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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, 05 January 24
BANGLADESH’S 2023 COAL-FIRED POWER OUTPUT TRIPLED, EASING SHORTAGES - REUTERS
Bangladesh nearly tripled its coal-fired power output in 2023, a Reuters analysis of government data showed, helping it tide over the worst power s ...
Tuesday, 02 January 24
COAL TRADE CONTINUES TO HEAD EAST - BALTIC EXCHANGE
The global coal trade, once concentrated in the Pacific and Atlantic basins, is undergoing a significant transformation, as highlighted in the Inte ...
Tuesday, 02 January 24
COAL CARGOES: AVOIDING EXPLOSION AND SELF-HEATING - GARD
KNOWLEDGE TO ELEVATE
Despite its contribution to greenhouse gas emissions, global coal consumption climbed to an all-time high in 2022 and is ...
Tuesday, 02 January 24
SINOPEC FORECASTS CHINA’S COAL CONSUMPTION TO PEAK AROUND 2025 - REUTERS
China Petrochemical Corp, or Sinopec, expects coal consumption to peak around 2025 at 4.37 billion metric tons, the state energy group said in an o ...
Thursday, 07 December 23
CHINA TO SET UP COAL PRODUCTION RESERVE TO STABILISE PRICES - REUTERS
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 ...
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- Iligan Light & Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Therma Luzon, Inc, Philippines
- Planning Commission, India
- Sical Logistics Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Interocean Group of Companies - India
- Lanco Infratech Ltd - India
- San Jose City I Power Corp, Philippines
- GVK Power & Infra Limited - India
- Indonesian Coal Mining Association
- Agrawal Coal Company - India
- Baramulti Group, Indonesia
- Jaiprakash Power Ventures ltd
- Intertek Mineral Services - Indonesia
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Chamber of Mines of South Africa
- Altura Mining Limited, Indonesia
- Essar Steel Hazira Ltd - India
- Attock Cement Pakistan Limited
- PTC India Limited - India
- Globalindo Alam Lestari - Indonesia
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- London Commodity Brokers - England
- Parliament of New Zealand
- Alfred C Toepfer International GmbH - Germany
- Maharashtra Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- IEA Clean Coal Centre - UK
- Salva Resources Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Wood Mackenzie - Singapore
- Electricity Generating Authority of Thailand
- Australian Coal Association
- Wilmar Investment Holdings
- Sarangani Energy Corporation, Philippines
- Siam City Cement PLC, Thailand
- Aboitiz Power Corporation - Philippines
- Energy Link Ltd, New Zealand
- Antam Resourcindo - Indonesia
- Central Java Power - Indonesia
- VISA Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Uttam Galva Steels Limited - India
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- Mercuria Energy - Indonesia
- Anglo American - United Kingdom
- Madhucon Powers Ltd - India
- Parry Sugars Refinery, India
- Vijayanagar Sugar Pvt Ltd - India
- McConnell Dowell - Australia
- Sojitz Corporation - Japan
- GN Power Mariveles Coal Plant, Philippines
- Mintek Dendrill Indonesia
- Mercator Lines Limited - India
- The University of Queensland
- Petrochimia International Co. Ltd.- Taiwan
- Carbofer General Trading SA - India
- Gujarat Electricity Regulatory Commission - India
- MS Steel International - UAE
- Bharathi Cement Corporation - India
- Merrill Lynch Commodities Europe
- Timah Investasi Mineral - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Renaissance Capital - South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Grasim Industreis Ltd - India
- Thiess Contractors Indonesia
- Indian Energy Exchange, India
- CIMB Investment Bank - Malaysia
- Karaikal Port Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Malabar Cements Ltd - India
- Riau Bara Harum - Indonesia
- Pendopo Energi Batubara - Indonesia
- Singapore Mercantile Exchange
- Petron Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Marubeni Corporation - India
- Thai Mozambique Logistica
- Semirara Mining Corp, Philippines
- Coastal Gujarat Power Limited - India
- Power Finance Corporation Ltd., India
- Simpson Spence & Young - Indonesia
- Orica Australia Pty. Ltd.
