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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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Thursday, 25 January 24
THE RED SEA ESCALATION IMPLICATIONS ON GLOBAL SEABORNE TRADE - MARIA BERTZELETOU
In recent days, discussions have intensified about the potential impact on the seaborne trade and ton-miles due to the evolving dynamics of market ...
Thursday, 25 January 24
RED SEA SHIPPING DISRUPTIONS KEEP GEOPOLITICAL PREMIUM FOR COMMODITIES - FITCH RATINGS
Shipping disruptions and re-routing away from the Red Sea will maintain the geopolitical premium in the main commodity markets, including for oil a ...
Friday, 19 January 24
INDONESIA TARGETS 710 MLN METRIC TONS COAL OUTPUT IN 2024 AFTER RECORD 2023 - REUTERS
Indonesia, a major thermal coal exporter, aims to produce 710 million metric tons of coal in 2024, its mining minister said on Monday, after postin ...
Friday, 19 January 24
DRUMMOND COLOMBIA COAL OUTPUT ROSE 7.1% IN 2023 - REUTERS
Coal production from miner Drummond’s Colombia operations rose 7.1% in 2023 to 29.5 million metric tons, while exports declined by 2.6% to 27 ...
Friday, 19 January 24
CHINA'S 2023 COAL OUTPUT HITS RECORD HIGH - REUTERS
China’s coal output reached a record high in 2023, data from the statistics bureau showed on Wednesday, amid an ongoing focus on energy secur ...
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- Videocon Industries ltd - India
- Minerals Council of Australia
- Coastal Gujarat Power Limited - India
- Electricity Authority, New Zealand
- Energy Development Corp, Philippines
- Bhushan Steel Limited - India
- Central Java Power - Indonesia
- ICICI Bank Limited - India
- Attock Cement Pakistan Limited
- PetroVietnam Power Coal Import and Supply Company
- PTC India Limited - India
- Pendopo Energi Batubara - Indonesia
- Ambuja Cements Ltd - India
- Ind-Barath Power Infra Limited - India
- Mjunction Services Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Manunggal Multi Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Maheswari Brothers Coal Limited - India
- Kaltim Prima Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- IEA Clean Coal Centre - UK
- Ministry of Transport, Egypt
- Edison Trading Spa - Italy
- Kumho Petrochemical, South Korea
- Bukit Baiduri Energy - Indonesia
- Parliament of New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Bhatia International Limited - India
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Chamber of Mines of South Africa
- Siam City Cement PLC, Thailand
- Savvy Resources Ltd - HongKong
- Salva Resources Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Georgia Ports Authority, United States
- Meenaskhi Energy Private Limited - India
- Parry Sugars Refinery, India
- Maharashtra Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- Oldendorff Carriers - Singapore
- Aditya Birla Group - India
- Krishnapatnam Port Company Ltd. - India
- Asmin Koalindo Tuhup - Indonesia
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- Lanco Infratech Ltd - India
- Anglo American - United Kingdom
- Riau Bara Harum - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- White Energy Company Limited
- India Bulls Power Limited - India
- Eastern Energy - Thailand
- Holcim Trading Pte Ltd - Singapore
- Bayan Resources Tbk. - Indonesia
- International Coal Ventures Pvt Ltd - India
- McConnell Dowell - Australia
- Australian Commodity Traders Exchange
- Indian Oil Corporation Limited
- Sree Jayajothi Cements Limited - India
- Medco Energi Mining Internasional
- GMR Energy Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Electricity Generating Authority of Thailand
- Mintek Dendrill Indonesia
- Makarim & Taira - Indonesia
- Deloitte Consulting - India
- Siam City Cement - Thailand
- CNBM International Corporation - China
- Renaissance Capital - South Africa
- Planning Commission, India
- AsiaOL BioFuels Corp., Philippines
- MS Steel International - UAE
- Heidelberg Cement - Germany
- The Treasury - Australian Government
- Agrawal Coal Company - India
- Toyota Tsusho Corporation, Japan
- Wood Mackenzie - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sarangani Energy Corporation, Philippines
- Wilmar Investment Holdings
- Malabar Cements Ltd - India
- Rio Tinto Coal - Australia
- SMG Consultants - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- PowerSource Philippines DevCo
- Orica Australia Pty. Ltd.
