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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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Tuesday, 14 November 23
CHINA'S BELT AND ROAD INITIATIVE TURNS AWAY FROM COAL - WOOD MACKENZIE
Ambitious, contentious and big spending, China’s Belt and Road Initiative (BRI) is 10 years old. In that time, China has splashed more than U ...
Friday, 10 November 23
THE COMMODITIES FEED: OIL UNDER PRESSURE - ING
Energy – Brent plummets
The oil market came under significant pressure yesterday. ICE Brent settled 4.19% lower on the day and ...
Friday, 10 November 23
COAL USE AT U.S. POWER PLANTS CONTINUES DOWNWARD SPIRAL; FULL IMPACT ON MINES TO BE FELT IN 2024 - IEEFA
This year, the use of coal by the U.S.’s power producers has been so anemic that the fuel has not achieved a 20% market share in any month so ...
Friday, 10 November 23
INDIA: NATIONAL COAL INDEX RISES 3.83 POINTS IN SEPTEMBER AMID HIGHER DEMAND - LIVEMINT
The National Coal Index (NCI) rose 3.83 points to 143.91 in September amid growing demand for coal.
The union coal ministry on Tuesd ...
Thursday, 09 November 23
WE'RE PRODUCING TOO MUCH COAL, OIL AND GAS, REPORT SAYS - WSJ
World leaders pledged in 2015 to reduce emissions in a combined effort to limit climate change.
Now they are stepping up production ...
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- Jorong Barutama Greston.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- GN Power Mariveles Coal Plant, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Power Finance Corporation Ltd., India
- Orica Australia Pty. Ltd.
- Mintek Dendrill Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Agrawal Coal Company - India
- The University of Queensland
- Interocean Group of Companies - India
- Thiess Contractors Indonesia
- Sinarmas Energy and Mining - Indonesia
- Edison Trading Spa - Italy
- Antam Resourcindo - Indonesia
- Singapore Mercantile Exchange
- SMG Consultants - Indonesia
- Bhushan Steel Limited - India
- Eastern Coal Council - USA
- Sarangani Energy Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- IHS Mccloskey Coal Group - USA
- Dalmia Cement Bharat India
- Grasim Industreis Ltd - India
- Salva Resources Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Siam City Cement - Thailand
- Uttam Galva Steels Limited - India
- Kumho Petrochemical, South Korea
- Sical Logistics Limited - India
- Bukit Makmur.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Petron Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sindya Power Generating Company Private Ltd
- Rio Tinto Coal - Australia
- The Treasury - Australian Government
- Jindal Steel & Power Ltd - India
- Mercuria Energy - Indonesia
- Ministry of Mines - Canada
- Ceylon Electricity Board - Sri Lanka
- Directorate Of Revenue Intelligence - India
- Energy Development Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Xindia Steels Limited - India
- Semirara Mining and Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Heidelberg Cement - Germany
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Electricity Regulatory Commission - India
- Mjunction Services Limited - India
- Indogreen Group - Indonesia
- Larsen & Toubro Limited - India
- Altura Mining Limited, Indonesia
- Timah Investasi Mineral - Indoneisa
- Aboitiz Power Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Romanian Commodities Exchange
- Economic Council, Georgia
- Coalindo Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SMC Global Power, Philippines
- Australian Coal Association
- Baramulti Group, Indonesia
- Intertek Mineral Services - Indonesia
- Latin American Coal - Colombia
- White Energy Company Limited
- LBH Netherlands Bv - Netherlands
- Georgia Ports Authority, United States
- Karbindo Abesyapradhi - Indoneisa
- Sree Jayajothi Cements Limited - India
- GAC Shipping (India) Pvt Ltd
- PowerSource Philippines DevCo
- Simpson Spence & Young - Indonesia
- Parry Sugars Refinery, India
- Star Paper Mills Limited - India
- McConnell Dowell - Australia
- Attock Cement Pakistan Limited
- Kobexindo Tractors - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Ministry of Transport, Egypt
- Iligan Light & Power Inc, Philippines
