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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, 29 November 22
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Friday, 25 November 22
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Thursday, 24 November 22
VIETNAM BOOSTS COAL USE PLAN FOR 2030 AS G7 CLIMATE OFFER STALLS - REUTERS
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- Billiton Holdings Pty Ltd - Australia
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- Metalloyd Limited - United Kingdom
- Energy Link Ltd, New Zealand
- Kaltim Prima Coal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Therma Luzon, Inc, Philippines
- Indian Oil Corporation Limited
- Ministry of Mines - Canada
- Petrochimia International Co. Ltd.- Taiwan
- Directorate General of MIneral and Coal - Indonesia
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- Altura Mining Limited, Indonesia
- New Zealand Coal & Carbon
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- Australian Commodity Traders Exchange
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- Kideco Jaya Agung - Indonesia
- Coal and Oil Company - UAE
- ICICI Bank Limited - India
- Romanian Commodities Exchange
- MS Steel International - UAE
- Borneo Indobara - Indonesia
- Sindya Power Generating Company Private Ltd
- Indian Energy Exchange, India
- Straits Asia Resources Limited - Singapore
- White Energy Company Limited
- Jindal Steel & Power Ltd - India
- Independent Power Producers Association of India
- Singapore Mercantile Exchange
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- Australian Coal Association
- Thiess Contractors Indonesia
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- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- Goldman Sachs - Singapore
- CNBM International Corporation - China
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- Indo Tambangraya Megah - Indonesia
- Gujarat Sidhee Cement - India
- Heidelberg Cement - Germany
- Bhoruka Overseas - Indonesia
- Ministry of Finance - Indonesia
- Simpson Spence & Young - Indonesia
- Planning Commission, India
- Jorong Barutama Greston.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Siam City Cement - Thailand
- Marubeni Corporation - India
- Carbofer General Trading SA - India
- Aditya Birla Group - India
- Sojitz Corporation - Japan
- Sinarmas Energy and Mining - Indonesia
- Mercator Lines Limited - India
- Orica Mining Services - Indonesia
- Ambuja Cements Ltd - India
- Ind-Barath Power Infra Limited - India
- Kartika Selabumi Mining - Indonesia
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- Makarim & Taira - Indonesia
- SN Aboitiz Power Inc, Philippines
- Agrawal Coal Company - India
- Samtan Co., Ltd - South Korea
- Parliament of New Zealand
- Anglo American - United Kingdom
- Bukit Makmur.PT - Indonesia
- Renaissance Capital - South Africa
- GMR Energy Limited - India
- Chettinad Cement Corporation Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Meralco Power Generation, Philippines
- Power Finance Corporation Ltd., India
- Sakthi Sugars Limited - India
- Deloitte Consulting - India
- Semirara Mining and Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- OPG Power Generation Pvt Ltd - India
- Economic Council, Georgia
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- Energy Development Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Price Waterhouse Coopers - Russia
- Bangladesh Power Developement Board
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- AsiaOL BioFuels Corp., Philippines
- Electricity Generating Authority of Thailand
- GVK Power & Infra Limited - India
- Videocon Industries ltd - India
- SMC Global Power, Philippines
- Leighton Contractors Pty Ltd - Australia
- Gujarat Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Meenaskhi Energy Private Limited - India
- Karaikal Port Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Tamil Nadu electricity Board
- Georgia Ports Authority, United States
- Holcim Trading Pte Ltd - Singapore
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- Sarangani Energy Corporation, Philippines
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- TeaM Sual Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Port Waratah Coal Services - Australia
- Standard Chartered Bank - UAE
- Barasentosa Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Baramulti Group, Indonesia
- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- Dalmia Cement Bharat India
- International Coal Ventures Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining Corp, Philippines
- Posco Energy - South Korea
- Coalindo Energy - Indonesia
- Central Java Power - Indonesia
- Interocean Group of Companies - India
- Oldendorff Carriers - Singapore
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- Intertek Mineral Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Larsen & Toubro Limited - India
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- Miang Besar Coal Terminal - Indonesia
- PowerSource Philippines DevCo
- Indika Energy - Indonesia
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- Vizag Seaport Private Limited - India
- Indonesian Coal Mining Association
- London Commodity Brokers - England
- Vijayanagar Sugar Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- San Jose City I Power Corp, Philippines
- Banpu Public Company Limited - Thailand
- The State Trading Corporation of India Ltd
- Formosa Plastics Group - Taiwan
- Bahari Cakrawala Sebuku - Indonesia
- Parry Sugars Refinery, India
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- Chamber of Mines of South Africa
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- IEA Clean Coal Centre - UK
- Bhushan Steel Limited - India
- Binh Thuan Hamico - Vietnam
- Vedanta Resources Plc - India
- Sical Logistics Limited - India
- Commonwealth Bank - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Bharathi Cement Corporation - India
- Africa Commodities Group - South Africa
- Antam Resourcindo - Indonesia
- Directorate Of Revenue Intelligence - India
- Tata Chemicals Ltd - India
- Merrill Lynch Commodities Europe
- Eastern Energy - Thailand
- Kapuas Tunggal Persada - Indonesia
- Alfred C Toepfer International GmbH - Germany
- The Treasury - Australian Government
- IHS Mccloskey Coal Group - USA
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- Ceylon Electricity Board - Sri Lanka
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