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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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Monday, 08 January 24
KOSPO TO BUY 80000 MT OF INDONESIAN LOW CALORIFIC VALUE COAL FOR FEB 2024
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for the supply of Indonesian Low Calorific Value Coal from qualified suppliers for Korean ...
Monday, 08 January 24
SEABORNE TRADE REACHES 12.4BN TONNES - CLARKSONS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
Monday, 08 January 24
CAPESIZES START THE NEW YEAR ON POSITIVE NOTE - BALTIC EXCHANGE
Capesize
This week the capsize market has been marked by a mix of activities and challenges. Despite a slow start following the Christmas and N ...
Friday, 05 January 24
MORGAN STANLEY SEES LOWER OIL PRICES IN 2024 ON OVERSUPPLY CONCERNS - REUTERS
Morgan Stanley sees Brent crude prices anchored near $80 per barrel in the first half in 2024 before declining towards the end of the year as it ex ...
Friday, 05 January 24
INDIA'S COAL OUTPUT RISES NEARLY 11 PC IN DEC TO 92.87 MT - PTI
India’s coal production increased by 10.75 per cent to 92.87 million tonne in December 2023 as compared to the year-ago period, an official s ...
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- CNBM International Corporation - China
- Indian Oil Corporation Limited
- Latin American Coal - Colombia
- Central Java Power - Indonesia
- Aditya Birla Group - India
- Mintek Dendrill Indonesia
- Malabar Cements Ltd - India
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Indogreen Group - Indonesia
- Ind-Barath Power Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Samtan Co., Ltd - South Korea
- Price Waterhouse Coopers - Russia
- SMG Consultants - Indonesia
- Essar Steel Hazira Ltd - India
- Marubeni Corporation - India
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Pipit Mutiara Jaya. PT, Indonesia
- Mercator Lines Limited - India
- Videocon Industries ltd - India
- South Luzon Thermal Energy Corporation
- Kohat Cement Company Ltd. - Pakistan
- IHS Mccloskey Coal Group - USA
- Riau Bara Harum - Indonesia
- OPG Power Generation Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Medco Energi Mining Internasional
- PTC India Limited - India
- GMR Energy Limited - India
- Billiton Holdings Pty Ltd - Australia
- Coal and Oil Company - UAE
- PNOC Exploration Corporation - Philippines
- Meralco Power Generation, Philippines
- Ministry of Transport, Egypt
- PetroVietnam Power Coal Import and Supply Company
- Alfred C Toepfer International GmbH - Germany
- Kaltim Prima Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Sojitz Corporation - Japan
- Kapuas Tunggal Persada - Indonesia
- Singapore Mercantile Exchange
- Electricity Generating Authority of Thailand
- Sical Logistics Limited - India
- Wood Mackenzie - Singapore
- Orica Australia Pty. Ltd.
