Investment Rating - The report downgrades Sipchem to Neutral from Buy due to limited earnings upside and full valuation [3][62]. Core Insights - The energy sector is experiencing a lower-for-longer oil price environment, with oil prices dropping approximately 13% since the start of the year to US$65/bbl, and forecasts suggest an average of US$64/bbl for 2025 and 2026 [1][34]. - The report favors GCC upstream/midstream names, particularly Abu Dhabi energy companies, which are better positioned to weather market volatility due to secured growth potential and advantageous contractual frameworks [2][34]. - In the chemicals sector, fertilizers are preferred due to strong demand dynamics, while caution is advised on petrochemicals due to high uncertainty and oversupply concerns [3][62]. Summary by Sections Energy Sector - The report highlights a preference for Abu Dhabi energy names due to their regulated returns and visible growth potential, with companies like ADNOC Drilling, ADNOC Gas, and Saudi Aramco rated as Buy [2][36]. - GCC energy names have shown strong year-on-year growth, with an average EBITDA consensus beat of approximately 6%, although share price performance has been muted [35][38]. - The report notes that the UAE's natural gas supply is expected to grow significantly, with Saudi Aramco aiming to increase gas production by over 60% by 2030 [12][54]. Chemicals Sector - The ME&A chemicals sector has underperformed, down approximately 11% year-to-date, with a notable decline in share prices for companies like Sipchem and Kayan [20][62]. - The report indicates that while margins are expected to expand in the second quarter, a weak macro backdrop could pressure earnings into the second half of 2025 [22][67]. - Companies with balanced product exposure and those benefiting from shareholder returns have fared better, while Sipchem is seen as less likely to benefit from a lower oil price environment due to its high fixed feed component [62][63].

Core Viewpoint - LyondellBasell Industries N.V. (LYB) and Sipchem are collaborating on a feasibility study for a large-scale mixed feed cracker complex in Saudi Arabia, with a proposed ownership split of 60% for Sipchem and 40% for LYB [1][3] Group 1: Project Details - The Saudi Ministry of Energy has allocated feedstock to support the joint project, which aims to define the technical, financial, and commercial aspects [2] - The project is expected to produce petrochemical products for both domestic and international markets, creating thousands of local jobs [2][3] - The collaboration will leverage advanced technologies and strategic location advantages to deliver long-term value [3] Group 2: Technological and Environmental Aspects - LYB's technologies will facilitate the production of differentiated polyethylene and polypropylene grades, including elastomeric polyolefins [3] - The partnership will explore carbon management solutions and low-emission technologies to align with net-zero emission goals [3][4] Group 3: Market Outlook and Performance - LYB anticipates a recovery in North American domestic demand for polyolefins in 2024, following two years of declines [5] - Seasonal demand gains are expected across most product categories in the first quarter, driven by interest rate cuts and inflation moderation [6] - The company projects increases in oxyfuels margins due to seasonal driving and gasoline requirements [6] Group 4: Stock Performance - LYB's stock has declined by 24.2% over the past year, compared to an 8.2% decline in the industry [4] - The company currently holds a Zacks Rank of 5 (Strong Sell), indicating a challenging market position [7]