Daily Brief Energy/Materials: Modec Inc, S&P 500 INDEX, Panoro Energy ASA, Sappi Ltd, JSW Steel Ltd, Permian Resources , Targa Resources, Empire Energy, Criterium Energy and more

• Since the US$535 million secondary placement announcement, Modec Inc (6269 JP)’s shares are down 15% from the undisturbed price of JPY3,320 per share (14 May).
• Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Modec’s shares have followed the pattern of previous large placements.
• The offering will likely be priced on 22 May. Investors who have participated in previous large Japanese placements tend to secure positive returns.

• The SPX gapped-up to reverse its 1-month downtrend on 5/3/24, followed by another upside gap on 5/6/24, and yet another on 5/15/24 on the breakout to all-time highs
• All of these gaps remain unfilled which signals upside power, a very bullish sign. These gaps at 5250-5263, 5127-5142, and 5073-5101 are now areas to expect short-term support, if tested.
• Market dynamics remain healthy and the S&P 500, Nasdaq 100, and DJI are all breaking out to new all-time highs, helping validate our bullish outlook.

• The DHIBM-7P pilot vertical well encountered 24 metres of net pay in an overall hydrocarbon column of 37 metres.
• The well was drilled from the pilot hole of the recently drilled Hibiscus South well that had already encountered 5-6 mmbbl recoverable resources.
• The bottom part of this well had been plugged ahead of drilling a horizontal producer in the area (this horizontal well will be drilled next).

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
Sappi’s ESG is “Strong”, driven by its “Strong” Environmental and Governance scores. The Social score is “Adequate”. Controversies are “Immaterial” and Disclosure is “Strong”. 

Sappi is a constituent of the FTSE4Good Index. All of the company’s regions (Europe, North America and South Africa) received a Platinum rating from EcoVadis for corporate social responsibility in FY 2022. The Platinum rating recognises the Top 1% of companies evaluated by EcoVadis.

While JSW Steel’s Q4/23-24 results were soft in our view, the full-year numbers were decent. Operational stats remained robust. The share of value-added products was high and continued to increase. The financial risk profile was unchanged q-o-q, but improved significantly from FYE 2022-23. However, liquidity deteriorated and was barely adequate.

We expect a stronger FY 2024-25 with higher revenue and earnings, as the steel operating environment appears to have bottomed out. Steel prices should remain stable, with possible upside. That said, the higher earnings could be offset by an increase in debt to cover the large and growing capex.

• In the first quarter of 2024, Permian Resources, led by co-CEOs Will Hickey and James Walter, achieved production and free cash flow above expectations, integrated Earthstone ahead of schedule, increased its annual synergy target by $50 million, and executed on accretive mergers and acquisitions with around $270 million of acquisitions announced that quarter.
• Notably, they reported total production of 320,000 barrels of oil equivalent per day and oil production of 152,000 barrels of oil per day.
• To maintain a robust balance sheet, the company minimized its financial leverage to approximately 1x and increased its liquidity to over $2 billion.

• Targa Resources Corp.
• is demonstrating resilience in its financial performance and operational execution, yielding mixed effects on its investment outlook.
• The company reported a robust Q1 2021, achieving record adjusted EBITDA, Permian volumes and LPG export volumes, alongside significant dividend increases and common share repurchases.

• Empire Energy Group Limited (ASX:EEG) is an oil and gas producer/developer, with onshore Northern Territory (NT) gas exploration and development assets.
• EEG has the largest tenement position in the highly prospective Greater McArthur Basin, which includes the Beetaloo Sub-basin.
• The release of the Federal Government’s Future Gas Strategy Paper, adds some certainty to the economic outlook and highlights the need for new supply sources to meet forecast demand through the energy transition and to service existing LNG contracts.

• Criterium has signed a binding sale agreement for its interest in the Bulu PSC for US$7.75 mm in cash.
• The price is in line with previous indications.
• This is a very important announcement as it provides more clarity on the divestment, the proceeds of which will boost the company’s balance sheet and allow it to accelerate its investment program and grow production faster.