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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, 09 November 23
GREEK AND CHINESE COMPANIES OWN 34% OF THE GLOBAL FLEET’S CARGO CAPACITY - BIMCO
“The global fleet of cargo carrying ships consists of around 61,000 ships with a deadweight capacity of about 2,200 million tonnes. The ships ...
Monday, 23 October 23
CHINA SEPT COAL OUTPUT HITS SIX-MONTH HIGH ON RISING POWER DEMAND - REUTERS
China’s September coal output rose 0.4% from August to the highest level since March, official data showed on Wednesday, on rising power dema ...
Monday, 23 October 23
INDIA COAL INVENTORIES DROP AT FASTEST PACE IN TWO YEARS, BOOSTING IMPORTS - REUTERS
Coal inventories at Indian power plants in the first half of October fell at their fastest rate in two years, an analysis of government data showed ...
Tuesday, 19 September 23
LNG SHIPPING STOCKS: THE ASIAN GROWTH UP-INDICES
Last week, the UP World LNG Shipping Index (UPI) gained 3.81 points or 2.51%, closing at 155.85 points. This index tracks the performance of LNG sh ...
Sunday, 10 September 23
GOLDMAN SACHS PREDICTS OIL PRICE TO HIT $100 ON OPEC CUTS - YAHOO FINANCE
Oil supply cuts by Saudi Arabia and Russia could lead to Brent crude jumping as high as $107 a barrel in 2024, Goldman Sachs Commodities Research h ...
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- Indian Energy Exchange, India
- Timah Investasi Mineral - Indoneisa
- Ministry of Mines - Canada
- San Jose City I Power Corp, Philippines
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Deloitte Consulting - India
- Kohat Cement Company Ltd. - Pakistan
- VISA Power Limited - India
- Directorate Of Revenue Intelligence - India
- Baramulti Group, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Mercuria Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Thiess Contractors Indonesia
- Billiton Holdings Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Rio Tinto Coal - Australia
- Samtan Co., Ltd - South Korea
- Petron Corporation, Philippines
- Port Waratah Coal Services - Australia
- The Treasury - Australian Government
- Australian Commodity Traders Exchange
- Asmin Koalindo Tuhup - Indonesia
- Edison Trading Spa - Italy
- Electricity Generating Authority of Thailand
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Metalloyd Limited - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CNBM International Corporation - China
- Carbofer General Trading SA - India
- MS Steel International - UAE
- Semirara Mining and Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Ministry of Transport, Egypt
- Global Green Power PLC Corporation, Philippines
- Parry Sugars Refinery, India
- Price Waterhouse Coopers - Russia
- New Zealand Coal & Carbon
- Commonwealth Bank - Australia
- Ministry of Finance - Indonesia
- Central Electricity Authority - India
- Formosa Plastics Group - Taiwan
- SN Aboitiz Power Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- Eastern Energy - Thailand
- Borneo Indobara - Indonesia
- Australian Coal Association
- London Commodity Brokers - England
- Globalindo Alam Lestari - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GMR Energy Limited - India
- Parliament of New Zealand
- Heidelberg Cement - Germany
- Energy Development Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Medco Energi Mining Internasional
- Planning Commission, India
- Posco Energy - South Korea
- Bukit Baiduri Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Mintek Dendrill Indonesia
- Aditya Birla Group - India
- Sinarmas Energy and Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Chamber of Mines of South Africa
- Leighton Contractors Pty Ltd - Australia
- Meralco Power Generation, Philippines
- Chettinad Cement Corporation Ltd - India
- Xindia Steels Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Latin American Coal - Colombia
- Simpson Spence & Young - Indonesia
- Thai Mozambique Logistica
- ICICI Bank Limited - India
- Uttam Galva Steels Limited - India
- Makarim & Taira - Indonesia
- Agrawal Coal Company - India
- Sakthi Sugars Limited - India
- Merrill Lynch Commodities Europe
- Binh Thuan Hamico - Vietnam
- Bharathi Cement Corporation - India
