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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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- Lanco Infratech Ltd - India
- Bukit Baiduri Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Bangladesh Power Developement Board
- Vizag Seaport Private Limited - India
- Singapore Mercantile Exchange
- Eastern Coal Council - USA
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- PTC India Limited - India
- Borneo Indobara - Indonesia
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Essar Steel Hazira Ltd - India
- London Commodity Brokers - England
- Global Coal Blending Company Limited - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mercuria Energy - Indonesia
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Oldendorff Carriers - Singapore
- Kobexindo Tractors - Indoneisa
- Commonwealth Bank - Australia
- Renaissance Capital - South Africa
- Ambuja Cements Ltd - India
- Banpu Public Company Limited - Thailand
- SN Aboitiz Power Inc, Philippines
- Antam Resourcindo - Indonesia
- White Energy Company Limited
- The University of Queensland
- Indo Tambangraya Megah - Indonesia
- Indian Energy Exchange, India
- Krishnapatnam Port Company Ltd. - India
- Standard Chartered Bank - UAE
- Maharashtra Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Mjunction Services Limited - India
- Sree Jayajothi Cements Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Economic Council, Georgia
- Heidelberg Cement - Germany
- Siam City Cement PLC, Thailand
- Iligan Light & Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Medco Energi Mining Internasional
- Grasim Industreis Ltd - India
- Chettinad Cement Corporation Ltd - India
- Ind-Barath Power Infra Limited - India
- Central Electricity Authority - India
- Meenaskhi Energy Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Gujarat Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- Electricity Authority, New Zealand
- Therma Luzon, Inc, Philippines
- Romanian Commodities Exchange
- Altura Mining Limited, Indonesia
- Formosa Plastics Group - Taiwan
- Orica Australia Pty. Ltd.
- Parry Sugars Refinery, India
- Eastern Energy - Thailand
- Marubeni Corporation - India
- Bharathi Cement Corporation - India
- Siam City Cement - Thailand
- Rashtriya Ispat Nigam Limited - India
- Sinarmas Energy and Mining - Indonesia
- OPG Power Generation Pvt Ltd - India
- Anglo American - United Kingdom
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- Metalloyd Limited - United Kingdom
- New Zealand Coal & Carbon
- Minerals Council of Australia
- Electricity Generating Authority of Thailand
- Aditya Birla Group - India
- Price Waterhouse Coopers - Russia
- Global Green Power PLC Corporation, Philippines
- Ministry of Transport, Egypt
- Orica Mining Services - Indonesia
- European Bulk Services B.V. - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- Holcim Trading Pte Ltd - Singapore
- Binh Thuan Hamico - Vietnam
- Independent Power Producers Association of India
- Kepco SPC Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- Ceylon Electricity Board - Sri Lanka
- Makarim & Taira - Indonesia
- Planning Commission, India
- Petron Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- The State Trading Corporation of India Ltd
- Georgia Ports Authority, United States
- Parliament of New Zealand
- San Jose City I Power Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Indonesian Coal Mining Association
- Intertek Mineral Services - Indonesia
- Wood Mackenzie - Singapore
- Attock Cement Pakistan Limited
- Gujarat Mineral Development Corp Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Energy Link Ltd, New Zealand
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Baramulti Group, Indonesia
- Videocon Industries ltd - India
- IHS Mccloskey Coal Group - USA
- Energy Development Corp, Philippines
- Africa Commodities Group - South Africa
- Xindia Steels Limited - India
- Interocean Group of Companies - India
- Agrawal Coal Company - India
- Kartika Selabumi Mining - Indonesia
- Australian Coal Association
- Mercator Lines Limited - India
- Directorate General of MIneral and Coal - Indonesia
- India Bulls Power Limited - India
- Power Finance Corporation Ltd., India
- LBH Netherlands Bv - Netherlands
- Straits Asia Resources Limited - Singapore
- Bukit Makmur.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Kaltim Prima Coal - Indonesia
- Indian Oil Corporation Limited
- Carbofer General Trading SA - India
- CIMB Investment Bank - Malaysia
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- Vedanta Resources Plc - India
- Coastal Gujarat Power Limited - India
- Sical Logistics Limited - India
- GVK Power & Infra Limited - India
- CNBM International Corporation - China
- Bayan Resources Tbk. - Indonesia
- Indogreen Group - Indonesia
- Deloitte Consulting - India
- Kideco Jaya Agung - Indonesia
- Sakthi Sugars Limited - India
- GAC Shipping (India) Pvt Ltd
- McConnell Dowell - Australia
- Coalindo Energy - Indonesia
- Sojitz Corporation - Japan
- Mintek Dendrill Indonesia
- Savvy Resources Ltd - HongKong
- Malabar Cements Ltd - India
- Tamil Nadu electricity Board
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Toyota Tsusho Corporation, Japan
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- Timah Investasi Mineral - Indoneisa
- VISA Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Manunggal Multi Energi - Indonesia
- Bulk Trading Sa - Switzerland
- SMG Consultants - Indonesia
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Rio Tinto Coal - Australia
- Leighton Contractors Pty Ltd - Australia
- GMR Energy Limited - India
- Coal and Oil Company - UAE
- Latin American Coal - Colombia
- Cement Manufacturers Association - India
- Bhushan Steel Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Thai Mozambique Logistica
- Star Paper Mills Limited - India
- Gujarat Sidhee Cement - India
- Maheswari Brothers Coal Limited - India
- ICICI Bank Limited - India
- Ministry of Finance - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Riau Bara Harum - Indonesia
- Salva Resources Pvt Ltd - India
- Central Java Power - Indonesia
- Cigading International Bulk Terminal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- ASAPP Information Group - India
- Goldman Sachs - Singapore
- Karbindo Abesyapradhi - Indoneisa
- TeaM Sual Corporation - Philippines
- Australian Commodity Traders Exchange
- Samtan Co., Ltd - South Korea
- Sarangani Energy Corporation, Philippines
- Merrill Lynch Commodities Europe
- PetroVietnam Power Coal Import and Supply Company
- Indika Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- The Treasury - Australian Government
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Sindya Power Generating Company Private Ltd
- Tata Chemicals Ltd - India
- Port Waratah Coal Services - Australia
- South Luzon Thermal Energy Corporation
- Karaikal Port Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Chamber of Mines of South Africa
- Kapuas Tunggal Persada - Indonesia
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Global Business Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Mines - Canada
- MS Steel International - UAE
- Posco Energy - South Korea
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