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Thursday, 15 January 15
LOW CASH COSTS, GOOD LIQUIDITY HELP ASIAN OIL COMPANIES IN PRICE ROUT - FITCH
 Fitch Ratings says that rated oil and gas production companies in Asia can comfortably operate under low oil prices for some time given their generally low cash production costs and strong liquidity. Fitch expects companies to further reduce capex if oil prices remain at current levels for a longer period.
Fitch further noted that, the fall of oil prices below USD50 per barrel is hurting cash generation and affecting investment decisions of companies in the sector. However, the impact on operating cash generation varies across Fitch-rated companies. South-east Asian companies, such as PTT Public Company Limited that produce more gas (60% or more of total production), will be less affected immediately compared with their north and south Asian counterparts that are more liquids-heavy. Liquids at companies like Petrochina, CNOOC, Sinopec, Oil India Ltd and MIE Holdings Corporation account for over 70% of total production in barrels of oil equivalent (boe) terms. Companies that hedged the prices of part of their oil production benefited from the protection in 2014, but they are likely to be exposed to market prices in 2015 because these types of hedges typically do not cover long periods.
Low cash production costs and the largely conventional upstream projects of the rated Asian oil companies provide them with additional flexibility in today's low oil price environment, said Fitch. While all-in costs (cash production costs plus depreciation, depletion and amortisation, or DD&A) are important in the long run, the relatively longer production lives of conventional oil and gas wells provide additional capex flexibility during periods of low hydrocarbon prices. Lifting costs in US dollars per boe are typically in the teens for the rated companies in Asia. Lower production tax requirements stemming from low realised prices, especially in China, also reduce the net impact of the oil price rout on operating cash generation. Companies are also looking to reduce opex, which can squeeze margins of oil field services companies.
Over the longer term though, with all-in costs exceeding USD35/boe for the rated Asian names, the economic viability of projects will be impaired if there is no meaningful increase in oil prices. At current prices, we expect certain high-cost projects to be delayed. These could include ventures in the Canadian oil sands and certain enhanced oil recovery projects on mature-depleting fields in Asia. Sponsor companies could also delay final investment decisions on some large projects with long lead times, such as some green field LNG projects, to preserve cash reserves.
Capex flexibility also varies across the rated companies. CNOOC and PTT have relatively low developed reserve lives of around four years, which gives them less flexibility to curtail development capex for a long period. The state-owned companies are unlikely to cut domestic capex drastically because they are mandated by states to raise production to supply their growing economies. In addition, PTT has lagged considerably behind its Asian peers in reserve replacement, with several large acquisitions not yet adding to proved reserves. For most of the other rated oil producers, though, reserve replacement has been robust (near 100% or above) in recent years, adding further to their flexibility. We also see the prospect of reserve write-downs for some companies if oil prices do not meaningfully improve by the time reserve reports are updated over the next few months.
Rated Asian oil companies, especially the state-owned ones, have very strong balance sheets, with low financial leverage and substantial cash balances. We expect these companies to have good financial flexibility arising from their good liquidity (large cash balances and strong access to capital). In India, we expect the government to reduce the substantial discounts (USD56/barrel) the two state-controlled upstream companies, Oil India and ONGC, have to provide to refiners, improving their cash margins under low oil prices. Malaysia's PETRONAS has a very strong balance sheet. However, the high dividends required by the Malaysian government remains a challenge, although the company is pushing to lower this burden.
According to Fitch, Fitch is also expect cash-rich companies to take advantage of attractive M&A opportunities, although their approach is likely to be measured to ensure their cash balances remain strong to deal with the uncertain oil price outlook. Asian companies are likely to focus on mid-sized assets that are producing or close to production that put less stress on their balance sheets.
Smaller companies like MIE of China have less financial flexibility. While MIE's lifting costs of around USD10/boe are low, it has relatively weaker access to funding than its larger peers, especially when oil prices are low. However, MIE's cash on hand at end-September 2014 (plus expected proceeds in 4Q14 from some asset disposals) and unutilised credit lines provide adequate short-term liquidity, while its major debt maturities are several years away.
