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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, 04 November 22
CHINA EXPANDS COAL TERM CONTRACTS TO ALL MINES TO STABILIZE MARKET - REUTERS
China has expanded long-term thermal coal supply contracts for 2023 to all coal mines and asked power utilities to source more of their demand thro ...
Thursday, 03 November 22
HANDYSIZE VALUES MOVING UP IN OCTOBER, WHILE LNG VALUES SKYROCKET - VESSELSVALUE
Handysize values have increased this month across most ages, following a period of decline. Values for generic 10 year old Handysizes have moved up ...
Thursday, 03 November 22
EUROPEAN GAS SUPPLY SURPLUS, NOVEMBER HBA DOWN TO US$ 308.2 PER TON - ESDM
European gas supply conditions have a major influence in determining fluctuations in the Reference Coal Price (HBA). The November 2022 HBA recorded ...
Wednesday, 02 November 22
MARKET INSIGHT - INTERMODAL
Only five weeks before western sanctions’ full effect, uncertainty over energy has markets and governments on the edge. What was initially th ...
Tuesday, 01 November 22
CHINA COAL TRADE DISRUPTED BY COVID OUTBREAKS AS WINTER LOOMS - REUTERS
China’s strict COVID-19 policy is constraining coal supplies and pushing up prices, industry officials and traders say, just weeks before the ...
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- Tamil Nadu electricity Board
- Barasentosa Lestari - Indonesia
- Grasim Industreis Ltd - India
- Global Coal Blending Company Limited - Australia
- The State Trading Corporation of India Ltd
- Rashtriya Ispat Nigam Limited - India
- Medco Energi Mining Internasional
- Independent Power Producers Association of India
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Alfred C Toepfer International GmbH - Germany
- Ministry of Transport, Egypt
- VISA Power Limited - India
- Rio Tinto Coal - Australia
- GN Power Mariveles Coal Plant, Philippines
- Heidelberg Cement - Germany
- The Treasury - Australian Government
- Electricity Generating Authority of Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Billiton Holdings Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- Ind-Barath Power Infra Limited - India
- Global Business Power Corporation, Philippines
- Marubeni Corporation - India
- Ministry of Finance - Indonesia
- Georgia Ports Authority, United States
- Africa Commodities Group - South Africa
- London Commodity Brokers - England
- Neyveli Lignite Corporation Ltd, - India
- Binh Thuan Hamico - Vietnam
- Intertek Mineral Services - Indonesia
- Bharathi Cement Corporation - India
- Madhucon Powers Ltd - India
- Riau Bara Harum - Indonesia
- Price Waterhouse Coopers - Russia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Makmur.PT - Indonesia
- MS Steel International - UAE
- Bangladesh Power Developement Board
- Kalimantan Lumbung Energi - Indonesia
- Bulk Trading Sa - Switzerland
- PTC India Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Carbofer General Trading SA - India
- Sree Jayajothi Cements Limited - India
- Malabar Cements Ltd - India
- Minerals Council of Australia
- Kumho Petrochemical, South Korea
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Parliament of New Zealand
- IHS Mccloskey Coal Group - USA
- Deloitte Consulting - India
- Formosa Plastics Group - Taiwan
- Indonesian Coal Mining Association
- Bukit Baiduri Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Bayan Resources Tbk. - Indonesia
- Meralco Power Generation, Philippines
- Borneo Indobara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GMR Energy Limited - India
- Gujarat Sidhee Cement - India
- Iligan Light & Power Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Dalmia Cement Bharat India
- Siam City Cement - Thailand
- Sakthi Sugars Limited - India
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Standard Chartered Bank - UAE
- Directorate General of MIneral and Coal - Indonesia
- ASAPP Information Group - India
- GAC Shipping (India) Pvt Ltd
- Larsen & Toubro Limited - India
- White Energy Company Limited
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- Globalindo Alam Lestari - Indonesia
- Sarangani Energy Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- European Bulk Services B.V. - Netherlands
- Orica Mining Services - Indonesia
- Baramulti Group, Indonesia
