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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 February 23
PAKISTAN PLANS TO QUADRUPLE DOMESTIC COAL-FIRED POWER, MOVE AWAY FROM GAS - REUTERS
Pakistan plans to quadruple its domestic coal-fired capacity to reduce power generation costs and will not build new gas-fired plants in the coming ...
Saturday, 18 February 23
2023 MARINE FUEL MARKET PREDICTIONS - JOHN BERGMAN, AURAMARINE
The drive for decarbonisation we witnessed in 2022 has continued into 2023, demonstrating the shipping’s industry positive strides in the fas ...
Saturday, 28 January 23
COAL GROWTH BLIP NOT TO BE REPEATED - BALTIC EXCHANGE
As 2022 drew to a close, global coal demand looked set to end the year just 1.2% up on the previous year. But that small increase was enough to pus ...
Thursday, 26 January 23
CHINA'S COAL OUTPUT INCREASES IN DECEMBER 2022 - XINHUA
China’s raw coal output posted stable expansion in December 2022, official data showed.
The country produced 400 million tonne ...
Thursday, 26 January 23
COKING COAL NARROWS THE GAP ON THERMAL AS CHINA REOPENS - REUTERS
The premium of high-grade thermal coal over coking coal in Asia is shrinking as China’s re-opening and ending of a ban on imports from Austra ...
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- Bangladesh Power Developement Board
- Samtan Co., Ltd - South Korea
- Indika Energy - Indonesia
- Energy Link Ltd, New Zealand
- Sojitz Corporation - Japan
- Sakthi Sugars Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Siam City Cement - Thailand
- Chettinad Cement Corporation Ltd - India
- Wilmar Investment Holdings
- Savvy Resources Ltd - HongKong
- Gujarat Electricity Regulatory Commission - India
- Timah Investasi Mineral - Indoneisa
- White Energy Company Limited
- Pipit Mutiara Jaya. PT, Indonesia
- Medco Energi Mining Internasional
- Trasteel International SA, Italy
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Power Finance Corporation Ltd., India
- Global Coal Blending Company Limited - Australia
- Ceylon Electricity Board - Sri Lanka
- SN Aboitiz Power Inc, Philippines
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- CNBM International Corporation - China
- GVK Power & Infra Limited - India
- Kobexindo Tractors - Indoneisa
- Straits Asia Resources Limited - Singapore
- Makarim & Taira - Indonesia
- Formosa Plastics Group - Taiwan
- Indo Tambangraya Megah - Indonesia
- India Bulls Power Limited - India
- Meenaskhi Energy Private Limited - India
- Kideco Jaya Agung - Indonesia
- Eastern Coal Council - USA
- Independent Power Producers Association of India
- Cement Manufacturers Association - India
- Deloitte Consulting - India
- Sical Logistics Limited - India
- Bukit Baiduri Energy - Indonesia
- Attock Cement Pakistan Limited
- Romanian Commodities Exchange
- Aditya Birla Group - India
- Ministry of Mines - Canada
- Antam Resourcindo - Indonesia
- Bharathi Cement Corporation - India
- Goldman Sachs - Singapore
- Vedanta Resources Plc - India
- Rio Tinto Coal - Australia
- Star Paper Mills Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Kumho Petrochemical, South Korea
- SMC Global Power, Philippines
- Coal and Oil Company - UAE
- Bhushan Steel Limited - India
- Coalindo Energy - Indonesia
- Dalmia Cement Bharat India
- Sinarmas Energy and Mining - Indonesia
- Vizag Seaport Private Limited - India
- Petron Corporation, Philippines
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- PTC India Limited - India
- Africa Commodities Group - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Electricity Authority, New Zealand
- Posco Energy - South Korea
- Bulk Trading Sa - Switzerland
- Manunggal Multi Energi - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Semirara Mining and Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Bukit Makmur.PT - Indonesia
- Ministry of Finance - Indonesia
- Borneo Indobara - Indonesia
- Altura Mining Limited, Indonesia
- Merrill Lynch Commodities Europe
- Commonwealth Bank - Australia
- Videocon Industries ltd - India
- South Luzon Thermal Energy Corporation
- ASAPP Information Group - India
- Mintek Dendrill Indonesia
- Gujarat Sidhee Cement - India
