Daily Brief Energy/Materials: SK Innovation, Coal, Halliburton Co, Alcoa , Kinder Morgan, VAALCO Energy and more

• The merger ratio, not as unfavorable to SK Innovation as feared, shows SK Group acting cautiously amid political and regulatory scrutiny.
• SK Inc.’s stake will drop to mid-60s; the 1.2x merger ratio for SK E&S could positively affect SK Innovation’s stock price short-term.
• Persuading KKR is crucial. SK E&S won’t convert ₩3T in RCPS or grant appraisal rights, potentially leading KKR to consider litigation, a significant risk to the merger.

• Recent changes in Canada’s M&A rules have restricted critical metal companies from selling to Chinese investors
• Chinese investors have played a key role in funding the exploration and development of copper porphyries, which are vital for global production
• The uncertainty caused by these rules may lead companies to relocate outside of Canada, potentially harming the country’s mining industry and economy

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• Halliburton forecasts low double-digit revenue growth from its international business and flat revenue growth from North America in 2024.
• Management expects sequential margin growth of 25-75 bps in its Drilling & Evaluation and Completion & Production segments in Q2 2024.
• Halliburton expects its FCF to rise 10% YoY in 2024. The company returned nearly 60% of its FCF to shareholders in 2023.

• Alcoa Corporation recently reported its first quarter 2024 earnings, delivering a mix of strategic developments and financial results that reflect the company’s evolving business landscape.
• The company announced a significant transaction, the acquisition of Alumina Limited, which is expected to consolidate its ownership in the Alcoa World Alumina and Chemicals joint venture.
• This all-stock deal, valued at approximately $2.2 billion, aims to provide a streamlined corporate structure and enhance shareholder value.

• Kinder Morgan reported a robust performance for the recent quarter, indicating positive trends in several key areas, while also outlining challenges and broader economic impacts that could shape future operations.
• The company demonstrated a healthy financial position with a 13% increase in adjusted earnings per share (EPS) and a 7% rise in EBITDA.
• The enhanced financial metrics were primarily driven by strong contributions from the Natural Gas and Refined Products segments.

• • The YE23 SEC net 1P reserves in Cote d’Ivoire are estimated at 16.9 mmboe; which compares very favorably with the previous estimate for the WI 1P reserves of 13 mmboe (as of 01/10/2023).
• • The YE23 WI 2P reserves are now estimated at 22.5 mmboe.
• Adding back production over November and December 2023 (assuming ~5 mbbl/d production), the new estimate represents an increase of ~1.1 mmboe vs the previous estimate of 21.7 mmboe at the end of October 2023.