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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, 01 December 23
COAL MINERS GROUP EXPECTS INDONESIA’S 2023 COAL OUTPUT TO SURPASS TARGET - REUTERS
The Indonesian Coal Mining Association (ICMA) expects the country’s 2023 coal output to surpass the official target of 695 million metric ton ...
Friday, 24 November 23
COAL IMPORTS TO INDIA IN OCTOBER 2023 REACHED HIGHEST LEVELS IN NEARLY A YEAR AND A HALF - VESSELSVALUE, VESON NAUTICAL
In October, coal imports to India reached 13.8 mt in October 2023, according to Oceanbolt, a Veson Nautical solution, the highest level since May 2 ...
Friday, 24 November 23
COAL SHIPMENTS TO ADVANCED ECONOMIES DOWN 17% SO FAR IN 2023 - BIMCO
In the first ten months of 2023, coal shipments to advanced economies fell by 17% y/y, as demand for electricity declined and the share of electric ...
Friday, 24 November 23
INTELLIGENT COAL MINES CONTRIBUTE TO IMPROVING SAFETY STANDARDS - CHINA DAILY
Mechanization, automation and intelligent upgrades have contributed to improved safety in coal mines, though the level of development of intelligen ...
Friday, 24 November 23
WHY AUSTRALIA'S COAL MINES ARE GETTING BIGGER - IEEFA
Australia’s largest coal mines are getting larger. Mines in New South Wales (NSW) are ramping up production following the state’s recov ...
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- Formosa Plastics Group - Taiwan
- Indian Energy Exchange, India
- TeaM Sual Corporation - Philippines
- Renaissance Capital - South Africa
- Indian Oil Corporation Limited
- TNB Fuel Sdn Bhd - Malaysia
- Orica Australia Pty. Ltd.
- Bhushan Steel Limited - India
- PTC India Limited - India
- Sical Logistics Limited - India
- Ambuja Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Wilmar Investment Holdings
- Planning Commission, India
- San Jose City I Power Corp, Philippines
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Electricity Authority, New Zealand
- The University of Queensland
- Pendopo Energi Batubara - Indonesia
- Eastern Coal Council - USA
- Kideco Jaya Agung - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Africa Commodities Group - South Africa
- Carbofer General Trading SA - India
- Baramulti Group, Indonesia
- Thiess Contractors Indonesia
- Indonesian Coal Mining Association
- Holcim Trading Pte Ltd - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Cement Manufacturers Association - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- GVK Power & Infra Limited - India
- Siam City Cement - Thailand
- Kapuas Tunggal Persada - Indonesia
- Manunggal Multi Energi - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ministry of Finance - Indonesia
- IHS Mccloskey Coal Group - USA
- Directorate General of MIneral and Coal - Indonesia
- Medco Energi Mining Internasional
- Minerals Council of Australia
- India Bulls Power Limited - India
- CNBM International Corporation - China
- Intertek Mineral Services - Indonesia
- Georgia Ports Authority, United States
- Indogreen Group - Indonesia
- Riau Bara Harum - Indonesia
- Australian Commodity Traders Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Madhucon Powers Ltd - India
- Indika Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Marubeni Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Bayan Resources Tbk. - Indonesia
- GAC Shipping (India) Pvt Ltd
- Makarim & Taira - Indonesia
- Global Business Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- The Treasury - Australian Government
- Mercuria Energy - Indonesia
- Parliament of New Zealand
- Meralco Power Generation, Philippines
- Bukit Makmur.PT - Indonesia
- Jindal Steel & Power Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Commonwealth Bank - Australia
- Global Green Power PLC Corporation, Philippines
- New Zealand Coal & Carbon
- Agrawal Coal Company - India
- Deloitte Consulting - India
- Ministry of Mines - Canada
- International Coal Ventures Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Mintek Dendrill Indonesia
- Oldendorff Carriers - Singapore
- Thai Mozambique Logistica
- Larsen & Toubro Limited - India
- Eastern Energy - Thailand
- Altura Mining Limited, Indonesia
- Australian Coal Association
- Edison Trading Spa - Italy
- Standard Chartered Bank - UAE
- Ministry of Transport, Egypt
