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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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Monday, 19 December 22
ENERGY CRISIS FUELS COAL COMEBACK IN GERMANY - REUTERS
Coal has made a comeback in Germany this year, as Europe’s largest economy turns to the dirty fuel to power it through an energy crisis.
...
Thursday, 15 December 22
MARKET INSIGHT - INTERMODAL
While observing the ship repair market very close to the end of the year, we are confident that shipyards worldwide are entering a new era. The nex ...
Tuesday, 13 December 22
STRONG COAL PRICES SUPPORT ROBUST EARNINGS AT INDONESIAN COAL MINERS - FITCH RATINGS
Fitch Ratings expects cash flow generation at Indonesian coal miners to remain strong in 2023, based on its forecast for coal prices to remain high ...
Tuesday, 13 December 22
BIMCO CII CLAUSE FINALLY RELEASED: DOES IT MAKE ANY SENSE OF CCI? - WFW
WHAT IS CII?
The new International Maritime Organisation’s (“IMO’s”) Carbon Intensity Indicator (“CII”) cer ...
Tuesday, 13 December 22
COAL BASE RAMPS UP ENERGY SUPPLY FOR WINTER NEEDS - XINHUA
Inner Mongolia Autonomous Region, China’s leading coal production base, has kicked its production into high gear to meet heating needs as col ...
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- TNB Fuel Sdn Bhd - Malaysia
- McConnell Dowell - Australia
- PTC India Limited - India
- Vizag Seaport Private Limited - India
- Coastal Gujarat Power Limited - India
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Indian Oil Corporation Limited
- Bukit Baiduri Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- SN Aboitiz Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Borneo Indobara - Indonesia
- Merrill Lynch Commodities Europe
- Parry Sugars Refinery, India
- Port Waratah Coal Services - Australia
- Bhatia International Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Edison Trading Spa - Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Xindia Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Binh Thuan Hamico - Vietnam
- Posco Energy - South Korea
- Global Coal Blending Company Limited - Australia
- CNBM International Corporation - China
- Kapuas Tunggal Persada - Indonesia
- Ind-Barath Power Infra Limited - India
- Metalloyd Limited - United Kingdom
- Salva Resources Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Iligan Light & Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- PowerSource Philippines DevCo
- Jaiprakash Power Ventures ltd
- Semirara Mining Corp, Philippines
- Gujarat Sidhee Cement - India
- Sarangani Energy Corporation, Philippines
- Thai Mozambique Logistica
- Bhushan Steel Limited - India
- OPG Power Generation Pvt Ltd - India
- India Bulls Power Limited - India
- Lanco Infratech Ltd - India
- Planning Commission, India
- Samtan Co., Ltd - South Korea
- Jorong Barutama Greston.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- Karbindo Abesyapradhi - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- Deloitte Consulting - India
- Indogreen Group - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Global Green Power PLC Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Sree Jayajothi Cements Limited - India
- Coalindo Energy - Indonesia
- Orica Mining Services - Indonesia
- ASAPP Information Group - India
- CIMB Investment Bank - Malaysia
- Bangladesh Power Developement Board
- IEA Clean Coal Centre - UK
- Karaikal Port Pvt Ltd - India
- ICICI Bank Limited - India
- Singapore Mercantile Exchange
- Kepco SPC Power Corporation, Philippines
- Eastern Coal Council - USA
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- Bayan Resources Tbk. - Indonesia
- SMG Consultants - Indonesia
- Indo Tambangraya Megah - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Manunggal Multi Energi - Indonesia
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Transport, Egypt
- Orica Australia Pty. Ltd.
