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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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Thursday, 02 March 23
DRY BULK MARKET: THE WAY CHINA GOES, SO GOES THE MARKET - BIMCO
We expect demand growth within the 1.5-2.5% range in 2023, driven by China’s economic recovery. Improvements in consumer sentiment should hel ...
Thursday, 02 March 23
INDIA, CHINA DEMAND BOOST LOW-RANK THERMAL COAL PRICES IN ASIA - RUSSELL, REUTERS
Signs of stronger import demand from India have arrested the decline in price of the thermal coal grades most commonly sought by the world’s ...
Thursday, 02 March 23
INDIA CHEERS THE RETURN OF ‘KING COAL’ AS INDUSTRY SEES BUOYANT FUTURE - REUTERS
India’s coal industry celebrated the return of its major conference after a three-year pandemic hiatus by presenting a bullish view of demand ...
Wednesday, 01 March 23
GEO CONNECT ASIA RETURNS IN MARCH TO ACCELERATE THE REGION’S GEOSPATIAL AND LOCATION INTELLIGENCE CAPABILITIES
Press Release: The third edition of GCA will be held in conjunction with Digital Construction Asia and the inaugural Drones Asia – an event d ...
Wednesday, 01 March 23
THE DECLINE IN THE COAL PRICE SINCE THE BEGINNING OF THE YEAR HAS BEEN SIGNIFICANT - INTERMODAL
Last week, the front-month API2 future rose by 3.5%, but since the beginning of the year the future has fallen by 39% to $136.65/t, while the Newca ...
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- Trasteel International SA, Italy
- Aditya Birla Group - India
- Eastern Energy - Thailand
- Coal and Oil Company - UAE
- Intertek Mineral Services - Indonesia
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- GMR Energy Limited - India
- Samtan Co., Ltd - South Korea
- Petron Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- Semirara Mining Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Goldman Sachs - Singapore
- Sakthi Sugars Limited - India
- Port Waratah Coal Services - Australia
- Parry Sugars Refinery, India
- Central Java Power - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Leighton Contractors Pty Ltd - Australia
- Sical Logistics Limited - India
- Minerals Council of Australia
- CNBM International Corporation - China
- Metalloyd Limited - United Kingdom
- Kapuas Tunggal Persada - Indonesia
- Merrill Lynch Commodities Europe
- Global Business Power Corporation, Philippines
- MS Steel International - UAE
- Parliament of New Zealand
- Thiess Contractors Indonesia
- Sinarmas Energy and Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Ministry of Transport, Egypt
- Offshore Bulk Terminal Pte Ltd, Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- Star Paper Mills Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Essar Steel Hazira Ltd - India
- Banpu Public Company Limited - Thailand
- CIMB Investment Bank - Malaysia
- Xindia Steels Limited - India
- Uttam Galva Steels Limited - India
- Kumho Petrochemical, South Korea
- Maharashtra Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- Posco Energy - South Korea
- PetroVietnam Power Coal Import and Supply Company
- Australian Commodity Traders Exchange
- Planning Commission, India
- Toyota Tsusho Corporation, Japan
- Georgia Ports Authority, United States
- Jindal Steel & Power Ltd - India
- Lanco Infratech Ltd - India
- Coalindo Energy - Indonesia
- Edison Trading Spa - Italy
- Ambuja Cements Ltd - India
- White Energy Company Limited
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- Ind-Barath Power Infra Limited - India
- Vedanta Resources Plc - India
- Bhushan Steel Limited - India
- Tata Chemicals Ltd - India
- Tamil Nadu electricity Board
- SMC Global Power, Philippines
- Makarim & Taira - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Indonesian Coal Mining Association
- Marubeni Corporation - India
- Latin American Coal - Colombia
- SMG Consultants - Indonesia
- Manunggal Multi Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Interocean Group of Companies - India
- Bhoruka Overseas - Indonesia
- Gujarat Sidhee Cement - India
- Electricity Generating Authority of Thailand
- San Jose City I Power Corp, Philippines
- Independent Power Producers Association of India
- Coastal Gujarat Power Limited - India
- Indo Tambangraya Megah - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- IHS Mccloskey Coal Group - USA
- Krishnapatnam Port Company Ltd. - India
- Orica Australia Pty. Ltd.
- Kepco SPC Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Karaikal Port Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- India Bulls Power Limited - India
- Antam Resourcindo - Indonesia
- McConnell Dowell - Australia
- Straits Asia Resources Limited - Singapore
- Central Electricity Authority - India
- Directorate General of MIneral and Coal - Indonesia
- Madhucon Powers Ltd - India
- Wood Mackenzie - Singapore
- Vizag Seaport Private Limited - India
- Australian Coal Association
- Globalindo Alam Lestari - Indonesia
- Kideco Jaya Agung - Indonesia
- Anglo American - United Kingdom
- Mercuria Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Indogreen Group - Indonesia
- Chettinad Cement Corporation Ltd - India
- Salva Resources Pvt Ltd - India
- Bangladesh Power Developement Board
- Bukit Asam (Persero) Tbk - Indonesia
- Dalmia Cement Bharat India
- Thai Mozambique Logistica
- Bhatia International Limited - India
- Bulk Trading Sa - Switzerland
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- Sojitz Corporation - Japan
- IEA Clean Coal Centre - UK
- PowerSource Philippines DevCo
- Cigading International Bulk Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Baramulti Group, Indonesia
- Wilmar Investment Holdings
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- Larsen & Toubro Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate Of Revenue Intelligence - India
- ICICI Bank Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Eastern Coal Council - USA
- Sindya Power Generating Company Private Ltd
- Bukit Makmur.PT - Indonesia
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Meralco Power Generation, Philippines
- Jaiprakash Power Ventures ltd
- Ministry of Finance - Indonesia
- GAC Shipping (India) Pvt Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- VISA Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Mjunction Services Limited - India
- Cement Manufacturers Association - India
- Indian Oil Corporation Limited
- Aboitiz Power Corporation - Philippines
- Orica Mining Services - Indonesia
- TeaM Sual Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PTC India Limited - India
- Energy Link Ltd, New Zealand
- Maheswari Brothers Coal Limited - India
- Agrawal Coal Company - India
- Holcim Trading Pte Ltd - Singapore
- Kartika Selabumi Mining - Indonesia
- Rio Tinto Coal - Australia
- The University of Queensland
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- Chamber of Mines of South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Heidelberg Cement - Germany
- Mercator Lines Limited - India
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- SN Aboitiz Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- International Coal Ventures Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Carbofer General Trading SA - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Mines - Canada
- Indika Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Sarangani Energy Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Therma Luzon, Inc, Philippines
- Sree Jayajothi Cements Limited - India
- The Treasury - Australian Government
- New Zealand Coal & Carbon
- Commonwealth Bank - Australia
- Oldendorff Carriers - Singapore
- Global Green Power PLC Corporation, Philippines
- The State Trading Corporation of India Ltd
- Neyveli Lignite Corporation Ltd, - India
- Economic Council, Georgia
- Borneo Indobara - Indonesia
- Iligan Light & Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- ASAPP Information Group - India
- Grasim Industreis Ltd - India
- Deloitte Consulting - India
- Kohat Cement Company Ltd. - Pakistan
- Kalimantan Lumbung Energi - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Videocon Industries ltd - India
- Barasentosa Lestari - Indonesia
- Riau Bara Harum - Indonesia
- LBH Netherlands Bv - Netherlands
- Siam City Cement - Thailand
- OPG Power Generation Pvt Ltd - India
- Attock Cement Pakistan Limited
- Pendopo Energi Batubara - Indonesia
- Energy Development Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
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