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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, 22 March 23
MARKET INSIGHT - INTERMODAL
The crude tanker market continues to gather momentum as we head towards the end of 1Q2023, against a backdrop of strong U.S. exports paired with a ...
Wednesday, 22 March 23
WILL LOWER GAS PRICES SPARK SWITCHING IN EUROPE AND ASIA?
Record high prices devastated demand for gas and LNG across Asia and Europe last year. But with prices falling, companies are starting to re-evalua ...
Monday, 20 March 23
NTPC MULLS 5.4 MILLION TONNES COAL IMPORT IN FIRST HALF OF 2023-24: PTI
State-run power giant NTPC is planning to import around 5.4 million tonnes of coal to meet the supply shortage during the first half 2023-24 fiscal ...
Monday, 20 March 23
S. AFRICA’S EXXARO RESOURCES SAYS COAL PRICES COOLING OFF - REUTERS
South Africa’s Exxaro Resources on Thursday posted a 28% jump in 2022 profit after seeing average coal prices surge more than 150%, but warne ...
Saturday, 18 March 23
RUSSIAN LNG EXPORTS TO EUROPE REMAIN HIGH - VESSELS VALUE
Russian LNG exports to Europe remained at very high levels in February at 3.6 million CBM, following a 13 month high in January of 4.1 million CBM. ...
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- Chamber of Mines of South Africa
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Energy Link Ltd, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Australian Commodity Traders Exchange
- Directorate Of Revenue Intelligence - India
- Neyveli Lignite Corporation Ltd, - India
- MS Steel International - UAE
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- Larsen & Toubro Limited - India
- PTC India Limited - India
- Electricity Authority, New Zealand
- Wood Mackenzie - Singapore
- Riau Bara Harum - Indonesia
- Singapore Mercantile Exchange
- OPG Power Generation Pvt Ltd - India
- The Treasury - Australian Government
- SMC Global Power, Philippines
- Wilmar Investment Holdings
- Leighton Contractors Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- PowerSource Philippines DevCo
- Orica Mining Services - Indonesia
- SMG Consultants - Indonesia
- Sojitz Corporation - Japan
- Malabar Cements Ltd - India
- Coastal Gujarat Power Limited - India
- CIMB Investment Bank - Malaysia
- Ministry of Mines - Canada
- Antam Resourcindo - Indonesia
- Central Electricity Authority - India
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- Global Business Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- Sarangani Energy Corporation, Philippines
- London Commodity Brokers - England
- Karaikal Port Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Jindal Steel & Power Ltd - India
- The University of Queensland
- Oldendorff Carriers - Singapore
- Makarim & Taira - Indonesia
- Mjunction Services Limited - India
- Planning Commission, India
- Gujarat Electricity Regulatory Commission - India
- Mintek Dendrill Indonesia
- Madhucon Powers Ltd - India
- Borneo Indobara - Indonesia
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- Semirara Mining and Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dalmia Cement Bharat India
- Mercuria Energy - Indonesia
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Bukit Makmur.PT - Indonesia
- Intertek Mineral Services - Indonesia
- Baramulti Group, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Banpu Public Company Limited - Thailand
- Indonesian Coal Mining Association
- Power Finance Corporation Ltd., India
- Miang Besar Coal Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Holcim Trading Pte Ltd - Singapore
- Krishnapatnam Port Company Ltd. - India
- Agrawal Coal Company - India
- Ind-Barath Power Infra Limited - India
- Indian Energy Exchange, India
- GN Power Mariveles Coal Plant, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Commonwealth Bank - Australia
- Tamil Nadu electricity Board
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- Latin American Coal - Colombia
- Maharashtra Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Africa Commodities Group - South Africa
- Therma Luzon, Inc, Philippines
- Ambuja Cements Ltd - India