- Thiess Contractors Indonesia
- Intertek Mineral Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Tamil Nadu electricity Board
- Riau Bara Harum - Indonesia
- Kaltim Prima Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Energy Link Ltd, New Zealand
- Price Waterhouse Coopers - Russia
- Australian Coal Association
- GAC Shipping (India) Pvt Ltd
- Chamber of Mines of South Africa
- Leighton Contractors Pty Ltd - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cement Manufacturers Association - India
- Essar Steel Hazira Ltd - India
- Heidelberg Cement - Germany
- Ambuja Cements Ltd - India
- Energy Development Corp, Philippines
- Bhoruka Overseas - Indonesia
- IHS Mccloskey Coal Group - USA
- Savvy Resources Ltd - HongKong
- Mintek Dendrill Indonesia
- Meenaskhi Energy Private Limited - India
- AsiaOL BioFuels Corp., Philippines
- LBH Netherlands Bv - Netherlands
- Power Finance Corporation Ltd., India
- Carbofer General Trading SA - India
- GVK Power & Infra Limited - India
- Bulk Trading Sa - Switzerland
- Africa Commodities Group - South Africa
- Oldendorff Carriers - Singapore
- Grasim Industreis Ltd - India
- Wood Mackenzie - Singapore
- European Bulk Services B.V. - Netherlands
- GN Power Mariveles Coal Plant, Philippines
- The Treasury - Australian Government
- Interocean Group of Companies - India
- Kideco Jaya Agung - Indonesia
- International Coal Ventures Pvt Ltd - India
- Electricity Authority, New Zealand
- Anglo American - United Kingdom
- Holcim Trading Pte Ltd - Singapore
- Maheswari Brothers Coal Limited - India
- Formosa Plastics Group - Taiwan
- Aditya Birla Group - India
- Vedanta Resources Plc - India
- Sojitz Corporation - Japan
- Asmin Koalindo Tuhup - Indonesia
- Marubeni Corporation - India
- Madhucon Powers Ltd - India
- Bharathi Cement Corporation - India
- PNOC Exploration Corporation - Philippines
- Central Electricity Authority - India
- Medco Energi Mining Internasional
- Wilmar Investment Holdings
- Aboitiz Power Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- Chettinad Cement Corporation Ltd - India
- White Energy Company Limited
- Mjunction Services Limited - India
- Cigading International Bulk Terminal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Economic Council, Georgia
- The State Trading Corporation of India Ltd
- Romanian Commodities Exchange
- Indika Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Globalindo Alam Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Australian Commodity Traders Exchange
- Siam City Cement PLC, Thailand
- Coal and Oil Company - UAE
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- Commonwealth Bank - Australia
- Directorate Of Revenue Intelligence - India
- Trasteel International SA, Italy
- Renaissance Capital - South Africa
- London Commodity Brokers - England
- Toyota Tsusho Corporation, Japan
- The University of Queensland
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- Mercuria Energy - Indonesia
- Meralco Power Generation, Philippines
- Ministry of Finance - Indonesia
- Latin American Coal - Colombia
- Central Java Power - Indonesia
- Independent Power Producers Association of India
- Georgia Ports Authority, United States
- Baramulti Group, Indonesia
- Altura Mining Limited, Indonesia
- Kumho Petrochemical, South Korea
- Agrawal Coal Company - India
- Eastern Energy - Thailand
- Indonesian Coal Mining Association
- Makarim & Taira - Indonesia
- Parliament of New Zealand
- Billiton Holdings Pty Ltd - Australia
- VISA Power Limited - India
- Antam Resourcindo - Indonesia
- Ministry of Mines - Canada
- Bahari Cakrawala Sebuku - Indonesia
- Therma Luzon, Inc, Philippines
- Siam City Cement - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GMR Energy Limited - India
- Neyveli Lignite Corporation Ltd, - India
- SMC Global Power, Philippines
- Goldman Sachs - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Tata Chemicals Ltd - India
- Attock Cement Pakistan Limited
- Rio Tinto Coal - Australia
- Standard Chartered Bank - UAE
- Petron Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Mercator Lines Limited - India
- New Zealand Coal & Carbon
- Gujarat Mineral Development Corp Ltd - India
- Electricity Generating Authority of Thailand
- Miang Besar Coal Terminal - Indonesia
- Global Business Power Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- MS Steel International - UAE
- TeaM Sual Corporation - Philippines
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