- Eastern Energy - Thailand
- Thai Mozambique Logistica
- Videocon Industries ltd - India
- Posco Energy - South Korea
- PNOC Exploration Corporation - Philippines
- Edison Trading Spa - Italy
- Miang Besar Coal Terminal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Parry Sugars Refinery, India
- Romanian Commodities Exchange
- Metalloyd Limited - United Kingdom
- Directorate Of Revenue Intelligence - India
- Indian Energy Exchange, India
- Energy Link Ltd, New Zealand
- IEA Clean Coal Centre - UK
- Wood Mackenzie - Singapore
- OPG Power Generation Pvt Ltd - India
- Economic Council, Georgia
- PowerSource Philippines DevCo
- Kobexindo Tractors - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Energy Development Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Coal and Oil Company - UAE
- Mjunction Services Limited - India
- Bhoruka Overseas - Indonesia
- SMC Global Power, Philippines
- Aboitiz Power Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- Agrawal Coal Company - India
- Kartika Selabumi Mining - Indonesia
- Jaiprakash Power Ventures ltd
- Kideco Jaya Agung - Indonesia
- Timah Investasi Mineral - Indoneisa
- Indika Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Anglo American - United Kingdom
- Mercator Lines Limited - India
- Banpu Public Company Limited - Thailand
- Bhatia International Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- Sojitz Corporation - Japan
- The University of Queensland
- Merrill Lynch Commodities Europe
- Siam City Cement PLC, Thailand
- Electricity Authority, New Zealand
- Indian Oil Corporation Limited
- Antam Resourcindo - Indonesia
- Latin American Coal - Colombia
- Toyota Tsusho Corporation, Japan
- Kapuas Tunggal Persada - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Commonwealth Bank - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Coalindo Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Interocean Group of Companies - India
- Gujarat Mineral Development Corp Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- CIMB Investment Bank - Malaysia
- Vedanta Resources Plc - India
- Salva Resources Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Tata Chemicals Ltd - India
- Xindia Steels Limited - India
- Aditya Birla Group - India
- Jindal Steel & Power Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Thiess Contractors Indonesia
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- International Coal Ventures Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Power Finance Corporation Ltd., India
- ICICI Bank Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Central Electricity Authority - India
- Semirara Mining and Power Corporation, Philippines
- Lanco Infratech Ltd - India
- GVK Power & Infra Limited - India
- Indogreen Group - Indonesia
- Therma Luzon, Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- TeaM Sual Corporation - Philippines
- CNBM International Corporation - China
- Ministry of Mines - Canada
- Goldman Sachs - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Central Java Power - Indonesia
- Trasteel International SA, Italy
- Sindya Power Generating Company Private Ltd
- Kaltim Prima Coal - Indonesia
- Oldendorff Carriers - Singapore
- Samtan Co., Ltd - South Korea
- McConnell Dowell - Australia
- India Bulls Power Limited - India
- Eastern Coal Council - USA
- Bhushan Steel Limited - India
- Mercuria Energy - Indonesia
- Wilmar Investment Holdings
- Port Waratah Coal Services - Australia
- Australian Commodity Traders Exchange
- Cement Manufacturers Association - India
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- Kohat Cement Company Ltd. - Pakistan
- Essar Steel Hazira Ltd - India
- Maheswari Brothers Coal Limited - India
- Star Paper Mills Limited - India
- Krishnapatnam Port Company Ltd. - India
- Coastal Gujarat Power Limited - India
- Manunggal Multi Energi - Indonesia
- Renaissance Capital - South Africa
- Planning Commission, India
- Petron Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Attock Cement Pakistan Limited
- Asmin Koalindo Tuhup - Indonesia
- Australian Coal Association
- Jorong Barutama Greston.PT - Indonesia
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Semirara Mining Corp, Philippines
- Sical Logistics Limited - India
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