- Bhatia International Limited - India
- Samtan Co., Ltd - South Korea
- Toyota Tsusho Corporation, Japan
- Vedanta Resources Plc - India
- Attock Cement Pakistan Limited
- Deloitte Consulting - India
- Sical Logistics Limited - India
- Coalindo Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Coal and Oil Company - UAE
- Cigading International Bulk Terminal - Indonesia
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Kideco Jaya Agung - Indonesia
- McConnell Dowell - Australia
- Petron Corporation, Philippines
- Semirara Mining Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Metalloyd Limited - United Kingdom
- Altura Mining Limited, Indonesia
- Minerals Council of Australia
- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Kartika Selabumi Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Renaissance Capital - South Africa
- Aditya Birla Group - India
- PetroVietnam Power Coal Import and Supply Company
- Price Waterhouse Coopers - Russia
- GAC Shipping (India) Pvt Ltd
- Kobexindo Tractors - Indoneisa
- Marubeni Corporation - India
- Posco Energy - South Korea
- Australian Coal Association
- New Zealand Coal & Carbon
- Bukit Asam (Persero) Tbk - Indonesia
- Bhoruka Overseas - Indonesia
- Salva Resources Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Heidelberg Cement - Germany
- Videocon Industries ltd - India
- Carbofer General Trading SA - India
- Sinarmas Energy and Mining - Indonesia
- Gujarat Sidhee Cement - India
- AsiaOL BioFuels Corp., Philippines
- Sindya Power Generating Company Private Ltd
- Rio Tinto Coal - Australia
- PNOC Exploration Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Indo Tambangraya Megah - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Parliament of New Zealand
- Sree Jayajothi Cements Limited - India
- Kepco SPC Power Corporation, Philippines
- Cement Manufacturers Association - India
- Meralco Power Generation, Philippines
- GMR Energy Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement PLC, Thailand
- Kaltim Prima Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Grasim Industreis Ltd - India
- European Bulk Services B.V. - Netherlands
- Energy Development Corp, Philippines
- IEA Clean Coal Centre - UK
- Star Paper Mills Limited - India
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Manunggal Multi Energi - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Bharathi Cement Corporation - India
- Mercator Lines Limited - India
- The State Trading Corporation of India Ltd
- Merrill Lynch Commodities Europe
- Bayan Resources Tbk. - Indonesia
- Orica Australia Pty. Ltd.
- Bulk Trading Sa - Switzerland
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Edison Trading Spa - Italy
- Parry Sugars Refinery, India
- Indika Energy - Indonesia
- Thiess Contractors Indonesia
- CNBM International Corporation - China
- GVK Power & Infra Limited - India
- Central Java Power - Indonesia
- Interocean Group of Companies - India
- Thai Mozambique Logistica
- Bangladesh Power Developement Board
- Trasteel International SA, Italy
- Sakthi Sugars Limited - India
- Independent Power Producers Association of India
- South Luzon Thermal Energy Corporation
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement - Thailand
- Anglo American - United Kingdom
- Indogreen Group - Indonesia
- Binh Thuan Hamico - Vietnam
- Georgia Ports Authority, United States
- Lanco Infratech Ltd - India
- Port Waratah Coal Services - Australia
- Meenaskhi Energy Private Limited - India
- Kumho Petrochemical, South Korea
- Maheswari Brothers Coal Limited - India
- Eastern Energy - Thailand
- Electricity Generating Authority of Thailand
- ASAPP Information Group - India
- Eastern Coal Council - USA
- Vijayanagar Sugar Pvt Ltd - India
- Bhushan Steel Limited - India
- Vizag Seaport Private Limited - India
- Economic Council, Georgia
- Goldman Sachs - Singapore
- Formosa Plastics Group - Taiwan
- White Energy Company Limited
- VISA Power Limited - India
- Iligan Light & Power Inc, Philippines
- Jaiprakash Power Ventures ltd
- Aboitiz Power Corporation - Philippines
- Karbindo Abesyapradhi - Indoneisa
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