- Holcim Trading Pte Ltd - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Orica Mining Services - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Coal and Oil Company - UAE
- ASAPP Information Group - India
- The State Trading Corporation of India Ltd
- Savvy Resources Ltd - HongKong
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meenaskhi Energy Private Limited - India
- Eastern Energy - Thailand
- Kaltim Prima Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Formosa Plastics Group - Taiwan
- Xindia Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- Port Waratah Coal Services - Australia
- Oldendorff Carriers - Singapore
- The Treasury - Australian Government
- CNBM International Corporation - China
- Bangladesh Power Developement Board
- Bukit Makmur.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Manunggal Multi Energi - Indonesia
- Goldman Sachs - Singapore
- Bhushan Steel Limited - India
- Eastern Coal Council - USA
- Asmin Koalindo Tuhup - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Cement Manufacturers Association - India
- Standard Chartered Bank - UAE
- OPG Power Generation Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Coalindo Energy - Indonesia
- Global Business Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- Directorate Of Revenue Intelligence - India
- Edison Trading Spa - Italy
- White Energy Company Limited
- Kideco Jaya Agung - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Dalmia Cement Bharat India
- Latin American Coal - Colombia
- Heidelberg Cement - Germany
- Global Coal Blending Company Limited - Australia
- Ministry of Mines - Canada
- Gujarat Sidhee Cement - India
- Aditya Birla Group - India
- Videocon Industries ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indika Energy - Indonesia
- Central Electricity Authority - India
- Medco Energi Mining Internasional
- LBH Netherlands Bv - Netherlands
- SMC Global Power, Philippines
- Australian Commodity Traders Exchange
- Bayan Resources Tbk. - Indonesia
- Toyota Tsusho Corporation, Japan
- Kapuas Tunggal Persada - Indonesia
- ICICI Bank Limited - India
- Energy Development Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- Deloitte Consulting - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Ministry of Transport, Egypt
- International Coal Ventures Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- PowerSource Philippines DevCo
- SN Aboitiz Power Inc, Philippines
- Economic Council, Georgia
- Miang Besar Coal Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Rio Tinto Coal - Australia
- Mjunction Services Limited - India
- Kepco SPC Power Corporation, Philippines
- GMR Energy Limited - India
- Trasteel International SA, Italy
- Straits Asia Resources Limited - Singapore
- Indian Oil Corporation Limited
- South Luzon Thermal Energy Corporation
- PNOC Exploration Corporation - Philippines
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Commonwealth Bank - Australia
- Kumho Petrochemical, South Korea
- Makarim & Taira - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- India Bulls Power Limited - India
- Banpu Public Company Limited - Thailand
- Meralco Power Generation, Philippines
- Georgia Ports Authority, United States
- Borneo Indobara - Indonesia
- Bhoruka Overseas - Indonesia
- SMG Consultants - Indonesia
- Indogreen Group - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement - Thailand
- Semirara Mining and Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Posco Energy - South Korea
- Tata Chemicals Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- IHS Mccloskey Coal Group - USA
- TeaM Sual Corporation - Philippines
- Minerals Council of Australia
- Jindal Steel & Power Ltd - India
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Maheswari Brothers Coal Limited - India
- Sakthi Sugars Limited - India
- Indo Tambangraya Megah - Indonesia
- Cigading International Bulk Terminal - Indonesia
- GAC Shipping (India) Pvt Ltd
- European Bulk Services B.V. - Netherlands
- New Zealand Coal & Carbon
- Pipit Mutiara Jaya. PT, Indonesia
- Vizag Seaport Private Limited - India
- Kartika Selabumi Mining - Indonesia
- Ministry of Finance - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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