- Anglo American - United Kingdom
- Vedanta Resources Plc - India
- Tata Chemicals Ltd - India
- Global Business Power Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- Bukit Baiduri Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Siam City Cement PLC, Thailand
- Asmin Koalindo Tuhup - Indonesia
- Globalindo Alam Lestari - Indonesia
- Makarim & Taira - Indonesia
- Deloitte Consulting - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Commodity Traders Exchange
- Madhucon Powers Ltd - India
- Interocean Group of Companies - India
- Kumho Petrochemical, South Korea
- Bharathi Cement Corporation - India
- SMC Global Power, Philippines
- Simpson Spence & Young - Indonesia
- Renaissance Capital - South Africa
- Bhoruka Overseas - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Lanco Infratech Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Chettinad Cement Corporation Ltd - India
- San Jose City I Power Corp, Philippines
- TeaM Sual Corporation - Philippines
- Ministry of Mines - Canada
- Sree Jayajothi Cements Limited - India
- Uttam Galva Steels Limited - India
- Romanian Commodities Exchange
- International Coal Ventures Pvt Ltd - India
- Rio Tinto Coal - Australia
- The State Trading Corporation of India Ltd
- Kepco SPC Power Corporation, Philippines
- London Commodity Brokers - England
- Edison Trading Spa - Italy
- Indonesian Coal Mining Association
- Gujarat Sidhee Cement - India
- Oldendorff Carriers - Singapore
- Australian Coal Association
- Planning Commission, India
- Parliament of New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Attock Cement Pakistan Limited
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Karaikal Port Pvt Ltd - India
- The University of Queensland
- Vijayanagar Sugar Pvt Ltd - India
- Chamber of Mines of South Africa
- Mjunction Services Limited - India
- Coalindo Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Parry Sugars Refinery, India
- Electricity Authority, New Zealand
- Sindya Power Generating Company Private Ltd
- Thai Mozambique Logistica
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bulk Trading Sa - Switzerland
- Agrawal Coal Company - India
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement - Thailand
- Gujarat Electricity Regulatory Commission - India
- Global Green Power PLC Corporation, Philippines
- Minerals Council of Australia
- Goldman Sachs - Singapore
- Baramulti Group, Indonesia
- Intertek Mineral Services - Indonesia
- ICICI Bank Limited - India
- Straits Asia Resources Limited - Singapore
- GAC Shipping (India) Pvt Ltd
- Semirara Mining Corp, Philippines
- VISA Power Limited - India
- Coastal Gujarat Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- The Treasury - Australian Government
- Georgia Ports Authority, United States
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Bhatia International Limited - India
- Krishnapatnam Port Company Ltd. - India
- Xindia Steels Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Dalmia Cement Bharat India
- Altura Mining Limited, Indonesia
- Port Waratah Coal Services - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Leighton Contractors Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Pendopo Energi Batubara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bhushan Steel Limited - India
- Power Finance Corporation Ltd., India
- Energy Link Ltd, New Zealand
- New Zealand Coal & Carbon
- Energy Development Corp, Philippines
- Banpu Public Company Limited - Thailand
- Jindal Steel & Power Ltd - India
- Manunggal Multi Energi - Indonesia
- Orica Mining Services - Indonesia
- Heidelberg Cement - Germany
- Borneo Indobara - Indonesia
- Aboitiz Power Corporation - Philippines
- Karbindo Abesyapradhi - Indoneisa
- Toyota Tsusho Corporation, Japan
- Jaiprakash Power Ventures ltd
- Barasentosa Lestari - Indonesia
- Antam Resourcindo - Indonesia
- Eastern Coal Council - USA
- Thiess Contractors Indonesia
- MS Steel International - UAE
- Star Paper Mills Limited - India
- Metalloyd Limited - United Kingdom
- IEA Clean Coal Centre - UK
- Kideco Jaya Agung - Indonesia
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- McConnell Dowell - Australia
- CIMB Investment Bank - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- ASAPP Information Group - India
- Savvy Resources Ltd - HongKong
- Bayan Resources Tbk. - Indonesia
- Central Electricity Authority - India
- Africa Commodities Group - South Africa
- Salva Resources Pvt Ltd - India
- Independent Power Producers Association of India
- TNB Fuel Sdn Bhd - Malaysia
- Indian Energy Exchange, India
- Trasteel International SA, Italy
- Bangladesh Power Developement Board
- Merrill Lynch Commodities Europe
- Wilmar Investment Holdings
- Larsen & Toubro Limited - India
- Indo Tambangraya Megah - Indonesia
- Vizag Seaport Private Limited - India
- White Energy Company Limited
- Tamil Nadu electricity Board
- Holcim Trading Pte Ltd - Singapore
- India Bulls Power Limited - India
- Formosa Plastics Group - Taiwan
- Directorate Of Revenue Intelligence - India
- GVK Power & Infra Limited - India
- PowerSource Philippines DevCo
- Directorate General of MIneral and Coal - Indonesia
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