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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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Tuesday, 17 January 23
CHINA'S SHANXI TARGETS 2023 COAL PRODUCTION OF NEARLY 1.37B TONS - XINHUA
China’s coal-rich province of Shanxi has set a coal production target of nearly 1.37 billion metric tons for 2023, according to a government ...
Tuesday, 17 January 23
MARKET INSIGHT - INTERMODAL
Rumor has it that the New Year has come, to set the pace in, for Russia to continue hostilities against Ukraine. Ten months on the go, into Russia& ...
Tuesday, 17 January 23
INDONESIA IS ACCOUNTING FOR 32.3% OF THE GLOBAL SEABORNE COAL MARKET IN 2022 - BENCHERO 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, Benchero ...
Tuesday, 10 January 23
INDONESIAN HBA IS SEEING A SPIKE IN JANUARY 2023 INSTEAD OF A SIGNIFICANT FALL IN DECEMBER 2022
COALspot.com: Indonesian Coal Price Reference up 8.43% in January 2023.
HBA is seeing a dramatic spike in January 2023 i ...
Sunday, 08 January 23
INDIAN COAL POWER PLANTS SHOULD BE COMPENSATED FOR 2022 FORCED GENERATION – REGULATOR : REUTERS
Indian power plants that rely on imported coal should be fully compensated when forced to supply electricity, the country’s power regulator s ...
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- Siam City Cement - Thailand
- Larsen & Toubro Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Carbofer General Trading SA - India
- Iligan Light & Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Vizag Seaport Private Limited - India
- Global Coal Blending Company Limited - Australia
- Agrawal Coal Company - India
- Kobexindo Tractors - Indoneisa
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- Directorate Of Revenue Intelligence - India
- Siam City Cement PLC, Thailand
- Ministry of Mines - Canada
- Sinarmas Energy and Mining - Indonesia
- SMG Consultants - Indonesia
- The State Trading Corporation of India Ltd
- GN Power Mariveles Coal Plant, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Romanian Commodities Exchange
- Bahari Cakrawala Sebuku - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- PTC India Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Australian Commodity Traders Exchange
- Kalimantan Lumbung Energi - Indonesia
- Xindia Steels Limited - India
- Malabar Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- Bhatia International Limited - India
- Economic Council, Georgia
- Edison Trading Spa - Italy
- Bayan Resources Tbk. - Indonesia
- Altura Mining Limited, Indonesia
- Kumho Petrochemical, South Korea
- Aditya Birla Group - India
- IEA Clean Coal Centre - UK
- Banpu Public Company Limited - Thailand
- Marubeni Corporation - India
- Mintek Dendrill Indonesia
- Tata Chemicals Ltd - India
- Renaissance Capital - South Africa
- Orica Mining Services - Indonesia
- Chamber of Mines of South Africa
- Borneo Indobara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Straits Asia Resources Limited - Singapore
- Star Paper Mills Limited - India
- GMR Energy Limited - India
- VISA Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Eastern Energy - Thailand
- Sarangani Energy Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Indika Energy - Indonesia
- Posco Energy - South Korea
- Independent Power Producers Association of India
- Madhucon Powers Ltd - India
- Bhushan Steel Limited - India
- PNOC Exploration Corporation - Philippines
- Coalindo Energy - Indonesia
- Petron Corporation, Philippines
- Orica Australia Pty. Ltd.
- McConnell Dowell - Australia
- Vedanta Resources Plc - India
- ASAPP Information Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kaltim Prima Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- Sree Jayajothi Cements Limited - India
- Lanco Infratech Ltd - India
- Thiess Contractors Indonesia
- Mjunction Services Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Bhoruka Overseas - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Standard Chartered Bank - UAE
- Karaikal Port Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- AsiaOL BioFuels Corp., Philippines
- TeaM Sual Corporation - Philippines
- Coastal Gujarat Power Limited - India
- MS Steel International - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Tamil Nadu electricity Board
- Minerals Council of Australia
- Antam Resourcindo - Indonesia
- Ministry of Finance - Indonesia
- Merrill Lynch Commodities Europe
- Eastern Coal Council - USA
- Semirara Mining Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Pendopo Energi Batubara - Indonesia
- Globalindo Alam Lestari - Indonesia
- Dalmia Cement Bharat India
- Rio Tinto Coal - Australia
- Videocon Industries ltd - India
- Bulk Trading Sa - Switzerland
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Anglo American - United Kingdom
- Grasim Industreis Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Latin American Coal - Colombia
- Electricity Generating Authority of Thailand
- Interocean Group of Companies - India
- Maheswari Brothers Coal Limited - India
- ICICI Bank Limited - India
- CIMB Investment Bank - Malaysia
- Singapore Mercantile Exchange
- Planning Commission, India
- Commonwealth Bank - Australia
- Indo Tambangraya Megah - Indonesia
- Sojitz Corporation - Japan
- Baramulti Group, Indonesia
- Mercuria Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Sidhee Cement - India
- Attock Cement Pakistan Limited
- Makarim & Taira - Indonesia
- Goldman Sachs - Singapore
- Africa Commodities Group - South Africa
- Wilmar Investment Holdings
- Indian Oil Corporation Limited
- Coal and Oil Company - UAE
- Krishnapatnam Port Company Ltd. - India
- Alfred C Toepfer International GmbH - Germany
- Toyota Tsusho Corporation, Japan
- Central Electricity Authority - India
- White Energy Company Limited
- Metalloyd Limited - United Kingdom
- European Bulk Services B.V. - Netherlands
- Global Business Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Neyveli Lignite Corporation Ltd, - India
- Savvy Resources Ltd - HongKong
- Sindya Power Generating Company Private Ltd
- Wood Mackenzie - Singapore
- Ceylon Electricity Board - Sri Lanka
- Energy Link Ltd, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- GAC Shipping (India) Pvt Ltd
- Ambuja Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- IHS Mccloskey Coal Group - USA
- Simpson Spence & Young - Indonesia
- Price Waterhouse Coopers - Russia
- Meralco Power Generation, Philippines
- PowerSource Philippines DevCo
- Maharashtra Electricity Regulatory Commission - India
- Thai Mozambique Logistica
- SMC Global Power, Philippines
- Salva Resources Pvt Ltd - India
- The University of Queensland
- Port Waratah Coal Services - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sical Logistics Limited - India
- Leighton Contractors Pty Ltd - Australia
- Energy Development Corp, Philippines
- Uttam Galva Steels Limited - India
- Therma Luzon, Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- SN Aboitiz Power Inc, Philippines
- Electricity Authority, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- CNBM International Corporation - China
- Indian Energy Exchange, India
- Parry Sugars Refinery, India
- Gujarat Mineral Development Corp Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Billiton Holdings Pty Ltd - Australia
- India Bulls Power Limited - India
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- Jindal Steel & Power Ltd - India
- The Treasury - Australian Government
- International Coal Ventures Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Bangladesh Power Developement Board
- London Commodity Brokers - England
- Bharathi Cement Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- Georgia Ports Authority, United States
- Deloitte Consulting - India
- New Zealand Coal & Carbon
- Parliament of New Zealand
- Semirara Mining and Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Indogreen Group - Indonesia
- Kepco SPC Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Central Java Power - Indonesia
- Oldendorff Carriers - Singapore
- LBH Netherlands Bv - Netherlands
- Bukit Makmur.PT - Indonesia
- Cement Manufacturers Association - India
- Meenaskhi Energy Private Limited - India
- GVK Power & Infra Limited - India
- Australian Coal Association
- Medco Energi Mining Internasional
- Essar Steel Hazira Ltd - India
- Formosa Plastics Group - Taiwan
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