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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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Thursday, 06 October 22
COAL INDIA ASKED TO ENHANCE SUPPLY TO THERMAL POWER PLANTS - IANS
With the festival season round the corner, Coal India Ltd. has been directed by the government to scale up dispatch to thermal power plants.
&n ...
Wednesday, 05 October 22
BUNKER PRICES DOWN AGAIN; IS THERE MORE TO COME? - INTEGR8 FUELS
It’s the economy…..”
VLSFO prices are now back to levels at the start of this year. After all the extremes of thi ...
Wednesday, 05 October 22
MARKET INSIGHT - INTERMODAL
Amid the looming western sanctions on Russia, the country is challenged to pivot its energy markets away from Europe and toward the East. Yet, Russ ...
Tuesday, 04 October 22
A REMARKABLE SHIFT IN FORTUNES HAS BEEN NOTED IN THE CRUDE OIL TANKER MARKETS - ALLIED SHIPPING
A remarkable shift in fortunes has been noted in the crude oil tanker markets over the past month, yet despite these shifts being seemingly in thei ...
Tuesday, 04 October 22
OIL PRICES COULD SOON RETURN TO $100 AS OPEC+ CONSIDERS ‘HISTORIC’ CUT, ANALYSTS SAY - CNBC
An influential alliance of some of the world’s most powerful oil producers is reportedly considering their largest output cut since the start ...
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- Simpson Spence & Young - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Dalmia Cement Bharat India
- Vijayanagar Sugar Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- Ministry of Finance - Indonesia
- Sindya Power Generating Company Private Ltd
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Trasteel International SA, Italy
- Pipit Mutiara Jaya. PT, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Metalloyd Limited - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Bhoruka Overseas - Indonesia
- SN Aboitiz Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Goldman Sachs - Singapore
- Salva Resources Pvt Ltd - India
- Orica Mining Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- PetroVietnam Power Coal Import and Supply Company
- PowerSource Philippines DevCo
- Global Green Power PLC Corporation, Philippines
- Planning Commission, India
- Kapuas Tunggal Persada - Indonesia
- Thai Mozambique Logistica
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Uttam Galva Steels Limited - India
- Directorate Of Revenue Intelligence - India
- Lanco Infratech Ltd - India
- Interocean Group of Companies - India
- Essar Steel Hazira Ltd - India
- Kobexindo Tractors - Indoneisa
- Altura Mining Limited, Indonesia
- Tata Chemicals Ltd - India
- San Jose City I Power Corp, Philippines
- Tamil Nadu electricity Board
- Cigading International Bulk Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Anglo American - United Kingdom
- Mjunction Services Limited - India
- Meralco Power Generation, Philippines
- Agrawal Coal Company - India
- Straits Asia Resources Limited - Singapore
- Power Finance Corporation Ltd., India
- Indonesian Coal Mining Association
- Sojitz Corporation - Japan
- Bhushan Steel Limited - India
- Chamber of Mines of South Africa
- Sarangani Energy Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Mines - Canada
- Iligan Light & Power Inc, Philippines
- Posco Energy - South Korea
- Indian Energy Exchange, India
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- Eastern Energy - Thailand
- New Zealand Coal & Carbon
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Standard Chartered Bank - UAE
- Heidelberg Cement - Germany
- SMG Consultants - Indonesia
- Binh Thuan Hamico - Vietnam
- Leighton Contractors Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- White Energy Company Limited
- Indo Tambangraya Megah - Indonesia
- Coalindo Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Indogreen Group - Indonesia
- Edison Trading Spa - Italy
- Holcim Trading Pte Ltd - Singapore
- Chettinad Cement Corporation Ltd - India
- Maheswari Brothers Coal Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Rio Tinto Coal - Australia
- Central Electricity Authority - India
- Cement Manufacturers Association - India
- McConnell Dowell - Australia
