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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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Sunday, 16 April 23
CHINA JUGGLES FOUR MAJOR ECONOMIC CHANGES IN 2023 - WOOD MACKENZIE
Change is afoot in China. Economic growth is slowing, while rising political tensions between China and the US, coupled with global supply chain re ...
Sunday, 16 April 23
CHINA'S MARCH COAL IMPORTS JUMP TO 3-YEAR HIGH - REUTERS
China’s coal imports surged in March to their highest in any month over the past three years as utilities increased purchases on expectations ...
Sunday, 16 April 23
OPEC KEEPS WORLD OIL DEMAND GROWTH OUTLOOK UNCHANGED
The OPEC Reference Basket (ORB) declined in March by $3.43, or 4.2%, m-o-m to average $78.45/b. The ICE Brent first-month contract fell by $4.33, o ...
Sunday, 16 April 23
CHEAPER SPOT LNG PRICES TEMPT SOME ASIAN BUYERS AMID SUPPLY GAINS - REUTERS
Cheaper spot prices for liquefied natural gas (LNG) are luring price-sensitive buyers back in Asia, with China and India recording rising imports i ...
Tuesday, 11 April 23
COAL USE CLIMBS WORLDWIDE DESPITE PROMISES TO SLASH IT - AAP
The burning of coal for electricity, cement, steel and other uses went up in 2022 despite global promises to phase down the fuel that is the bigges ...
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- Rio Tinto Coal - Australia
- Goldman Sachs - Singapore
- Bharathi Cement Corporation - India
- Eastern Coal Council - USA
- Rashtriya Ispat Nigam Limited - India
- Semirara Mining Corp, Philippines
- Indogreen Group - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- Port Waratah Coal Services - Australia
- Savvy Resources Ltd - HongKong
- Kaltim Prima Coal - Indonesia
- Wilmar Investment Holdings
- Trasteel International SA, Italy
- Central Electricity Authority - India
- Makarim & Taira - Indonesia
- Global Business Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- ICICI Bank Limited - India
- White Energy Company Limited
- Kideco Jaya Agung - Indonesia
- Bhatia International Limited - India
- SN Aboitiz Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Kumho Petrochemical, South Korea
- Power Finance Corporation Ltd., India
- Essar Steel Hazira Ltd - India
- Semirara Mining and Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Malabar Cements Ltd - India
- Mjunction Services Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Formosa Plastics Group - Taiwan
- Kartika Selabumi Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Baramulti Group, Indonesia
- International Coal Ventures Pvt Ltd - India
- Marubeni Corporation - India
- Borneo Indobara - Indonesia
- The Treasury - Australian Government
- Binh Thuan Hamico - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indian Oil Corporation Limited
- Lanco Infratech Ltd - India
- Global Coal Blending Company Limited - Australia
- India Bulls Power Limited - India
- Coalindo Energy - Indonesia
- SMG Consultants - Indonesia
- London Commodity Brokers - England
- PNOC Exploration Corporation - Philippines
- Commonwealth Bank - Australia
- Sojitz Corporation - Japan
- Iligan Light & Power Inc, Philippines
- TeaM Sual Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Toyota Tsusho Corporation, Japan
- Holcim Trading Pte Ltd - Singapore
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Anglo American - United Kingdom
- Meralco Power Generation, Philippines
- Planning Commission, India
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Simpson Spence & Young - Indonesia
- Barasentosa Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Bangladesh Power Developement Board
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- GN Power Mariveles Coal Plant, Philippines
- Posco Energy - South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sakthi Sugars Limited - India
- GMR Energy Limited - India
- Indian Energy Exchange, India
- VISA Power Limited - India
- Meenaskhi Energy Private Limited - India
- Attock Cement Pakistan Limited
- Billiton Holdings Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- Dalmia Cement Bharat India
- Mintek Dendrill Indonesia
- McConnell Dowell - Australia
- Maharashtra Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Sindya Power Generating Company Private Ltd
- Parry Sugars Refinery, India
- Vijayanagar Sugar Pvt Ltd - India
- Electricity Authority, New Zealand
- Parliament of New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Manunggal Multi Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Salva Resources Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Ceylon Electricity Board - Sri Lanka
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Alfred C Toepfer International GmbH - Germany
- Karbindo Abesyapradhi - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kohat Cement Company Ltd. - Pakistan
- Economic Council, Georgia
- Orica Mining Services - Indonesia
- Coal and Oil Company - UAE
- Larsen & Toubro Limited - India
- Energy Development Corp, Philippines
- Heidelberg Cement - Germany
- Mercator Lines Limited - India
- Timah Investasi Mineral - Indoneisa
- Sree Jayajothi Cements Limited - India
- Agrawal Coal Company - India
- Kepco SPC Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Global Green Power PLC Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Chamber of Mines of South Africa
- CNBM International Corporation - China
- IHS Mccloskey Coal Group - USA
- Banpu Public Company Limited - Thailand
- Cigading International Bulk Terminal - Indonesia
- Romanian Commodities Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Australian Commodity Traders Exchange
- Price Waterhouse Coopers - Russia
- Independent Power Producers Association of India
- Altura Mining Limited, Indonesia
- Globalindo Alam Lestari - Indonesia
- Thiess Contractors Indonesia
- Wood Mackenzie - Singapore
- Ministry of Mines - Canada
- Edison Trading Spa - Italy
- IEA Clean Coal Centre - UK
- Vizag Seaport Private Limited - India
- Tata Chemicals Ltd - India
- Africa Commodities Group - South Africa
- Australian Coal Association
- Directorate Of Revenue Intelligence - India
- Siam City Cement - Thailand
- Oldendorff Carriers - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Bhoruka Overseas - Indonesia
- GVK Power & Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Leighton Contractors Pty Ltd - Australia
- The University of Queensland
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Tamil Nadu electricity Board
- Orica Australia Pty. Ltd.
- Central Java Power - Indonesia
- Cement Manufacturers Association - India
- Therma Luzon, Inc, Philippines
- Carbofer General Trading SA - India
- Gujarat Mineral Development Corp Ltd - India
- Sarangani Energy Corporation, Philippines
- Eastern Energy - Thailand
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- Metalloyd Limited - United Kingdom
- Siam City Cement PLC, Thailand
- Videocon Industries ltd - India
- New Zealand Coal & Carbon
- Jindal Steel & Power Ltd - India
- Indika Energy - Indonesia
- Uttam Galva Steels Limited - India
- Petron Corporation, Philippines
- Energy Link Ltd, New Zealand
- Star Paper Mills Limited - India
- European Bulk Services B.V. - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- Vedanta Resources Plc - India
- South Luzon Thermal Energy Corporation
- Gujarat Sidhee Cement - India
- Indonesian Coal Mining Association
- Bayan Resources Tbk. - Indonesia
- Interocean Group of Companies - India
- Miang Besar Coal Terminal - Indonesia
- The State Trading Corporation of India Ltd
- Deloitte Consulting - India
- Bahari Cakrawala Sebuku - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Ministry of Transport, Egypt
- Antam Resourcindo - Indonesia
- Madhucon Powers Ltd - India
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Aditya Birla Group - India
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- PTC India Limited - India
- Mercuria Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Merrill Lynch Commodities Europe
- Krishnapatnam Port Company Ltd. - India
- Kapuas Tunggal Persada - Indonesia
- Minerals Council of Australia
- Grasim Industreis Ltd - India
- Pendopo Energi Batubara - Indonesia
- Singapore Mercantile Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Bhushan Steel Limited - India
- PowerSource Philippines DevCo
- Bukit Makmur.PT - Indonesia
- Medco Energi Mining Internasional
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