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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, 04 October 22
INDONESIAN COAL PRICE REFERENCE SURGE AGAIN TO RECORD HIGH
COALspot.com: Indonesian Coal Price Reference reached another record high in October as Russia's war in Ukraine continues to spark a surge in c ...
Sunday, 02 October 22
MISC STRENGTHENS ITS PARTNERSHIP WITH SEARIVER MARITIME
MISC Berhad (MISC) today announced that its subsidiaries Polaris LNG Three Pte. Ltd. and Polaris LNG Four Pte. Ltd. have secured long-term time cha ...
Thursday, 29 September 22
MARKET INSIGHT - INTERMODAL
This week, focus turns to the 38th APPEC Conference, where leading professionals from the global oil industry will discuss the future key drivers o ...
Thursday, 29 September 22
HIGH COAL PRICES REMAIN A CONCERN FOR DOMESTIC NON-FERROUS METAL COMPANIES - ICRA
According to ICRA on Monday, the high price of coal will have a negative effect on the profitability of domestic non-ferrous metal companies that m ...
Tuesday, 27 September 22
14% INCREASE IN EUROPEAN COAL DEMAND TO BE SHORT-TERM TREND - WOOD MACKENZIE
European seaborne thermal coal demand is projected to increase 14% or 12 million metric tonnes (Mt) this year to 98 Mt as it grapples with the curr ...
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- Bhatia International Limited - India
- SMG Consultants - Indonesia
- Coalindo Energy - Indonesia
- Interocean Group of Companies - India
- Formosa Plastics Group - Taiwan
- Posco Energy - South Korea
- Ind-Barath Power Infra Limited - India
- PNOC Exploration Corporation - Philippines
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- White Energy Company Limited
- Kapuas Tunggal Persada - Indonesia
- Intertek Mineral Services - Indonesia
- The State Trading Corporation of India Ltd
- Aboitiz Power Corporation - Philippines
- Xindia Steels Limited - India
- GMR Energy Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Madhucon Powers Ltd - India
- Global Business Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Maheswari Brothers Coal Limited - India
- VISA Power Limited - India
- Barasentosa Lestari - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Siam City Cement - Thailand
- International Coal Ventures Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Eastern Energy - Thailand
- Bhoruka Overseas - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Kideco Jaya Agung - Indonesia
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Kartika Selabumi Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Borneo Indobara - Indonesia
- Agrawal Coal Company - India
- Vizag Seaport Private Limited - India
- Port Waratah Coal Services - Australia
- Australian Commodity Traders Exchange
- Ministry of Finance - Indonesia
- Simpson Spence & Young - Indonesia
- CNBM International Corporation - China
- Attock Cement Pakistan Limited
- Bahari Cakrawala Sebuku - Indonesia
- Global Coal Blending Company Limited - Australia
- Grasim Industreis Ltd - India
- Indogreen Group - Indonesia
- Marubeni Corporation - India
- Carbofer General Trading SA - India
- Medco Energi Mining Internasional
- ICICI Bank Limited - India
- Toyota Tsusho Corporation, Japan
- GN Power Mariveles Coal Plant, Philippines
- Parry Sugars Refinery, India
- ASAPP Information Group - India
- Orica Australia Pty. Ltd.
