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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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Wednesday, 21 June 23
CHINA'S MAY COAL IMPORTS FROM AUSTRALIA RECOVER TO PRE-BAN LEVELS - REUTERS
Australian coal sales to China increased in May, as trade resumed between them even as overall coal demand weakened against an uncertain macroecono ...
Monday, 19 June 23
DROUGHT-DEPLETED HYDROPOWER DRIVES CHINA TO TURN TO COAL - REUTERS
China has leant hard on coal-fired power plants as well as wind and solar generators to make up for a shortfall in hydroelectric generation as a re ...
Monday, 19 June 23
CHINA COAL OUTPUT UP 4.2 PCT IN MAY - XINHUA
China’s raw coal output posted steady growth in May, official data showed.
The country produced 390 million tonnes of raw coal ...
Wednesday, 24 May 23
AMMONIA-FUELLED BULK CARRIERS WITHIN FIVE YEARS - BALTIC EXCHANGE
Within five years, ships powered by clean ammonia could be a feature on the iron ore trade routes between West Australia and East Asia.
A study ...
Tuesday, 23 May 23
CHINA'S APRIL COAL OUTPUT LEAPS 11% ON YEAR, BUT DEMAND DOWNTURN LOOMS - REUTERS
China’s daily coal output in April jumped 11% from the same month a year earlier, boosted by Beijing’s order to increase supply to ensu ...
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- Planning Commission, India
- South Luzon Thermal Energy Corporation
- Samtan Co., Ltd - South Korea
- Sojitz Corporation - Japan
- LBH Netherlands Bv - Netherlands
- Therma Luzon, Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Jindal Steel & Power Ltd - India
- New Zealand Coal & Carbon
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Bukit Makmur.PT - Indonesia
- Renaissance Capital - South Africa
- London Commodity Brokers - England
- Ceylon Electricity Board - Sri Lanka
- Electricity Generating Authority of Thailand
- Karaikal Port Pvt Ltd - India
- Deloitte Consulting - India
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- Meenaskhi Energy Private Limited - India
- Straits Asia Resources Limited - Singapore
- European Bulk Services B.V. - Netherlands
- Bukit Baiduri Energy - Indonesia
- Thiess Contractors Indonesia
- Australian Coal Association
- Mjunction Services Limited - India
- Africa Commodities Group - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Georgia Ports Authority, United States
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Savvy Resources Ltd - HongKong
- Orica Mining Services - Indonesia
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Grasim Industreis Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Bulk Trading Sa - Switzerland
- Directorate Of Revenue Intelligence - India
- The State Trading Corporation of India Ltd
- Parliament of New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Global Green Power PLC Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- Malabar Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Kepco SPC Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement - Thailand
- Directorate General of MIneral and Coal - Indonesia
- Coal and Oil Company - UAE
- Mercuria Energy - Indonesia
- Baramulti Group, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Sindya Power Generating Company Private Ltd
- Romanian Commodities Exchange
- Videocon Industries ltd - India
- India Bulls Power Limited - India
- Aditya Birla Group - India
- OPG Power Generation Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- TeaM Sual Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Petron Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Tamil Nadu electricity Board
- Pipit Mutiara Jaya. PT, Indonesia
- Semirara Mining Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Bhushan Steel Limited - India
- Goldman Sachs - Singapore
- Ministry of Mines - Canada
- Price Waterhouse Coopers - Russia
- Eastern Coal Council - USA
- Lanco Infratech Ltd - India
- Minerals Council of Australia
- Riau Bara Harum - Indonesia
- Borneo Indobara - Indonesia
- SN Aboitiz Power Inc, Philippines
- Port Waratah Coal Services - Australia
- Star Paper Mills Limited - India
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- Central Electricity Authority - India
- Xindia Steels Limited - India
- Power Finance Corporation Ltd., India
- Kartika Selabumi Mining - Indonesia
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- GMR Energy Limited - India
- Kumho Petrochemical, South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Wilmar Investment Holdings
- Alfred C Toepfer International GmbH - Germany
- Antam Resourcindo - Indonesia
- Kobexindo Tractors - Indoneisa
- Anglo American - United Kingdom
- Ind-Barath Power Infra Limited - India
- Thai Mozambique Logistica
- Ambuja Cements Ltd - India
- Indian Oil Corporation Limited
- AsiaOL BioFuels Corp., Philippines
- Miang Besar Coal Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- The University of Queensland
- Asmin Koalindo Tuhup - Indonesia
- GVK Power & Infra Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Wood Mackenzie - Singapore
- Manunggal Multi Energi - Indonesia
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- Edison Trading Spa - Italy
- Kaltim Prima Coal - Indonesia
- Makarim & Taira - Indonesia
- PNOC Exploration Corporation - Philippines
- Independent Power Producers Association of India
- ICICI Bank Limited - India
- Gujarat Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Bhatia International Limited - India
- PTC India Limited - India
- Central Java Power - Indonesia
- Sical Logistics Limited - India
- San Jose City I Power Corp, Philippines
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Indika Energy - Indonesia
- Sakthi Sugars Limited - India
- Uttam Galva Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meralco Power Generation, Philippines
- MS Steel International - UAE
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Standard Chartered Bank - UAE
- Carbofer General Trading SA - India
- Heidelberg Cement - Germany
- Altura Mining Limited, Indonesia
- Electricity Authority, New Zealand
- Toyota Tsusho Corporation, Japan
- Vijayanagar Sugar Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dalmia Cement Bharat India
- Orica Australia Pty. Ltd.
- Posco Energy - South Korea
- Jaiprakash Power Ventures ltd
- Interocean Group of Companies - India
- Eastern Energy - Thailand
- Madhucon Powers Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Sree Jayajothi Cements Limited - India
- Commonwealth Bank - Australia
- CIMB Investment Bank - Malaysia
- White Energy Company Limited
- Intertek Mineral Services - Indonesia
- Indo Tambangraya Megah - Indonesia
- Ministry of Transport, Egypt
- IHS Mccloskey Coal Group - USA
- Banpu Public Company Limited - Thailand
- Australian Commodity Traders Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Agrawal Coal Company - India
- Holcim Trading Pte Ltd - Singapore
- Bangladesh Power Developement Board
- Indonesian Coal Mining Association
- SMG Consultants - Indonesia
- Bayan Resources Tbk. - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- CNBM International Corporation - China
- Leighton Contractors Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Parry Sugars Refinery, India
- Gujarat Mineral Development Corp Ltd - India
- Energy Link Ltd, New Zealand
- Singapore Mercantile Exchange
- Essar Steel Hazira Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Chettinad Cement Corporation Ltd - India
- Coalindo Energy - Indonesia
- Vedanta Resources Plc - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Rio Tinto Coal - Australia
- Medco Energi Mining Internasional
- Cement Manufacturers Association - India
- VISA Power Limited - India
- GAC Shipping (India) Pvt Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Chamber of Mines of South Africa
- Attock Cement Pakistan Limited
- ASAPP Information Group - India
- Global Business Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Indian Energy Exchange, India
- Kalimantan Lumbung Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- McConnell Dowell - Australia
- Indogreen Group - Indonesia
- Timah Investasi Mineral - Indoneisa
- Coastal Gujarat Power Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Economic Council, Georgia
- Tata Chemicals Ltd - India
- Mercator Lines Limited - India
- International Coal Ventures Pvt Ltd - India
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