Our approach with oil and gas companies is to rate through the cycle, Fitch says in its latest analysis report. While strong production, weak demand growth and high inventory levels put significant near-term pressure on oil prices, high global marginal production costs and capex cuts leading to reduced production should over time result in a more balanced market that supports higher prices for oil. While low oil prices and high capex requirements will dent the credit metrics of Asian oil producers, ratings of many of these companies, especially the state-owned companies whose ratings benefit from state linkages, remain resilient.
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Friday, 06 September 24
REBOUND IN OIL DEMAND COULD LIFT MARKET IN LATTER HALF OF 2024 - BIMCO
Supply/demand
Based on a strong second half demand, the supply/balance is forecast to strengthen in 2024 but weaken slightly in 2025 as n ...
Friday, 06 September 24
GLOBAL SEABORNE LNG TRADE HAS CONTINUED TO INCREASE LAST YEAR - BANCHERO COSTA
Global seaborne LNG trade has continued to increase last year, helped also by the events in Ukraine which forced Europe to diversify away from Russ ...
Wednesday, 28 August 24
SEABORNE COAL IMPORTS INTO INDIA INCREASED BY +9.9% Y-O-Y TO 146.6 MLN T - BANCHERO COSTA
Global coal trade has really picked up pace over the past year, and is now fully back to pre-Covid levels said Banchero Costa Research in its lates ...
Tuesday, 06 August 24
EXERCISE CAUTION WITH AMMONIA SWITCH - BALTIC EXCHANGE
A new study from the Massachusetts Institute of Technology (MIT) has thrown a spanner into the plan to transition ships from diesel fuel to ammonia ...
Friday, 02 August 24
ENERGY MARKET DEVELOPMENTS: COAL AND NATURAL GAS PRICES REACH RECORD HIGHS - WORLD BANK
The recent surge in natural gas and coal prices has been so swift that the main benchmarks were roughly three times higher in 2022Q2 compared to a ...
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- Cement Manufacturers Association - India
- Globalindo Alam Lestari - Indonesia
- Eastern Coal Council - USA
- Trasteel International SA, Italy
- Petrochimia International Co. Ltd.- Taiwan
- Ind-Barath Power Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Thiess Contractors Indonesia
- Petron Corporation, Philippines
- IEA Clean Coal Centre - UK
- Attock Cement Pakistan Limited
- Coastal Gujarat Power Limited - India
- Meralco Power Generation, Philippines
- Marubeni Corporation - India
- VISA Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Riau Bara Harum - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Planning Commission, India
- Goldman Sachs - Singapore
- CNBM International Corporation - China
- GVK Power & Infra Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Bangladesh Power Developement Board
- Malabar Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Gujarat Electricity Regulatory Commission - India
- Simpson Spence & Young - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Interocean Group of Companies - India
- Indika Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Electricity Generating Authority of Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Makmur.PT - Indonesia
- Standard Chartered Bank - UAE
- Ministry of Finance - Indonesia
- Agrawal Coal Company - India
- Xindia Steels Limited - India
- Alfred C Toepfer International GmbH - Germany
- Romanian Commodities Exchange
- Global Green Power PLC Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Bhoruka Overseas - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sinarmas Energy and Mining - Indonesia
- Indonesian Coal Mining Association
- Indian Oil Corporation Limited
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Energy Development Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- MS Steel International - UAE
- Bahari Cakrawala Sebuku - Indonesia
- SMG Consultants - Indonesia
- London Commodity Brokers - England
- Kideco Jaya Agung - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Vedanta Resources Plc - India
- Eastern Energy - Thailand
- Deloitte Consulting - India
- Carbofer General Trading SA - India
- Kobexindo Tractors - Indoneisa
- South Luzon Thermal Energy Corporation
- Toyota Tsusho Corporation, Japan
- Bharathi Cement Corporation - India
- Chettinad Cement Corporation Ltd - India
- Commonwealth Bank - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tamil Nadu electricity Board
- Karaikal Port Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- ASAPP Information Group - India
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Aditya Birla Group - India
- Georgia Ports Authority, United States
- Kumho Petrochemical, South Korea
- ICICI Bank Limited - India
- Salva Resources Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- International Coal Ventures Pvt Ltd - India
- Coal and Oil Company - UAE
- Chamber of Mines of South Africa
- Kaltim Prima Coal - Indonesia
- Bhatia International Limited - India
- Samtan Co., Ltd - South Korea
- Siam City Cement PLC, Thailand
- Independent Power Producers Association of India
- Neyveli Lignite Corporation Ltd, - India
- Edison Trading Spa - Italy
- India Bulls Power Limited - India
- Africa Commodities Group - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Australian Commodity Traders Exchange
- Gujarat Sidhee Cement - India
- Mintek Dendrill Indonesia
- Power Finance Corporation Ltd., India
- Oldendorff Carriers - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Lanco Infratech Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- Ambuja Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Mjunction Services Limited - India
- CIMB Investment Bank - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Australia Pty. Ltd.