- Bhoruka Overseas - Indonesia
- Banpu Public Company Limited - Thailand
- Independent Power Producers Association of India
- VISA Power Limited - India
- Economic Council, Georgia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Goldman Sachs - Singapore
- Maharashtra Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- Aditya Birla Group - India
- Sinarmas Energy and Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- Malabar Cements Ltd - India
- The State Trading Corporation of India Ltd
- Samtan Co., Ltd - South Korea
- Kumho Petrochemical, South Korea
- Siam City Cement PLC, Thailand
- Energy Link Ltd, New Zealand
- Semirara Mining and Power Corporation, Philippines
- MS Steel International - UAE
- Krishnapatnam Port Company Ltd. - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Merrill Lynch Commodities Europe
- GN Power Mariveles Coal Plant, Philippines
- Leighton Contractors Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- Trasteel International SA, Italy
- Attock Cement Pakistan Limited
- Metalloyd Limited - United Kingdom
- SN Aboitiz Power Inc, Philippines
- Latin American Coal - Colombia
- Lanco Infratech Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- Straits Asia Resources Limited - Singapore
- Gujarat Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Petron Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Mercator Lines Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Coalindo Energy - Indonesia
- SMG Consultants - Indonesia
- Xindia Steels Limited - India
- Energy Development Corp, Philippines
- Central Electricity Authority - India
- Kartika Selabumi Mining - Indonesia
- Bhatia International Limited - India
- Sojitz Corporation - Japan
- Parry Sugars Refinery, India
- Heidelberg Cement - Germany
- South Luzon Thermal Energy Corporation
- ASAPP Information Group - India
- Essar Steel Hazira Ltd - India
- Vedanta Resources Plc - India
- Anglo American - United Kingdom
- Tamil Nadu electricity Board
- Dalmia Cement Bharat India
- Cigading International Bulk Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- Barasentosa Lestari - Indonesia
- Videocon Industries ltd - India
- Electricity Generating Authority of Thailand
- Aboitiz Power Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Port Waratah Coal Services - Australia
- Jaiprakash Power Ventures ltd
- GMR Energy Limited - India
- Simpson Spence & Young - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Global Coal Blending Company Limited - Australia
- Kobexindo Tractors - Indoneisa
- McConnell Dowell - Australia
- Directorate Of Revenue Intelligence - India
- Orica Mining Services - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Coal and Oil Company - UAE
- Indo Tambangraya Megah - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Asmin Koalindo Tuhup - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Grasim Industreis Ltd - India
- PowerSource Philippines DevCo
- Gujarat Sidhee Cement - India
- Singapore Mercantile Exchange
- Power Finance Corporation Ltd., India
- SMC Global Power, Philippines
- White Energy Company Limited
- Price Waterhouse Coopers - Russia
- Semirara Mining Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Uttam Galva Steels Limited - India
- Wood Mackenzie - Singapore
- Central Java Power - Indonesia
- Toyota Tsusho Corporation, Japan
- Antam Resourcindo - Indonesia
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- LBH Netherlands Bv - Netherlands
- Chamber of Mines of South Africa
- Bangladesh Power Developement Board
- Rio Tinto Coal - Australia
- Meenaskhi Energy Private Limited - India
- Bulk Trading Sa - Switzerland
- PNOC Exploration Corporation - Philippines
- Sakthi Sugars Limited - India
- Vizag Seaport Private Limited - India
- Star Paper Mills Limited - India
- Ind-Barath Power Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- Interocean Group of Companies - India
- Sarangani Energy Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Borneo Indobara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Tata Chemicals Ltd - India
- Globalindo Alam Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
- Posco Energy - South Korea
- Kalimantan Lumbung Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
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