- Indika Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Baramulti Group, Indonesia
- Marubeni Corporation - India
- Borneo Indobara - Indonesia
- Meenaskhi Energy Private Limited - India
- Bhatia International Limited - India
- VISA Power Limited - India
- TeaM Sual Corporation - Philippines
- Renaissance Capital - South Africa
- Price Waterhouse Coopers - Russia
- The State Trading Corporation of India Ltd
- Pendopo Energi Batubara - Indonesia
- Bukit Makmur.PT - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Wood Mackenzie - Singapore
- London Commodity Brokers - England
- Petron Corporation, Philippines
- Larsen & Toubro Limited - India
- Banpu Public Company Limited - Thailand
- South Luzon Thermal Energy Corporation
- Ambuja Cements Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- ICICI Bank Limited - India
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Antam Resourcindo - Indonesia
- Energy Development Corp, Philippines
- Independent Power Producers Association of India
- Gujarat Mineral Development Corp Ltd - India
- Kumho Petrochemical, South Korea
- Australian Commodity Traders Exchange
- Electricity Generating Authority of Thailand
- Ceylon Electricity Board - Sri Lanka
- Alfred C Toepfer International GmbH - Germany
- Central Java Power - Indonesia
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- Sakthi Sugars Limited - India
- Gujarat Electricity Regulatory Commission - India
- IHS Mccloskey Coal Group - USA
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- Energy Link Ltd, New Zealand
- Kepco SPC Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Orica Australia Pty. Ltd.
- SMC Global Power, Philippines
- Star Paper Mills Limited - India
- Georgia Ports Authority, United States
- Oldendorff Carriers - Singapore
- Timah Investasi Mineral - Indoneisa
- Toyota Tsusho Corporation, Japan
- ASAPP Information Group - India
- Vedanta Resources Plc - India
- Malabar Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Videocon Industries ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Australian Coal Association
- Singapore Mercantile Exchange
- Krishnapatnam Port Company Ltd. - India
- Coal and Oil Company - UAE
- Riau Bara Harum - Indonesia
- International Coal Ventures Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Parliament of New Zealand
- Ind-Barath Power Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The University of Queensland
- Samtan Co., Ltd - South Korea
- Jorong Barutama Greston.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- Minerals Council of Australia
- The Treasury - Australian Government
- Jindal Steel & Power Ltd - India
- Semirara Mining Corp, Philippines
- Merrill Lynch Commodities Europe
- Globalindo Alam Lestari - Indonesia
- Commonwealth Bank - Australia
- AsiaOL BioFuels Corp., Philippines
- Madhucon Powers Ltd - India
- Therma Luzon, Inc, Philippines
- CNBM International Corporation - China
- Africa Commodities Group - South Africa
- Latin American Coal - Colombia
- Kalimantan Lumbung Energi - Indonesia
- GMR Energy Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Siam City Cement - Thailand
- Siam City Cement PLC, Thailand
- Carbofer General Trading SA - India
- Wilmar Investment Holdings
- Electricity Authority, New Zealand
- Makarim & Taira - Indonesia
- IEA Clean Coal Centre - UK
- CIMB Investment Bank - Malaysia
- LBH Netherlands Bv - Netherlands
- Kaltim Prima Coal - Indonesia
- Sical Logistics Limited - India
- Bharathi Cement Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Formosa Plastics Group - Taiwan
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- PTC India Limited - India
- Gujarat Sidhee Cement - India
- Eastern Coal Council - USA
- Mercuria Energy - Indonesia
- Ministry of Transport, Egypt
- Romanian Commodities Exchange
- Deloitte Consulting - India
- MS Steel International - UAE
- GVK Power & Infra Limited - India
- India Bulls Power Limited - India
- Aditya Birla Group - India
- Vizag Seaport Private Limited - India
- Thiess Contractors Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Mercator Lines Limited - India
- Medco Energi Mining Internasional
- TNB Fuel Sdn Bhd - Malaysia
- Manunggal Multi Energi - Indonesia
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