- Pendopo Energi Batubara - Indonesia
- Singapore Mercantile Exchange
- Economic Council, Georgia
- Krishnapatnam Port Company Ltd. - India
- Larsen & Toubro Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- Rio Tinto Coal - Australia
- Intertek Mineral Services - Indonesia
- Central Electricity Authority - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jindal Steel & Power Ltd - India
- Essar Steel Hazira Ltd - India
- Mercator Lines Limited - India
- Jaiprakash Power Ventures ltd
- Parliament of New Zealand
- Grasim Industreis Ltd - India
- Altura Mining Limited, Indonesia
- New Zealand Coal & Carbon
- Heidelberg Cement - Germany
- Barasentosa Lestari - Indonesia
- Port Waratah Coal Services - Australia
- McConnell Dowell - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Anglo American - United Kingdom
- Posco Energy - South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SN Aboitiz Power Inc, Philippines
- Tata Chemicals Ltd - India
- Bhushan Steel Limited - India
- SMC Global Power, Philippines
- Latin American Coal - Colombia
- Baramulti Group, Indonesia
- Bukit Baiduri Energy - Indonesia
- The University of Queensland
- Central Java Power - Indonesia
- Sarangani Energy Corporation, Philippines
- Thai Mozambique Logistica
- PTC India Limited - India
- Antam Resourcindo - Indonesia
- Bayan Resources Tbk. - Indonesia
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Sical Logistics Limited - India
- Indo Tambangraya Megah - Indonesia
- Videocon Industries ltd - India
- Sakthi Sugars Limited - India
- Kepco SPC Power Corporation, Philippines
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- Formosa Plastics Group - Taiwan
- PetroVietnam Power Coal Import and Supply Company
- San Jose City I Power Corp, Philippines
- White Energy Company Limited
- Indogreen Group - Indonesia
- Madhucon Powers Ltd - India
- Ministry of Transport, Egypt
- Coalindo Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- Wood Mackenzie - Singapore
- Uttam Galva Steels Limited - India
- Ministry of Mines - Canada
- Star Paper Mills Limited - India
- IHS Mccloskey Coal Group - USA
- Banpu Public Company Limited - Thailand
- Minerals Council of Australia
- Siam City Cement - Thailand
- Renaissance Capital - South Africa
- European Bulk Services B.V. - Netherlands
- Borneo Indobara - Indonesia
- Savvy Resources Ltd - HongKong
- Energy Link Ltd, New Zealand
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Medco Energi Mining Internasional
- Wilmar Investment Holdings
- Vizag Seaport Private Limited - India
- TeaM Sual Corporation - Philippines
- Makarim & Taira - Indonesia
- Aboitiz Power Corporation - Philippines
- Australian Coal Association
- GAC Shipping (India) Pvt Ltd
- Parry Sugars Refinery, India
- Dalmia Cement Bharat India
- Jorong Barutama Greston.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Price Waterhouse Coopers - Russia
- Directorate General of MIneral and Coal - Indonesia
- Orica Mining Services - Indonesia
- The State Trading Corporation of India Ltd
- Binh Thuan Hamico - Vietnam
- Directorate Of Revenue Intelligence - India
- Karbindo Abesyapradhi - Indoneisa
- Global Business Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- Sojitz Corporation - Japan
- OPG Power Generation Pvt Ltd - India
- Electricity Authority, New Zealand
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