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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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Wednesday, 31 January 24
CHINA'S INNER MONGOLIA COAL OUTPUT HIT 1.21B TONS IN 2023 - XINHUA
North China’s Inner Mongolia autonomous region churned out 1.21 billion tons of coal in 2023 as it strives to guarantee the country’s e ...
Wednesday, 31 January 24
GAS EXPORTS COST U.S. CONSUMERS MORE THAN $100 BILLION OVER 16-MONTH PERIOD - IEEFA
Limited Demand Growth Could Dampen the Dry Bulk Market in the Coming Months BIMCOStarting in late 2021—before its invasion of Ukraine—R ...
Tuesday, 30 January 24
LIMITED DEMAND GROWTH COULD DAMPEN THE DRY BULK MARKET IN THE COMING MONTHS - BIMCO
Demand
In our base scenario, we expect cargo demand to grow by 0-1% in 2024 and 0.5-1.5% in 2025. This is a 0.5 percentage point reduction for ...
Friday, 26 January 24
RED SEA DIVERSIONS ADD NEARLY A MILLION DOLLARS PER VOYAGE TO SHIPPING COSTS WHILE DOUBLING TRANSIT TIME - LSEG
The incremental costs of diverting a tanker from Asia to NW Europe via the Cape of Good Hope is accounting for an extra $932,905 USD per voyage whi ...
Friday, 26 January 24
HARD COAL GUARDIAN ANGEL OF THE ENERGY SUPPLY - GERMANY COAL IMPORTERS ASSOCIATION
- No security of supply without hard coal
- The Substitute Power Plant Provision Act (EKBG) must be extended
- Higher grid fees due to the ...
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- Sree Jayajothi Cements Limited - India
- European Bulk Services B.V. - Netherlands
- London Commodity Brokers - England
- Riau Bara Harum - Indonesia
- Altura Mining Limited, Indonesia
- Merrill Lynch Commodities Europe
- Planning Commission, India
- Kartika Selabumi Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Jorong Barutama Greston.PT - Indonesia
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Jindal Steel & Power Ltd - India
- Mjunction Services Limited - India
- Uttam Galva Steels Limited - India
- Posco Energy - South Korea
- Lanco Infratech Ltd - India
- Bukit Baiduri Energy - Indonesia
- Ministry of Finance - Indonesia
- Parliament of New Zealand
- Alfred C Toepfer International GmbH - Germany
- Tata Chemicals Ltd - India
- Eastern Energy - Thailand
- White Energy Company Limited
- Bayan Resources Tbk. - Indonesia
- ICICI Bank Limited - India
- Semirara Mining Corp, Philippines
- Simpson Spence & Young - Indonesia
- SMC Global Power, Philippines
- Carbofer General Trading SA - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Billiton Holdings Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Bhoruka Overseas - Indonesia
- The State Trading Corporation of India Ltd
- Orica Australia Pty. Ltd.
- Banpu Public Company Limited - Thailand
- Electricity Generating Authority of Thailand
- Holcim Trading Pte Ltd - Singapore
- PTC India Limited - India
- Deloitte Consulting - India
- Coalindo Energy - Indonesia
- GMR Energy Limited - India
- Jaiprakash Power Ventures ltd
- Attock Cement Pakistan Limited
- Madhucon Powers Ltd - India
- Aditya Birla Group - India
- Gujarat Electricity Regulatory Commission - India
- Sakthi Sugars Limited - India
- Rio Tinto Coal - Australia
- Mintek Dendrill Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Eastern Coal Council - USA
- India Bulls Power Limited - India
- Heidelberg Cement - Germany
- Africa Commodities Group - South Africa
- Marubeni Corporation - India
- Larsen & Toubro Limited - India
- South Luzon Thermal Energy Corporation
- Cigading International Bulk Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Transport, Egypt
- The Treasury - Australian Government
- Indian Oil Corporation Limited
- Siam City Cement PLC, Thailand
- Sinarmas Energy and Mining - Indonesia
- Directorate Of Revenue Intelligence - India
- Cement Manufacturers Association - India
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- Manunggal Multi Energi - Indonesia
- Tamil Nadu electricity Board
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- Salva Resources Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Bhatia International Limited - India
- Miang Besar Coal Terminal - Indonesia
- Australian Coal Association
- Goldman Sachs - Singapore
- Formosa Plastics Group - Taiwan
- Central Java Power - Indonesia
- Kumho Petrochemical, South Korea
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Mines - Canada
