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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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Friday, 18 November 22
REALITIES OF LOI LIABILITIES - BALTIC EXCHANGE
KNOWLEDGE TO ELEVATE
The cargo misdelivery claim in Trafigura Maritime Logistics Pte Ltd v. Clearlake Shipping Pte Ltd (Miracle Hope) [2022] E ...
Tuesday, 15 November 22
CHINA SEES RISING COAL STORAGE AMID SUPPLY PUSH - XINHUA
Coal stockpiles at China’s power plants have seen considerable increases, ensuring energy supply for the winter, the country’s energy r ...
Tuesday, 15 November 22
SEABORNE THERMAL COAL PRICES START TO EASE, BUT PROCESS IS UNEVEN - REUTERS
Prices for seaborne thermal coal have started to drop as fears of a winter energy crunch ease, but the rate of decline has varied across the differ ...
Thursday, 10 November 22
INDIA: THERMAL PLANTS HAVE ADEQUATE COAL STOCKS AT 25.6 MILLION TONNES, SAYS GOVT - IANS
The coal stock with domestic dry fuel-based power plants, as on October 31, was 25.6 million tonnes, the government said, adding that the availabil ...
Tuesday, 08 November 22
OUTLOOK ON CHINA’S WEAKENED BASIC MATERIALS SECTOR CLOUDED BY POLICY SWINGS - FITCH RATINGS
Fitch Ratings expects basic materials demand in China to improve qoq in 4Q22, driven by seasonally higher construction activity, solid infrastructu ...
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- GAC Shipping (India) Pvt Ltd
- VISA Power Limited - India
- Xindia Steels Limited - India
- Aditya Birla Group - India
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Finance - Indonesia
- SN Aboitiz Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Bukit Baiduri Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- Ind-Barath Power Infra Limited - India
- Global Coal Blending Company Limited - Australia
- Wilmar Investment Holdings
- Banpu Public Company Limited - Thailand
- Renaissance Capital - South Africa
- Deloitte Consulting - India
- Sojitz Corporation - Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chettinad Cement Corporation Ltd - India
- Grasim Industreis Ltd - India
- Commonwealth Bank - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cement Manufacturers Association - India
- Romanian Commodities Exchange
- GMR Energy Limited - India
- Orica Australia Pty. Ltd.
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Eastern Coal Council - USA
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining and Power Corporation, Philippines
- Tamil Nadu electricity Board
- Vedanta Resources Plc - India
- International Coal Ventures Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Indonesian Coal Mining Association
- Marubeni Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- SMC Global Power, Philippines
- Planning Commission, India
- Coastal Gujarat Power Limited - India
- Toyota Tsusho Corporation, Japan
- OPG Power Generation Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Indian Energy Exchange, India
- Savvy Resources Ltd - HongKong
- Aboitiz Power Corporation - Philippines
- Parry Sugars Refinery, India
- Thiess Contractors Indonesia
- Globalindo Alam Lestari - Indonesia
- Indogreen Group - Indonesia
- SMG Consultants - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Mercuria Energy - Indonesia
- Port Waratah Coal Services - Australia
- Chamber of Mines of South Africa
- Meralco Power Generation, Philippines
- Central Java Power - Indonesia
- Lanco Infratech Ltd - India
- Indian Oil Corporation Limited
- Formosa Plastics Group - Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Electricity Authority, New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Sidhee Cement - India
- Bangladesh Power Developement Board
- San Jose City I Power Corp, Philippines
- Dalmia Cement Bharat India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Price Waterhouse Coopers - Russia
- Sakthi Sugars Limited - India
- Mjunction Services Limited - India
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- Ministry of Transport, Egypt
- Agrawal Coal Company - India
- Vijayanagar Sugar Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- Energy Link Ltd, New Zealand
- Posco Energy - South Korea
- Metalloyd Limited - United Kingdom
- Semirara Mining Corp, Philippines
- New Zealand Coal & Carbon
- Bharathi Cement Corporation - India
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Kideco Jaya Agung - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- Independent Power Producers Association of India
- Leighton Contractors Pty Ltd - Australia
- Jindal Steel & Power Ltd - India
- Australian Coal Association
- Pendopo Energi Batubara - Indonesia
- Petron Corporation, Philippines
- Coalindo Energy - Indonesia
- MS Steel International - UAE
- ICICI Bank Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Wood Mackenzie - Singapore
- Electricity Generating Authority of Thailand
- Coal and Oil Company - UAE
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- Directorate Of Revenue Intelligence - India
- Samtan Co., Ltd - South Korea
- ASAPP Information Group - India
- Carbofer General Trading SA - India
- Siam City Cement - Thailand
- Iligan Light & Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- India Bulls Power Limited - India
- Altura Mining Limited, Indonesia
- Bulk Trading Sa - Switzerland
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- TeaM Sual Corporation - Philippines
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Development Corp, Philippines
- Parliament of New Zealand
- Kartika Selabumi Mining - Indonesia
- South Luzon Thermal Energy Corporation
- Sree Jayajothi Cements Limited - India
- Thai Mozambique Logistica
- White Energy Company Limited
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Bhatia International Limited - India
- CIMB Investment Bank - Malaysia
- IHS Mccloskey Coal Group - USA
- IEA Clean Coal Centre - UK
- Bukit Makmur.PT - Indonesia
- Heidelberg Cement - Germany
- Edison Trading Spa - Italy
- Essar Steel Hazira Ltd - India
- Straits Asia Resources Limited - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Tata Chemicals Ltd - India
- Orica Mining Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Trasteel International SA, Italy
- Minerals Council of Australia
- Attock Cement Pakistan Limited
- Makarim & Taira - Indonesia
- Africa Commodities Group - South Africa
- Global Business Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- Bayan Resources Tbk. - Indonesia
- Sarangani Energy Corporation, Philippines
- Indika Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Anglo American - United Kingdom
- Power Finance Corporation Ltd., India
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- CNBM International Corporation - China
- Neyveli Lignite Corporation Ltd, - India
- Malabar Cements Ltd - India
- Baramulti Group, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Antam Resourcindo - Indonesia
- PTC India Limited - India
- Singapore Mercantile Exchange
- Kepco SPC Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- Timah Investasi Mineral - Indoneisa
- GVK Power & Infra Limited - India
- Cigading International Bulk Terminal - Indonesia
- Mercator Lines Limited - India
- Barasentosa Lestari - Indonesia
- Eastern Energy - Thailand
- Therma Luzon, Inc, Philippines
- Standard Chartered Bank - UAE
- Star Paper Mills Limited - India
- Riau Bara Harum - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Miang Besar Coal Terminal - Indonesia
- Rio Tinto Coal - Australia
- The Treasury - Australian Government
- Madhucon Powers Ltd - India
- Maheswari Brothers Coal Limited - India
- Borneo Indobara - Indonesia
- PowerSource Philippines DevCo
- Sical Logistics Limited - India
- Bhoruka Overseas - Indonesia
- Kumho Petrochemical, South Korea
- Medco Energi Mining Internasional
- Asmin Koalindo Tuhup - Indonesia
- Latin American Coal - Colombia
- PNOC Exploration Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Manunggal Multi Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Larsen & Toubro Limited - India
- Kaltim Prima Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- London Commodity Brokers - England
- Simpson Spence & Young - Indonesia
- Global Green Power PLC Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- The University of Queensland
- Siam City Cement PLC, Thailand
- Jaiprakash Power Ventures ltd
- Mintek Dendrill Indonesia
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