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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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Wednesday, 07 December 22
MARKET INSIGHT - INTERMODAL
China’s coal imports from January to October were 230.1m mt, a decrease of around 10.7% y-o-y (2021 totalled 323.2m mt). The question is if t ...
Wednesday, 07 December 22
INDIA'S STEEL MINISTRY SEEKS IMPORT TAX WAIVER FOR COKING COAL - SOURCES REUTERS REPORTED
India’s steel ministry has asked the finance ministry for a waiver of import tax on coking coal among a slew of raw materials, as it scramble ...
Tuesday, 06 December 22
INDIA'S COAL PRODUCTION RISES 17% IN APR-NOV PERIOD - PTI
The country’s coal production increased 17 per cent to 524.20 million tonnes in the April-November period of the ongoing fiscal.
...
Tuesday, 06 December 22
INDONESIA AIMS TO STARTS COLLECTING COAL LEVY IN Q1 2023 - MINISTER, REUTERS REPORTED
Indonesia aims to establish a coal fund agency and start collecting a coal levy in the first quarter next year, to help ensure supply security for ...
Saturday, 03 December 22
COMPLEX RUSSIAN PRICE CAP MAKES MARITIME VISIBILITY A MUST - WINDWARD
Many commentators and analysts are speculating about the potential impact the Russian seaborne oil price cap will have on organizations and entitie ...
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- Directorate General of MIneral and Coal - Indonesia
- GVK Power & Infra Limited - India
- Indo Tambangraya Megah - Indonesia
- OPG Power Generation Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Minerals Council of Australia
- Latin American Coal - Colombia
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indogreen Group - Indonesia
- Central Java Power - Indonesia
- Eastern Coal Council - USA
- Straits Asia Resources Limited - Singapore
- Mercator Lines Limited - India
- Anglo American - United Kingdom
- Agrawal Coal Company - India
- Australian Coal Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kumho Petrochemical, South Korea
- Altura Mining Limited, Indonesia
- Aboitiz Power Corporation - Philippines
- Chamber of Mines of South Africa
- International Coal Ventures Pvt Ltd - India
- The University of Queensland
- Ind-Barath Power Infra Limited - India
- SN Aboitiz Power Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement - Thailand
- Ceylon Electricity Board - Sri Lanka
- AsiaOL BioFuels Corp., Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Binh Thuan Hamico - Vietnam
- Larsen & Toubro Limited - India
- CNBM International Corporation - China
- Toyota Tsusho Corporation, Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- New Zealand Coal & Carbon
- Deloitte Consulting - India
- PNOC Exploration Corporation - Philippines
- Mintek Dendrill Indonesia
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- Sojitz Corporation - Japan
- Bayan Resources Tbk. - Indonesia
- Ministry of Transport, Egypt
- Thiess Contractors Indonesia
- Salva Resources Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Vedanta Resources Plc - India
- Semirara Mining and Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Posco Energy - South Korea
- Kohat Cement Company Ltd. - Pakistan
- LBH Netherlands Bv - Netherlands
- Oldendorff Carriers - Singapore
- Star Paper Mills Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dalmia Cement Bharat India
- Attock Cement Pakistan Limited
- Kobexindo Tractors - Indoneisa
- Central Electricity Authority - India
- Xindia Steels Limited - India
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- CIMB Investment Bank - Malaysia
- Kapuas Tunggal Persada - Indonesia
- Australian Commodity Traders Exchange
- MS Steel International - UAE
- Parry Sugars Refinery, India
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Link Ltd, New Zealand
- Price Waterhouse Coopers - Russia
- Coal and Oil Company - UAE
- Bukit Baiduri Energy - Indonesia
- Economic Council, Georgia
- Antam Resourcindo - Indonesia
- Commonwealth Bank - Australia
- South Luzon Thermal Energy Corporation
- TNB Fuel Sdn Bhd - Malaysia
- White Energy Company Limited
- Ministry of Mines - Canada
- Eastern Energy - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Indian Oil Corporation Limited
- Barasentosa Lestari - Indonesia