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- VISA Power Limited - India
- SMG Consultants - Indonesia
- Grasim Industreis Ltd - India
- Toyota Tsusho Corporation, Japan
- CNBM International Corporation - China
- Vizag Seaport Private Limited - India
- Samtan Co., Ltd - South Korea
- Kobexindo Tractors - Indoneisa
- Energy Link Ltd, New Zealand
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- Petrochimia International Co. Ltd.- Taiwan
- Anglo American - United Kingdom
- Dalmia Cement Bharat India
- San Jose City I Power Corp, Philippines
- Siam City Cement - Thailand
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- Therma Luzon, Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chettinad Cement Corporation Ltd - India
- Chamber of Mines of South Africa
- Global Green Power PLC Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Gujarat Sidhee Cement - India
- PNOC Exploration Corporation - Philippines
- Australian Commodity Traders Exchange
- Economic Council, Georgia
- Bharathi Cement Corporation - India
- Rashtriya Ispat Nigam Limited - India
- SN Aboitiz Power Inc, Philippines
- Mercator Lines Limited - India
- IHS Mccloskey Coal Group - USA
- TeaM Sual Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ind-Barath Power Infra Limited - India
- Borneo Indobara - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Indian Energy Exchange, India
- Indo Tambangraya Megah - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kepco SPC Power Corporation, Philippines
- Commonwealth Bank - Australia
- Star Paper Mills Limited - India
- Vedanta Resources Plc - India
- Bangladesh Power Developement Board
- Agrawal Coal Company - India
- Price Waterhouse Coopers - Russia
- Parry Sugars Refinery, India
- Ceylon Electricity Board - Sri Lanka
- Karaikal Port Pvt Ltd - India
- Bhushan Steel Limited - India
- Renaissance Capital - South Africa
- Port Waratah Coal Services - Australia
- Global Business Power Corporation, Philippines
- Meralco Power Generation, Philippines
- GAC Shipping (India) Pvt Ltd
- Makarim & Taira - Indonesia
- Coastal Gujarat Power Limited - India
- Sarangani Energy Corporation, Philippines
- Romanian Commodities Exchange
- Straits Asia Resources Limited - Singapore
- Sojitz Corporation - Japan
- Pendopo Energi Batubara - Indonesia
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Central Electricity Authority - India
- Sical Logistics Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Independent Power Producers Association of India
- Power Finance Corporation Ltd., India
- Interocean Group of Companies - India
- PowerSource Philippines DevCo
- Minerals Council of Australia
- Edison Trading Spa - Italy
- Electricity Authority, New Zealand
- Xindia Steels Limited - India
- Semirara Mining and Power Corporation, Philippines
- ASAPP Information Group - India
- Timah Investasi Mineral - Indoneisa
- Maheswari Brothers Coal Limited - India
- Petron Corporation, Philippines
- Georgia Ports Authority, United States
- Bukit Makmur.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Kideco Jaya Agung - Indonesia
- Meenaskhi Energy Private Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Wilmar Investment Holdings
- Asmin Koalindo Tuhup - Indonesia
- Singapore Mercantile Exchange
- Indika Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- MS Steel International - UAE
- Kapuas Tunggal Persada - Indonesia
- Global Coal Blending Company Limited - Australia
- GVK Power & Infra Limited - India
- OPG Power Generation Pvt Ltd - India
- Videocon Industries ltd - India
- Aboitiz Power Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Essar Steel Hazira Ltd - India
- Sindya Power Generating Company Private Ltd
- Malabar Cements Ltd - India
- Baramulti Group, Indonesia
- Coal and Oil Company - UAE
- Wood Mackenzie - Singapore
- Barasentosa Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Medco Energi Mining Internasional
- Antam Resourcindo - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mercuria Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- IEA Clean Coal Centre - UK
- Energy Development Corp, Philippines
- Latin American Coal - Colombia
- Orica Mining Services - Indonesia
- New Zealand Coal & Carbon
- Kohat Cement Company Ltd. - Pakistan
- Metalloyd Limited - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
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