Daily Brief Energy/Materials: Rent.com.au Ltd, Vale SA, Flotek Industries, Pan American Silver, Seadrill and more

• Vale had a bad quarter with revenues and earnings well below expectations.
• The company saw a decent performance in iron ore production, particularly at S11D.
• Although there was a gap between production and sales, Vale’s management expects to offset the impact in the second half of the year.

• Flotek is repositioning the company’s field operations to serve customers in both the Chemistry Technologies and Data Analytics business segments.
• Improved cost control contributed to $1.9 million of adjusted gross profit in 1Q23, compared with ($2.1) million in 4Q22 and ($0.5) million in 1Q22.
• The 1Q23 adjusted gross profit margin was 5.5% in 1Q23.

Pan American Silver (PAAS) completed the Yamana transaction at the end of March, continuing its track record of timely and value-accretive acquisitions that add scale and improve profitability. With the full annualised contribution from the Yamana assets, we estimate PAAS will produce c 25Moz of silver and 1.1Moz of gold in FY24. The anticipated launch of Escobal (FY25e) could further increase silver production to above 40Moz, bringing PAAS closer to the industry leader, Fresnillo. In this note we reinstate our estimates and update our valuation to reflect the Yamana acquisition. Our sum-of-the-parts valuation is now US$22.5/share.

• SDRL reported Q1 results affirming the positive attributes of the business after repositioning assets in the fourth quarter. The first quarter included economic utilization of 95% resulting in cost absorption
• Day rates continue to trend higher putting SDRL in an advantageous spot as a portion of its fleet becomes available late in 2023 and early 2024
• Subsequent to the first quarter, SDRL closed the acquisition of Aquadrill and has now provided full year guidance incorporating the business