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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, 18 March 23
HEDGE TO OFFSET LNG VOLATILITY, TRADERS TOLD - BALTIC EXCHANGE
A shift in imports from Asia to Europe led to significant volatility in liquefied natural gas shipping last year, prompting industry experts to urg ...
Friday, 17 March 23
INDONESIAN COAL PRICE REFERENCE UP AROUND 2.17% IN MARCH 2023
COALspot.com: Indonesian Coal Price Reference up around 2.17% in March 2023.
According to the new HBA regulation No. 41.K/MB.0 ...
Saturday, 11 March 23
MARKET INSIGHT - INTERMODAL
Uncertainty over the recovery of Chinese demand, demand destruction in Europe, as well as weather conditions will pivot the LNG market this summer. ...
Wednesday, 08 March 23
INDONESIAN COAL REFERENCE PRICE FORMULA HAS OFFICIALLY CHANGED
Indonesian Minister of Energy and Mineral Resources has officially changed the guideline for determining the benchmark price for the sale of coal c ...
Thursday, 02 March 23
INDIA'S SEABORNE CRUDE OIL IMPORTS IN 2022 INCREASED BY 11.5% YOY - BANCHERO COSTA
2022 has turned out to be a very positive year for crude oil trade, despite the surging oil prices and risks of economic recession, Banchero Costa ...
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- Minerals Council of Australia
- Central Java Power - Indonesia
- International Coal Ventures Pvt Ltd - India
- Cement Manufacturers Association - India
- Videocon Industries ltd - India
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- Sarangani Energy Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Wood Mackenzie - Singapore
- Ambuja Cements Ltd - India
- Borneo Indobara - Indonesia
- Eastern Coal Council - USA
- Meralco Power Generation, Philippines
- ASAPP Information Group - India
- GVK Power & Infra Limited - India
- Intertek Mineral Services - Indonesia
- Jindal Steel & Power Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- IEA Clean Coal Centre - UK
- Chettinad Cement Corporation Ltd - India
- Jaiprakash Power Ventures ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Port Waratah Coal Services - Australia
- Holcim Trading Pte Ltd - Singapore
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Marubeni Corporation - India
- VISA Power Limited - India
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Tata Chemicals Ltd - India
- Kideco Jaya Agung - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Romanian Commodities Exchange
- Coal and Oil Company - UAE
- Independent Power Producers Association of India
- Australian Commodity Traders Exchange
- Lanco Infratech Ltd - India
- Baramulti Group, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Chamber of Mines of South Africa
- The Treasury - Australian Government
- IHS Mccloskey Coal Group - USA
- Maheswari Brothers Coal Limited - India
- Indian Energy Exchange, India
- Bhushan Steel Limited - India
- White Energy Company Limited
- Aboitiz Power Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- The University of Queensland
- Mercuria Energy - Indonesia
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Central Electricity Authority - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kapuas Tunggal Persada - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Gujarat Electricity Regulatory Commission - India
- Indian Oil Corporation Limited
- Africa Commodities Group - South Africa
- Siam City Cement - Thailand
- Xindia Steels Limited - India
- Meenaskhi Energy Private Limited - India
- Kepco SPC Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Bulk Trading Sa - Switzerland
- Thai Mozambique Logistica
- Simpson Spence & Young - Indonesia
- Binh Thuan Hamico - Vietnam
- Carbofer General Trading SA - India
- Sree Jayajothi Cements Limited - India
- Global Business Power Corporation, Philippines
- Planning Commission, India
- TeaM Sual Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Agrawal Coal Company - India
- Aditya Birla Group - India
- South Luzon Thermal Energy Corporation
- Energy Development Corp, Philippines
- Bangladesh Power Developement Board
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Commonwealth Bank - Australia
- Energy Link Ltd, New Zealand
- Essar Steel Hazira Ltd - India
- MS Steel International - UAE
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Star Paper Mills Limited - India
- Kumho Petrochemical, South Korea
- Standard Chartered Bank - UAE
- Mjunction Services Limited - India
- Riau Bara Harum - Indonesia
- Barasentosa Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Parliament of New Zealand
- Renaissance Capital - South Africa
- Karbindo Abesyapradhi - Indoneisa
- Bukit Makmur.PT - Indonesia
- Mintek Dendrill Indonesia
- Ind-Barath Power Infra Limited - India
- Dalmia Cement Bharat India
- Globalindo Alam Lestari - Indonesia
- Australian Coal Association
- Manunggal Multi Energi - Indonesia
- Siam City Cement PLC, Thailand
- Coastal Gujarat Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Antam Resourcindo - Indonesia
- Altura Mining Limited, Indonesia
- Power Finance Corporation Ltd., India
- Ministry of Transport, Egypt
- McConnell Dowell - Australia
- Indo Tambangraya Megah - Indonesia
- Edison Trading Spa - Italy
- Vizag Seaport Private Limited - India
- Goldman Sachs - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ICICI Bank Limited - India
- Oldendorff Carriers - Singapore
- Bayan Resources Tbk. - Indonesia
- Bhoruka Overseas - Indonesia
- Attock Cement Pakistan Limited
- PTC India Limited - India
- Heidelberg Cement - Germany
- Asmin Koalindo Tuhup - Indonesia
- Global Coal Blending Company Limited - Australia
- Posco Energy - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Formosa Plastics Group - Taiwan
- Kalimantan Lumbung Energi - Indonesia
- SMC Global Power, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sical Logistics Limited - India
- Bharathi Cement Corporation - India
- Vedanta Resources Plc - India
- Savvy Resources Ltd - HongKong
- Kartika Selabumi Mining - Indonesia
- Metalloyd Limited - United Kingdom
- Malabar Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Deloitte Consulting - India
- Wilmar Investment Holdings
- Billiton Holdings Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Finance - Indonesia
- Indogreen Group - Indonesia
- Latin American Coal - Colombia
- Rashtriya Ispat Nigam Limited - India
- Singapore Mercantile Exchange
- Maharashtra Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- PowerSource Philippines DevCo
- SN Aboitiz Power Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- Thiess Contractors Indonesia
- Price Waterhouse Coopers - Russia
- Uttam Galva Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- GN Power Mariveles Coal Plant, Philippines
- Global Green Power PLC Corporation, Philippines
- Orica Mining Services - Indonesia
- SMG Consultants - Indonesia
- Indonesian Coal Mining Association
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- Parry Sugars Refinery, India
- CNBM International Corporation - China
- India Bulls Power Limited - India
- Sakthi Sugars Limited - India
- Anglo American - United Kingdom
- Electricity Generating Authority of Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Trasteel International SA, Italy
- Therma Luzon, Inc, Philippines
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
- Iligan Light & Power Inc, Philippines
- Indika Energy - Indonesia
- GMR Energy Limited - India
- GAC Shipping (India) Pvt Ltd
- Bhatia International Limited - India
- PNOC Exploration Corporation - Philippines
- London Commodity Brokers - England
- Orica Australia Pty. Ltd.
- Eastern Energy - Thailand
- Coalindo Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- San Jose City I Power Corp, Philippines
- Banpu Public Company Limited - Thailand
- Kobexindo Tractors - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Samtan Co., Ltd - South Korea
- Timah Investasi Mineral - Indoneisa
- Gujarat Sidhee Cement - India
- Madhucon Powers Ltd - India
- Rio Tinto Coal - Australia
- Ceylon Electricity Board - Sri Lanka
- Sojitz Corporation - Japan
- Semirara Mining Corp, Philippines
- The State Trading Corporation of India Ltd
- Electricity Authority, New Zealand
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