- Semirara Mining Corp, Philippines
- Maheswari Brothers Coal Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kideco Jaya Agung - Indonesia
- PowerSource Philippines DevCo
- Directorate General of MIneral and Coal - Indonesia
- ASAPP Information Group - India
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Indo Tambangraya Megah - Indonesia
- Altura Mining Limited, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Kartika Selabumi Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Straits Asia Resources Limited - Singapore
- Africa Commodities Group - South Africa
- Trasteel International SA, Italy
- Sindya Power Generating Company Private Ltd
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- International Coal Ventures Pvt Ltd - India
- Renaissance Capital - South Africa
- Riau Bara Harum - Indonesia
- GAC Shipping (India) Pvt Ltd
- Bhatia International Limited - India
- Ambuja Cements Ltd - India
- Dalmia Cement Bharat India
- Barasentosa Lestari - Indonesia
- CIMB Investment Bank - Malaysia
- Manunggal Multi Energi - Indonesia
- Bulk Trading Sa - Switzerland
- Ind-Barath Power Infra Limited - India
- Sojitz Corporation - Japan
- Gujarat Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- Antam Resourcindo - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- SMC Global Power, Philippines
- PTC India Limited - India
- Kaltim Prima Coal - Indonesia
- Eastern Coal Council - USA
- Interocean Group of Companies - India
- Cement Manufacturers Association - India
- The University of Queensland
- Energy Link Ltd, New Zealand
- Ceylon Electricity Board - Sri Lanka
- Attock Cement Pakistan Limited
- European Bulk Services B.V. - Netherlands
- Madhucon Powers Ltd - India
- Sical Logistics Limited - India
- Malabar Cements Ltd - India
- Salva Resources Pvt Ltd - India
- Anglo American - United Kingdom
- Siam City Cement - Thailand
- Indian Oil Corporation Limited
- South Luzon Thermal Energy Corporation
- AsiaOL BioFuels Corp., Philippines
- White Energy Company Limited
- Electricity Authority, New Zealand
- Romanian Commodities Exchange
- Indika Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- SMG Consultants - Indonesia
- Tamil Nadu electricity Board
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Marubeni Corporation - India
- Miang Besar Coal Terminal - Indonesia
- Bhushan Steel Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Jaiprakash Power Ventures ltd
- Economic Council, Georgia
- TeaM Sual Corporation - Philippines
- GVK Power & Infra Limited - India
- Kumho Petrochemical, South Korea
- Singapore Mercantile Exchange
- OPG Power Generation Pvt Ltd - India
- Indogreen Group - Indonesia
- Lanco Infratech Ltd - India
- Mjunction Services Limited - India
- Jindal Steel & Power Ltd - India
- Orica Mining Services - Indonesia
- Georgia Ports Authority, United States
- Alfred C Toepfer International GmbH - Germany
- IEA Clean Coal Centre - UK
- Karaikal Port Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Vizag Seaport Private Limited - India
- Orica Australia Pty. Ltd.
- Wood Mackenzie - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Kobexindo Tractors - Indoneisa
- Wilmar Investment Holdings
- Standard Chartered Bank - UAE
- Goldman Sachs - Singapore
- Coal and Oil Company - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Bayan Resources Tbk. - Indonesia
- Indonesian Coal Mining Association
- Bukit Makmur.PT - Indonesia
- Tata Chemicals Ltd - India
- McConnell Dowell - Australia
- Siam City Cement PLC, Thailand
- Grasim Industreis Ltd - India
- Sree Jayajothi Cements Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Pendopo Energi Batubara - Indonesia
- Gujarat Sidhee Cement - India
- Intertek Mineral Services - Indonesia
- Iligan Light & Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Meenaskhi Energy Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Central Java Power - Indonesia
- Kepco SPC Power Corporation, Philippines
- Mercator Lines Limited - India
- Banpu Public Company Limited - Thailand
- Vedanta Resources Plc - India
- Independent Power Producers Association of India
- Larsen & Toubro Limited - India
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