- SMG Consultants - Indonesia
- IEA Clean Coal Centre - UK
- Indian Energy Exchange, India
- PowerSource Philippines DevCo
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Ministry of Finance - Indonesia
- PTC India Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Karbindo Abesyapradhi - Indoneisa
- Bhatia International Limited - India
- San Jose City I Power Corp, Philippines
- Electricity Generating Authority of Thailand
- Neyveli Lignite Corporation Ltd, - India
- Marubeni Corporation - India
- Videocon Industries ltd - India
- Formosa Plastics Group - Taiwan
- Sarangani Energy Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Kideco Jaya Agung - Indonesia
- Mjunction Services Limited - India
- GAC Shipping (India) Pvt Ltd
- Bukit Makmur.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- Rashtriya Ispat Nigam Limited - India
- Interocean Group of Companies - India
- Coastal Gujarat Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- London Commodity Brokers - England
- Medco Energi Mining Internasional
- Rio Tinto Coal - Australia
- Africa Commodities Group - South Africa
- Bharathi Cement Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Sical Logistics Limited - India
- Bhoruka Overseas - Indonesia
- Baramulti Group, Indonesia
- Coalindo Energy - Indonesia
- India Bulls Power Limited - India
- Bhushan Steel Limited - India
- Parliament of New Zealand
- Mercuria Energy - Indonesia
- Planning Commission, India
- Jaiprakash Power Ventures ltd
- Aditya Birla Group - India
- Globalindo Alam Lestari - Indonesia
- Riau Bara Harum - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Simpson Spence & Young - Indonesia
- Holcim Trading Pte Ltd - Singapore
- IHS Mccloskey Coal Group - USA
- Independent Power Producers Association of India
- Gujarat Electricity Regulatory Commission - India
- Borneo Indobara - Indonesia
- SMC Global Power, Philippines
- Metalloyd Limited - United Kingdom
- Singapore Mercantile Exchange
- Ambuja Cements Ltd - India
- Therma Luzon, Inc, Philippines
- Goldman Sachs - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Energy Development Corp, Philippines
- Indonesian Coal Mining Association
- Kartika Selabumi Mining - Indonesia
- McConnell Dowell - Australia
- Directorate Of Revenue Intelligence - India
- The State Trading Corporation of India Ltd
- Tata Chemicals Ltd - India
- ICICI Bank Limited - India
- Bulk Trading Sa - Switzerland
- Edison Trading Spa - Italy
- Standard Chartered Bank - UAE
- Chettinad Cement Corporation Ltd - India
- Sakthi Sugars Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Port Waratah Coal Services - Australia
- Carbofer General Trading SA - India
- Timah Investasi Mineral - Indoneisa
- Madhucon Powers Ltd - India
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- Global Business Power Corporation, Philippines
- Indika Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Maheswari Brothers Coal Limited - India
- Lanco Infratech Ltd - India
- Georgia Ports Authority, United States
- Meralco Power Generation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- TeaM Sual Corporation - Philippines
- Romanian Commodities Exchange
- Leighton Contractors Pty Ltd - Australia
- Renaissance Capital - South Africa
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Trasteel International SA, Italy
- VISA Power Limited - India
- Jindal Steel & Power Ltd - India
- Merrill Lynch Commodities Europe
- Semirara Mining Corp, Philippines
- Iligan Light & Power Inc, Philippines
- Cement Manufacturers Association - India
- The Treasury - Australian Government
- Cigading International Bulk Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Pendopo Energi Batubara - Indonesia
- European Bulk Services B.V. - Netherlands
- ASAPP Information Group - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thai Mozambique Logistica
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Banpu Public Company Limited - Thailand
- Meenaskhi Energy Private Limited - India
- Vizag Seaport Private Limited - India
- Tamil Nadu electricity Board
- Manunggal Multi Energi - Indonesia
- Wood Mackenzie - Singapore
- Petron Corporation, Philippines
- Malabar Cements Ltd - India
- Sinarmas Energy and Mining - Indonesia
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