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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, 26 February 23
MAWANI AND JEDDAH CHAMBER SIGN AN AGREEMENT TO BUILD INTEGRATED LOGISTICS PARK
Press Release: The Saudi Ports Authority (Mawani) and Jeddah Chamber of Commerce and Industry have today inked an agreement to set up an integrated ...
Saturday, 25 February 23
INDONESIA IS STILL BY FAR THE TOP SUPPLIER OF COAL TO CHINA - 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, said ban ...
Wednesday, 22 February 23
MARKET INSIGHT - INTERMODAL
The short-term outlook of the global soybean market is currently pivoted by a combination of weather patterns that are affecting the harvest progre ...
Saturday, 18 February 23
OIL UNLIKELY TO BREAK ABOVE $100/BBL THIS YEAR, J.P.MORGAN SAYS –- REUTERS
Brent oil prices are unlikely to breach the $100 a barrel level this year, barring any significant geopolitical drivers, with OPEC+ potentially add ...
Saturday, 18 February 23
CHINA'S COAL PRICES FALL TO 1 YR-LOW, CLOUDING DEMAND AND IMPORT OUTLOOK - REUTERS
China’s thermal coal prices hit their lowest levels in a year this week on rising inventories as domestic mine production is recovering faste ...
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- Wilmar Investment Holdings
- VISA Power Limited - India
- LBH Netherlands Bv - Netherlands
- Alfred C Toepfer International GmbH - Germany
- Aboitiz Power Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- SN Aboitiz Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Bharathi Cement Corporation - India
- Maheswari Brothers Coal Limited - India
- Indian Energy Exchange, India
- Indo Tambangraya Megah - Indonesia
- Eastern Energy - Thailand
- Eastern Coal Council - USA
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aditya Birla Group - India
- Ceylon Electricity Board - Sri Lanka
- SMC Global Power, Philippines
- Meenaskhi Energy Private Limited - India
- The University of Queensland
- Mercator Lines Limited - India
- Bukit Baiduri Energy - Indonesia
- Meralco Power Generation, Philippines
- European Bulk Services B.V. - Netherlands
- Edison Trading Spa - Italy
- Singapore Mercantile Exchange
- Directorate General of MIneral and Coal - Indonesia
- Anglo American - United Kingdom
- ICICI Bank Limited - India
- Rio Tinto Coal - Australia
- GVK Power & Infra Limited - India
- Savvy Resources Ltd - HongKong
- Indian Oil Corporation Limited
- Electricity Generating Authority of Thailand
- Samtan Co., Ltd - South Korea
- Parry Sugars Refinery, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Electricity Regulatory Commission - India
- Petrochimia International Co. Ltd.- Taiwan
- Rashtriya Ispat Nigam Limited - India
- Holcim Trading Pte Ltd - Singapore
- Videocon Industries ltd - India
- Medco Energi Mining Internasional
- Deloitte Consulting - India
- Bayan Resources Tbk. - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Malabar Cements Ltd - India
- Orica Australia Pty. Ltd.