- Videocon Industries ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Aditya Birla Group - India
- Indian Energy Exchange, India
- PTC India Limited - India
- Coal and Oil Company - UAE
- Chamber of Mines of South Africa
- Standard Chartered Bank - UAE
- Barasentosa Lestari - Indonesia
- The State Trading Corporation of India Ltd
- Pendopo Energi Batubara - Indonesia
- Bukit Baiduri Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Posco Energy - South Korea
- ICICI Bank Limited - India
- Straits Asia Resources Limited - Singapore
- Parliament of New Zealand
- Mercator Lines Limited - India
- Global Green Power PLC Corporation, Philippines
- Thai Mozambique Logistica
- Ambuja Cements Ltd - India
- India Bulls Power Limited - India
- Orica Mining Services - Indonesia
- Banpu Public Company Limited - Thailand
- Vizag Seaport Private Limited - India
- Bhatia International Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- CNBM International Corporation - China
- Kapuas Tunggal Persada - Indonesia
- Bharathi Cement Corporation - India
- Borneo Indobara - Indonesia
- Port Waratah Coal Services - Australia
- Eastern Energy - Thailand
- Global Coal Blending Company Limited - Australia
- Energy Link Ltd, New Zealand
- Jaiprakash Power Ventures ltd
- CIMB Investment Bank - Malaysia
- Carbofer General Trading SA - India
- Coastal Gujarat Power Limited - India
- Electricity Authority, New Zealand
- Samtan Co., Ltd - South Korea
- IEA Clean Coal Centre - UK
- Riau Bara Harum - Indonesia
- Sojitz Corporation - Japan
- Maheswari Brothers Coal Limited - India
- Madhucon Powers Ltd - India
- Bulk Trading Sa - Switzerland
- Karaikal Port Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Bayan Resources Tbk. - Indonesia
- Globalindo Alam Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Indonesian Coal Mining Association
- Kideco Jaya Agung - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Planning Commission, India
- Merrill Lynch Commodities Europe
- Manunggal Multi Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Gujarat Mineral Development Corp Ltd - India
- Medco Energi Mining Internasional
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
- Central Electricity Authority - India
- Wilmar Investment Holdings
- London Commodity Brokers - England
- Makarim & Taira - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- European Bulk Services B.V. - Netherlands
- MS Steel International - UAE
- Leighton Contractors Pty Ltd - Australia
- ASAPP Information Group - India
- AsiaOL BioFuels Corp., Philippines
- Essar Steel Hazira Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Central Java Power - Indonesia
- Ind-Barath Power Infra Limited - India
- Indika Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Tamil Nadu electricity Board
- Australian Commodity Traders Exchange
- Minerals Council of Australia
- Gujarat Sidhee Cement - India
- GMR Energy Limited - India
- Metalloyd Limited - United Kingdom
- Therma Luzon, Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- Cement Manufacturers Association - India
- Toyota Tsusho Corporation, Japan
- Meenaskhi Energy Private Limited - India
- New Zealand Coal & Carbon
- Savvy Resources Ltd - HongKong
- Kartika Selabumi Mining - Indonesia
- Deloitte Consulting - India
- Anglo American - United Kingdom
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- GVK Power & Infra Limited - India
- Tata Chemicals Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Meralco Power Generation, Philippines
- San Jose City I Power Corp, Philippines
- Oldendorff Carriers - Singapore
- Marubeni Corporation - India
- Bhoruka Overseas - Indonesia
- VISA Power Limited - India
- Bangladesh Power Developement Board
- Indian Oil Corporation Limited
- Commonwealth Bank - Australia
- Global Business Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- Vedanta Resources Plc - India
- Kalimantan Lumbung Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Lanco Infratech Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Finance - Indonesia
- Trasteel International SA, Italy
- Goldman Sachs - Singapore
- Billiton Holdings Pty Ltd - Australia
- Independent Power Producers Association of India
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