- OPG Power Generation Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Vedanta Resources Plc - India
- The University of Queensland
- Tata Chemicals Ltd - India
- Economic Council, Georgia
- Dalmia Cement Bharat India
- Marubeni Corporation - India
- Eastern Coal Council - USA
- Sindya Power Generating Company Private Ltd
- Directorate General of MIneral and Coal - Indonesia
- Standard Chartered Bank - UAE
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- Timah Investasi Mineral - Indoneisa
- Ministry of Finance - Indonesia
- Independent Power Producers Association of India
- Petrochimia International Co. Ltd.- Taiwan
- San Jose City I Power Corp, Philippines
- Jaiprakash Power Ventures ltd
- Ministry of Mines - Canada
- VISA Power Limited - India
- Latin American Coal - Colombia
- Kepco SPC Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Romanian Commodities Exchange
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Orica Mining Services - Indonesia
- Indika Energy - Indonesia
- Madhucon Powers Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMC Global Power, Philippines
- Thiess Contractors Indonesia
- New Zealand Coal & Carbon
- Kobexindo Tractors - Indoneisa
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- Indogreen Group - Indonesia
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- Vijayanagar Sugar Pvt Ltd - India
- Grasim Industreis Ltd - India
- Metalloyd Limited - United Kingdom
- Thai Mozambique Logistica
- Semirara Mining Corp, Philippines
- Borneo Indobara - Indonesia
- Indian Energy Exchange, India
- IHS Mccloskey Coal Group - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mercator Lines Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Power Finance Corporation Ltd., India
- Billiton Holdings Pty Ltd - Australia
- Therma Luzon, Inc, Philippines
- Sojitz Corporation - Japan
- TNB Fuel Sdn Bhd - Malaysia
- Central Electricity Authority - India
- Commonwealth Bank - Australia
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Baramulti Group, Indonesia
- Kartika Selabumi Mining - Indonesia
- GVK Power & Infra Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Merrill Lynch Commodities Europe
- Posco Energy - South Korea
- Australian Coal Association
- Meralco Power Generation, Philippines
- Global Green Power PLC Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Barasentosa Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Larsen & Toubro Limited - India
- Bangladesh Power Developement Board
- Coalindo Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Goldman Sachs - Singapore
- Trasteel International SA, Italy
- Straits Asia Resources Limited - Singapore
- Samtan Co., Ltd - South Korea
- Interocean Group of Companies - India
- Sakthi Sugars Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- GAC Shipping (India) Pvt Ltd
- European Bulk Services B.V. - Netherlands
- Port Waratah Coal Services - Australia
- Rashtriya Ispat Nigam Limited - India
- Coal and Oil Company - UAE
- Kideco Jaya Agung - Indonesia
- The State Trading Corporation of India Ltd
- Neyveli Lignite Corporation Ltd, - India
- Kalimantan Lumbung Energi - Indonesia
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- ASAPP Information Group - India
- Banpu Public Company Limited - Thailand
- Price Waterhouse Coopers - Russia
- Cigading International Bulk Terminal - Indonesia
- Carbofer General Trading SA - India
- Antam Resourcindo - Indonesia
- Singapore Mercantile Exchange
- Jorong Barutama Greston.PT - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Bharathi Cement Corporation - India
- Indonesian Coal Mining Association
- Xindia Steels Limited - India
- Altura Mining Limited, Indonesia
- Gujarat Electricity Regulatory Commission - India
- SN Aboitiz Power Inc, Philippines
- Petron Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Global Business Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Gujarat Sidhee Cement - India
- Semirara Mining and Power Corporation, Philippines
- London Commodity Brokers - England
- Global Coal Blending Company Limited - Australia
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