb drawdown. Gasoline stocks dropped more than expected, while distillate inventories unexpectedly rose.
• US natural gas inventories rise 35 bcf for the week ending 23/Aug, exceeding analyst expectations of a 33 bcf buildup. Inventories are 12.1% above the 5-year seasonal average
• Exxon expects global crude oil demand to remain around 100m bpd through 2050. Brokerages lowered target prices on Occidental and Halliburton.

Anton Oilfield’s H1/24 numbers were softer than expected in our view, with profitability growth lagging revenue improvement. Positively, there was a surge in new orders. This is the third consecutive quarter showing a significant rise in new orders. We expect the business’ positive momentum to continue in FY 2024. The large (3x revenue) and growing backlog support revenue visibility. The financial risk profile remains stable.

• ORG Technology (002701 CH), via the Offeror Huarui Fengquan Development Limited, has announced SAMR has given its approval. ORG still requires MOFCOM, NDRC, and SAFE to sign off. 
• Interestingly, SASAC/NCSSF-backed Champion Holdings, the competing/initial bidder for CPMC (906 HK), secured MOFCOM, NDRC, and SAFE before SAMR clearance. Champion’s regulatory pre-conditions took a little over seven months to secure.
• What now? SAMR is China’s primary antitrust regulator (overlapping with NDRC). So this is positive for ORG. However, I’d still stick to ORG’s pre-condition long stop in terms of timing. 

• Arrow has now drilled 3 horizontal wells in Carrizales Norte.
• The flow rates of the wells are exceeding our expectations.
• The first CN horizontal well (CNB HZ-1) is being restricted to a current oil flow rate of 2,090 bbl/d with approximately 41% water cut.

• New Fortress Energy (NFE) in its second quarter 2024 earnings, ended up performing below expectations, achieving $120 million in EBITDA against a targeted $275 million, primarily due to delays in deploying its FLNG 1 asset.
• This delay had a substantial impact on the quarterly results but was offset by the project’s completion in July, which is now fully operational and expected to generate considerable free cash flow annually.
• 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.

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.

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