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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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Saturday, 25 March 23
COAL INDIA HAS STRONG CASE TO INCREASE PRICES, TALKS ON: CMD AGRAWAL - BUSINESS STANDARD
Coal India (CIL) Chairman and Managing Director Pramod Agrawal said on Monday there is a “strong case” for increasing coal prices, and ...
Saturday, 25 March 23
ASIAN CRUDE PALM OIL WATCH 1Q23 - FITCH RATINGS
Malaysian benchmark crude palm oil (CPO) spot prices have averaged around USD915 per tonne (t) so far in 1Q23, sharply lower than the average of ar ...
Saturday, 25 March 23
INDONESIA’S COAL EXPORT INCREASED BY 21.0% YOY TO 388.4 MLN T IN 2022 - BANCHERO COSTA
After a slow start in the first quarter, global coal trade has really picked up pace last year, and is now fully back to pre-Covid levels. In the f ...
Saturday, 25 March 23
GLOBAL LNG-ASIA SPOT PRICES SLIP AS WEAK NORTHERN DEMAND REMAINS - REUTERS
Asian spot prices of liquefied natural gas (LNG) declined this week, falling to a 21-month low, as weak demand in the northeast Asia region continu ...
Wednesday, 22 March 23
OIL PRICE FALL SPECULATIVE, TO HIT $140 BY YEAR-END -ANDURAND: REUTERS
The recent fall in oil prices due to banking jitters is speculative and oil will hit $140 a barrel by the end of the year, hedge fund manager Pierr ...
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- Borneo Indobara - Indonesia
- Sindya Power Generating Company Private Ltd
- Meralco Power Generation, Philippines
- Coastal Gujarat Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Electricity Regulatory Commission - India
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- South Luzon Thermal Energy Corporation
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- Straits Asia Resources Limited - Singapore
- GMR Energy Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Romanian Commodities Exchange
- Petron Corporation, Philippines
- Samtan Co., Ltd - South Korea
- TeaM Sual Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Electricity Generating Authority of Thailand
- Lanco Infratech Ltd - India
- Kumho Petrochemical, South Korea
- SN Aboitiz Power Inc, Philippines
- Videocon Industries ltd - India
- Bulk Trading Sa - Switzerland
- Miang Besar Coal Terminal - Indonesia
- Metalloyd Limited - United Kingdom
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- ASAPP Information Group - India
- Australian Coal Association
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- Coalindo Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- San Jose City I Power Corp, Philippines
- MS Steel International - UAE
- Ministry of Mines - Canada
- Holcim Trading Pte Ltd - Singapore
- Malabar Cements Ltd - India
- VISA Power Limited - India
- McConnell Dowell - Australia
- Economic Council, Georgia
- Altura Mining Limited, Indonesia
- Merrill Lynch Commodities Europe
- Port Waratah Coal Services - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Mercator Lines Limited - India
- Bukit Makmur.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Bhushan Steel Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- The State Trading Corporation of India Ltd
- Bangladesh Power Developement Board
- Kapuas Tunggal Persada - Indonesia
- Singapore Mercantile Exchange
- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- IHS Mccloskey Coal Group - USA
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Therma Luzon, Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Indogreen Group - Indonesia
- Maheswari Brothers Coal Limited - India
- Indian Energy Exchange, India
- Bahari Cakrawala Sebuku - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Tamil Nadu electricity Board
- Eastern Coal Council - USA
- GN Power Mariveles Coal Plant, Philippines
- Anglo American - United Kingdom
- Eastern Energy - Thailand
- Manunggal Multi Energi - Indonesia
- Indonesian Coal Mining Association
- Rio Tinto Coal - Australia
- Central Electricity Authority - India
- Toyota Tsusho Corporation, Japan
- Kobexindo Tractors - Indoneisa
- Sojitz Corporation - Japan
- Chamber of Mines of South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indo Tambangraya Megah - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ministry of Transport, Egypt
- Cement Manufacturers Association - India
- Posco Energy - South Korea
- Independent Power Producers Association of India
- Sakthi Sugars Limited - India
- Antam Resourcindo - Indonesia
- Makarim & Taira - Indonesia
- New Zealand Coal & Carbon
- Pendopo Energi Batubara - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Goldman Sachs - Singapore
- Ind-Barath Power Infra Limited - India
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Bhatia International Limited - India
- Siam City Cement PLC, Thailand
- Price Waterhouse Coopers - Russia
- Planning Commission, India
- Larsen & Toubro Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Bharathi Cement Corporation - India
- Dalmia Cement Bharat India
- Marubeni Corporation - India
- Semirara Mining and Power Corporation, Philippines
- Mjunction Services Limited - India
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- AsiaOL BioFuels Corp., Philippines
- Global Business Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Uttam Galva Steels Limited - India
- Orica Australia Pty. Ltd.
- Agrawal Coal Company - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- Wilmar Investment Holdings
- IEA Clean Coal Centre - UK
- Globalindo Alam Lestari - Indonesia
- PowerSource Philippines DevCo
- Ministry of Finance - Indonesia
- Wood Mackenzie - Singapore
- Global Green Power PLC Corporation, Philippines
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- Trasteel International SA, Italy
- Standard Chartered Bank - UAE
- Heidelberg Cement - Germany
- Jaiprakash Power Ventures ltd
- Grasim Industreis Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Energy Link Ltd, New Zealand
- Siam City Cement - Thailand
- Simpson Spence & Young - Indonesia
- The University of Queensland
- Jindal Steel & Power Ltd - India
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Tata Chemicals Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- OPG Power Generation Pvt Ltd - India
- Minerals Council of Australia
- Timah Investasi Mineral - Indoneisa
- Edison Trading Spa - Italy
- London Commodity Brokers - England
- Billiton Holdings Pty Ltd - Australia
- Sical Logistics Limited - India
- Salva Resources Pvt Ltd - India
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Formosa Plastics Group - Taiwan
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- The Treasury - Australian Government
- Essar Steel Hazira Ltd - India
- Madhucon Powers Ltd - India
- Attock Cement Pakistan Limited
- European Bulk Services B.V. - Netherlands
- Asmin Koalindo Tuhup - Indonesia
- CNBM International Corporation - China
- Electricity Authority, New Zealand
- ICICI Bank Limited - India
- Riau Bara Harum - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Africa Commodities Group - South Africa
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Banpu Public Company Limited - Thailand
- Thiess Contractors Indonesia
- Semirara Mining Corp, Philippines
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- PTC India Limited - India
- Deloitte Consulting - India
- Sree Jayajothi Cements Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Sarangani Energy Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Carbofer General Trading SA - India
- Renaissance Capital - South Africa
- Coal and Oil Company - UAE
- Aboitiz Power Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- Energy Development Corp, Philippines
- Bhoruka Overseas - Indonesia
- SMC Global Power, Philippines
- Parry Sugars Refinery, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- Star Paper Mills Limited - India
- Kideco Jaya Agung - Indonesia
- Mercuria Energy - Indonesia
- White Energy Company Limited
- GAC Shipping (India) Pvt Ltd
- Xindia Steels Limited - India
- Orica Mining Services - Indonesia
- Commonwealth Bank - Australia
- Kohat Cement Company Ltd. - Pakistan
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