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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, 08 January 23
ELEVATED COAL PRICE A DRAG ON MARGINS OF DOMESTIC BASE METAL PLAYERS: ICRA
The increased price of coal continue to be a drag on the margin of domestic base metal players with no immediate relief in sight, rating agency ICR ...
Monday, 02 January 23
CHINA’S COAL CONSUMPTION TO PEAK BY 2035: REPORT - REUTERS
China’s primary energy consumption is likely to peak at nearly 6.03 billion tonnes of standard coal between 2030 and 2035, refining giant Chi ...
Thursday, 29 December 22
INDIA'S COAL DEMAND LIKELY TO PEAK BETWEEN 2030-2035: MINISTER - ANI
The demand for coal in India will continue and is likely to peak between 2030-2035, Union Minister of Coal, Mines, and Parliamentary Affairs Pralha ...
Thursday, 29 December 22
RIO TINTO AND PARTNERS COULD RECEIVE AS MUCH AS $450M IN GOVERNMENT COMPENSATION FOR COAL PRICE CAP - THE GUARDIAN
Compensation payments for the Gladstone power plant remain the sticking point in the federal government’s coal price cap compensation negotia ...
Wednesday, 28 December 22
MARKET INSIGHT - INTERMODAL
The United Nations Conference on Trade and Development (UNCTAD) published a Global Trade Update on December 13th highlighting that global trade wou ...
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- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
- New Zealand Coal & Carbon
- Simpson Spence & Young - Indonesia
- Therma Luzon, Inc, Philippines
- Wood Mackenzie - Singapore
- Straits Asia Resources Limited - Singapore
- Star Paper Mills Limited - India
- Riau Bara Harum - Indonesia
- Bayan Resources Tbk. - Indonesia
- Rio Tinto Coal - Australia
- Mercator Lines Limited - India
- Coalindo Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- San Jose City I Power Corp, Philippines
- Formosa Plastics Group - Taiwan
- Port Waratah Coal Services - Australia
- Electricity Authority, New Zealand
- Kartika Selabumi Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Goldman Sachs - Singapore
- London Commodity Brokers - England
- Indika Energy - Indonesia
- Thiess Contractors Indonesia
- Independent Power Producers Association of India
- Lanco Infratech Ltd - India
- Oldendorff Carriers - Singapore
- Videocon Industries ltd - India
- Planning Commission, India
- McConnell Dowell - Australia
- Vedanta Resources Plc - India
- India Bulls Power Limited - India
- Directorate Of Revenue Intelligence - India
- SMG Consultants - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Mines - Canada
- Kohat Cement Company Ltd. - Pakistan
- Georgia Ports Authority, United States
- Kaltim Prima Coal - Indonesia
- Electricity Generating Authority of Thailand
- Kalimantan Lumbung Energi - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Merrill Lynch Commodities Europe
- Uttam Galva Steels Limited - India
- PNOC Exploration Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Energy - Thailand
- Energy Link Ltd, New Zealand
- Kumho Petrochemical, South Korea
- SMC Global Power, Philippines
- VISA Power Limited - India
- Aditya Birla Group - India
- South Luzon Thermal Energy Corporation
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Parry Sugars Refinery, India
- Asmin Koalindo Tuhup - Indonesia
- Makarim & Taira - Indonesia
- Eastern Coal Council - USA
- Global Coal Blending Company Limited - Australia
- White Energy Company Limited
- Ministry of Finance - Indonesia
- Indian Energy Exchange, India
- Ind-Barath Power Infra Limited - India
- Sical Logistics Limited - India
- Bhoruka Overseas - Indonesia
- Bulk Trading Sa - Switzerland
- Gujarat Mineral Development Corp Ltd - India
- GMR Energy Limited - India
- Cement Manufacturers Association - India
- Iligan Light & Power Inc, Philippines
- Orica Mining Services - Indonesia
- Edison Trading Spa - Italy
- PowerSource Philippines DevCo
- Semirara Mining Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- European Bulk Services B.V. - Netherlands
- Sarangani Energy Corporation, Philippines
- MS Steel International - UAE
- Sakthi Sugars Limited - India
- Metalloyd Limited - United Kingdom
- Indogreen Group - Indonesia
- Indian Oil Corporation Limited
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- GAC Shipping (India) Pvt Ltd
- Meralco Power Generation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Gujarat Sidhee Cement - India
- Parliament of New Zealand
- Ambuja Cements Ltd - India
- IEA Clean Coal Centre - UK
- Mintek Dendrill Indonesia
- Australian Coal Association
- Bharathi Cement Corporation - India
- TNB Fuel Sdn Bhd - Malaysia
- Ceylon Electricity Board - Sri Lanka
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining and Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Baramulti Group, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- LBH Netherlands Bv - Netherlands
- Chamber of Mines of South Africa
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Africa Commodities Group - South Africa
- Leighton Contractors Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Marubeni Corporation - India
- Intertek Mineral Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Timah Investasi Mineral - Indoneisa
- Borneo Indobara - Indonesia
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Baiduri Energy - Indonesia
- Xindia Steels Limited - India
- PTC India Limited - India
- International Coal Ventures Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Economic Council, Georgia
- Jindal Steel & Power Ltd - India
- Interocean Group of Companies - India
- Cigading International Bulk Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- GVK Power & Infra Limited - India
- Orica Australia Pty. Ltd.
- Petron Corporation, Philippines
- Heidelberg Cement - Germany
- Thai Mozambique Logistica
- Toyota Tsusho Corporation, Japan
- Madhucon Powers Ltd - India
- Ministry of Transport, Egypt
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Meenaskhi Energy Private Limited - India
- Altura Mining Limited, Indonesia
- Samtan Co., Ltd - South Korea
- Australian Commodity Traders Exchange
- The State Trading Corporation of India Ltd
- Wilmar Investment Holdings
- The Treasury - Australian Government
- Barasentosa Lestari - Indonesia
- Central Electricity Authority - India
- Trasteel International SA, Italy
- Salva Resources Pvt Ltd - India
- Standard Chartered Bank - UAE
- Coal and Oil Company - UAE
- Miang Besar Coal Terminal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Grasim Industreis Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Posco Energy - South Korea
- Minerals Council of Australia
- Malabar Cements Ltd - India
- Bangladesh Power Developement Board
- Price Waterhouse Coopers - Russia
- ICICI Bank Limited - India
- Bhushan Steel Limited - India
- Agrawal Coal Company - India
- IHS Mccloskey Coal Group - USA
- Anglo American - United Kingdom
- Jorong Barutama Greston.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kepco SPC Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- Vizag Seaport Private Limited - India
- Latin American Coal - Colombia
- Savvy Resources Ltd - HongKong
- Essar Steel Hazira Ltd - India
- Siam City Cement - Thailand
- Sojitz Corporation - Japan
- Singapore Mercantile Exchange
- The University of Queensland
- AsiaOL BioFuels Corp., Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- Maheswari Brothers Coal Limited - India
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- Bahari Cakrawala Sebuku - Indonesia
- Romanian Commodities Exchange
- CNBM International Corporation - China
- Bhatia International Limited - India
- Binh Thuan Hamico - Vietnam
- Commonwealth Bank - Australia
- Antam Resourcindo - Indonesia
- Jaiprakash Power Ventures ltd
- Medco Energi Mining Internasional
- Power Finance Corporation Ltd., India
- Mjunction Services Limited - India
- SN Aboitiz Power Inc, Philippines
- Central Java Power - Indonesia
- Energy Development Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- Larsen & Toubro Limited - India
- PetroVietnam Power Coal Import and Supply Company
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