- International Coal Ventures Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Semirara Mining Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Malabar Cements Ltd - India
- Edison Trading Spa - Italy
- Ambuja Cements Ltd - India
- Madhucon Powers Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Sindya Power Generating Company Private Ltd
- Alfred C Toepfer International GmbH - Germany
- Globalindo Alam Lestari - Indonesia
- Minerals Council of Australia
- Central Java Power - Indonesia
- Renaissance Capital - South Africa
- Essar Steel Hazira Ltd - India
- Indogreen Group - Indonesia
- SMG Consultants - Indonesia
- Intertek Mineral Services - Indonesia
- Latin American Coal - Colombia
- Petrochimia International Co. Ltd.- Taiwan
- Australian Coal Association
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Planning Commission, India
- Meralco Power Generation, Philippines
- Price Waterhouse Coopers - Russia
- Karbindo Abesyapradhi - Indoneisa
- The Treasury - Australian Government
- Heidelberg Cement - Germany
- PetroVietnam Power Coal Import and Supply Company
- Banpu Public Company Limited - Thailand
- Indian Energy Exchange, India
- Marubeni Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Uttam Galva Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- Thiess Contractors Indonesia
- GAC Shipping (India) Pvt Ltd
- Ministry of Transport, Egypt
- Bayan Resources Tbk. - Indonesia
- PowerSource Philippines DevCo
- TeaM Sual Corporation - Philippines
- Georgia Ports Authority, United States
- TNB Fuel Sdn Bhd - Malaysia
- Orica Mining Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- AsiaOL BioFuels Corp., Philippines
- Global Business Power Corporation, Philippines
- MS Steel International - UAE
- Therma Luzon, Inc, Philippines
- Parry Sugars Refinery, India
- Interocean Group of Companies - India
- Tata Chemicals Ltd - India
- ICICI Bank Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Standard Chartered Bank - UAE
- Mercuria Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Larsen & Toubro Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Grasim Industreis Ltd - India
- London Commodity Brokers - England
- Riau Bara Harum - Indonesia
- Aboitiz Power Corporation - Philippines
- Chamber of Mines of South Africa
- Maheswari Brothers Coal Limited - India
- Binh Thuan Hamico - Vietnam
- Mjunction Services Limited - India
- LBH Netherlands Bv - Netherlands
- Karaikal Port Pvt Ltd - India
- Energy Development Corp, Philippines
- Orica Australia Pty. Ltd.
- Bhoruka Overseas - Indonesia
- Jaiprakash Power Ventures ltd
- Port Waratah Coal Services - Australia
- PNOC Exploration Corporation - Philippines
- Central Electricity Authority - India
- Indian Oil Corporation Limited
- Parliament of New Zealand
- Leighton Contractors Pty Ltd - Australia
- Anglo American - United Kingdom
- Simpson Spence & Young - Indonesia
- Pendopo Energi Batubara - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CIMB Investment Bank - Malaysia
- Xindia Steels Limited - India
- New Zealand Coal & Carbon
- Kalimantan Lumbung Energi - Indonesia
- Wood Mackenzie - Singapore
- Barasentosa Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Tamil Nadu electricity Board
- Agrawal Coal Company - India
- Miang Besar Coal Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Lanco Infratech Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Baramulti Group, Indonesia
- Bhatia International Limited - India
- Iligan Light & Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- Siam City Cement PLC, Thailand
- Gujarat Mineral Development Corp Ltd - India
- The University of Queensland
- Kaltim Prima Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Carbofer General Trading SA - India
- Sarangani Energy Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Salva Resources Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Oldendorff Carriers - Singapore
- Krishnapatnam Port Company Ltd. - India
- Eastern Energy - Thailand
- Mercator Lines Limited - India
- Singapore Mercantile Exchange
- McConnell Dowell - Australia
- Cigading International Bulk Terminal - Indonesia
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