- Neyveli Lignite Corporation Ltd, - India
- Sree Jayajothi Cements Limited - India
- Siam City Cement - Thailand
- AsiaOL BioFuels Corp., Philippines
- Ministry of Mines - Canada
- Bank of Tokyo Mitsubishi UFJ Ltd
- Romanian Commodities Exchange
- Thai Mozambique Logistica
- Gujarat Mineral Development Corp Ltd - India
- Indonesian Coal Mining Association
- Cement Manufacturers Association - India
- Central Java Power - Indonesia
- South Luzon Thermal Energy Corporation
- Bahari Cakrawala Sebuku - Indonesia
- Grasim Industreis Ltd - India
- Kaltim Prima Coal - Indonesia
- Altura Mining Limited, Indonesia
- Intertek Mineral Services - Indonesia
- India Bulls Power Limited - India
- Africa Commodities Group - South Africa
- Coal and Oil Company - UAE
- Posco Energy - South Korea
- Agrawal Coal Company - India
- PNOC Exploration Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Kepco SPC Power Corporation, Philippines
- Sical Logistics Limited - India
- Heidelberg Cement - Germany
- Coalindo Energy - Indonesia
- Renaissance Capital - South Africa
- Goldman Sachs - Singapore
- Salva Resources Pvt Ltd - India
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Jaiprakash Power Ventures ltd
- Mjunction Services Limited - India
- Straits Asia Resources Limited - Singapore
- Oldendorff Carriers - Singapore
- Leighton Contractors Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- Maharashtra Electricity Regulatory Commission - India
- Essar Steel Hazira Ltd - India
- Kideco Jaya Agung - Indonesia
- Electricity Authority, New Zealand
- Vizag Seaport Private Limited - India
- Commonwealth Bank - Australia
- Chamber of Mines of South Africa
- Metalloyd Limited - United Kingdom
- The Treasury - Australian Government
- Gujarat Sidhee Cement - India
- GN Power Mariveles Coal Plant, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- Makarim & Taira - Indonesia
- Latin American Coal - Colombia
- Standard Chartered Bank - UAE
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- White Energy Company Limited
- Trasteel International SA, Italy
- Dalmia Cement Bharat India
- Thiess Contractors Indonesia
- Ind-Barath Power Infra Limited - India
- Semirara Mining Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Coastal Gujarat Power Limited - India
- Larsen & Toubro Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Star Paper Mills Limited - India
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Energy Link Ltd, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- San Jose City I Power Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- PTC India Limited - India
- Bhatia International Limited - India
- Petron Corporation, Philippines
- Riau Bara Harum - Indonesia
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- New Zealand Coal & Carbon
- IEA Clean Coal Centre - UK
- Kobexindo Tractors - Indoneisa
- The State Trading Corporation of India Ltd
- Sarangani Energy Corporation, Philippines
- Ambuja Cements Ltd - India
- Interocean Group of Companies - India
- Australian Commodity Traders Exchange
- Sakthi Sugars Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Vedanta Resources Plc - India
- McConnell Dowell - Australia
- PowerSource Philippines DevCo
- Attock Cement Pakistan Limited
- Iligan Light & Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Energy Development Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Bangladesh Power Developement Board
- Jindal Steel & Power Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Kapuas Tunggal Persada - Indonesia
- Kumho Petrochemical, South Korea
- Directorate Of Revenue Intelligence - India
- Manunggal Multi Energi - Indonesia
- ASAPP Information Group - India
- Carbofer General Trading SA - India
- Madhucon Powers Ltd - India
- Georgia Ports Authority, United States
- Independent Power Producers Association of India
- Karaikal Port Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Miang Besar Coal Terminal - Indonesia
- MS Steel International - UAE
- SMG Consultants - Indonesia
- Timah Investasi Mineral - Indoneisa
- Formosa Plastics Group - Taiwan
- Ministry of Transport, Egypt
- Bukit Makmur.PT - Indonesia
- Marubeni Corporation - India
- Bhushan Steel Limited - India
- Port Waratah Coal Services - Australia
- Economic Council, Georgia
- Australian Coal Association
- Bulk Trading Sa - Switzerland
- IHS Mccloskey Coal Group - USA
- Mercuria Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- Parliament of New Zealand
- Ministry of Finance - Indonesia
- Global Green Power PLC Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- Tata Chemicals Ltd - India
- Minerals Council of Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CNBM International Corporation - China
- TeaM Sual Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Indogreen Group - Indonesia
- Bhoruka Overseas - Indonesia
- Simpson Spence & Young - Indonesia
- GMR Energy Limited - India
- Planning Commission, India
- Sojitz Corporation - Japan
- Orica Mining Services - Indonesia
- London Commodity Brokers - England
- Mintek Dendrill Indonesia
- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
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