- Indian Energy Exchange, India
- SN Aboitiz Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Power Finance Corporation Ltd., India
- Baramulti Group, Indonesia
- Sical Logistics Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Java Power - Indonesia
- Coastal Gujarat Power Limited - India
- Essar Steel Hazira Ltd - India
- Samtan Co., Ltd - South Korea
- Chamber of Mines of South Africa
- Jorong Barutama Greston.PT - Indonesia
- Romanian Commodities Exchange
- Sinarmas Energy and Mining - Indonesia
- Africa Commodities Group - South Africa
- Mintek Dendrill Indonesia
- Altura Mining Limited, Indonesia
- Karaikal Port Pvt Ltd - India
- Indonesian Coal Mining Association
- Malabar Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- Kalimantan Lumbung Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Metalloyd Limited - United Kingdom
- Energy Link Ltd, New Zealand
- Thai Mozambique Logistica
- Meralco Power Generation, Philippines
- Timah Investasi Mineral - Indoneisa
- Siam City Cement PLC, Thailand
- Salva Resources Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- The Treasury - Australian Government
- IHS Mccloskey Coal Group - USA
- Miang Besar Coal Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Kumho Petrochemical, South Korea
- Billiton Holdings Pty Ltd - Australia
- Videocon Industries ltd - India
- Edison Trading Spa - Italy
- Economic Council, Georgia
- Singapore Mercantile Exchange
- Global Green Power PLC Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Semirara Mining Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Rashtriya Ispat Nigam Limited - India
- Gujarat Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Thiess Contractors Indonesia
- Chettinad Cement Corporation Ltd - India
- Wood Mackenzie - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sakthi Sugars Limited - India
- SMC Global Power, Philippines
- Krishnapatnam Port Company Ltd. - India
- Banpu Public Company Limited - Thailand
- Kohat Cement Company Ltd. - Pakistan
- Tata Chemicals Ltd - India
- Sojitz Corporation - Japan
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Ministry of Mines - Canada
- Deloitte Consulting - India
- AsiaOL BioFuels Corp., Philippines
- TeaM Sual Corporation - Philippines
- San Jose City I Power Corp, Philippines
- Riau Bara Harum - Indonesia
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- IEA Clean Coal Centre - UK
- Lanco Infratech Ltd - India
- Kaltim Prima Coal - Indonesia
- Bharathi Cement Corporation - India
- Mjunction Services Limited - India
- Bhushan Steel Limited - India
- McConnell Dowell - Australia
- Karbindo Abesyapradhi - Indoneisa
- Bangladesh Power Developement Board
- Savvy Resources Ltd - HongKong
- Parliament of New Zealand
- Semirara Mining and Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Central Electricity Authority - India
- Anglo American - United Kingdom
- Wilmar Investment Holdings
- Bukit Makmur.PT - Indonesia
- Coal and Oil Company - UAE
- Binh Thuan Hamico - Vietnam
- The University of Queensland
- Standard Chartered Bank - UAE
- Tamil Nadu electricity Board
- Price Waterhouse Coopers - Russia
- Antam Resourcindo - Indonesia
- Oldendorff Carriers - Singapore
- Independent Power Producers Association of India
- Latin American Coal - Colombia
- GAC Shipping (India) Pvt Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Directorate Of Revenue Intelligence - India
- Eastern Coal Council - USA
- Jaiprakash Power Ventures ltd
- PowerSource Philippines DevCo
- Planning Commission, India
- Commonwealth Bank - Australia
- Orica Mining Services - Indonesia
- Jindal Steel & Power Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Offshore Bulk Terminal Pte Ltd, Singapore
- GVK Power & Infra Limited - India
- Ambuja Cements Ltd - India
- Renaissance Capital - South Africa
- European Bulk Services B.V. - Netherlands
- Rio Tinto Coal - Australia
- Star Paper Mills Limited - India
- Kobexindo Tractors - Indoneisa
- Therma Luzon, Inc, Philippines
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- Straits Asia Resources Limited - Singapore
- Electricity Generating Authority of Thailand
- London Commodity Brokers - England
- Heidelberg Cement - Germany
- Aditya Birla Group - India
- Sarangani Energy Corporation, Philippines
- Australian Coal Association
- LBH Netherlands Bv - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Alfred C Toepfer International GmbH - Germany
- Bayan Resources Tbk. - Indonesia
- Cement Manufacturers Association - India
- Mercuria Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- India Bulls Power Limited - India
- Dalmia Cement Bharat India
- Kepco SPC Power Corporation, Philippines
- Georgia Ports Authority, United States
- Mercator Lines Limited - India
- Uttam Galva Steels Limited - India
- Gujarat Sidhee Cement - India
- Makarim & Taira - Indonesia
- Meenaskhi Energy Private Limited - India
- Electricity Authority, New Zealand
- Petron Corporation, Philippines
- PTC India Limited - India
- Iligan Light & Power Inc, Philippines
- Energy Development Corp, Philippines
- Goldman Sachs - Singapore
- MS Steel International - UAE
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
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