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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, 23 September 22
CHINA DIGS DEEP TO RAISE COAL OUTPUT TO RECORD HIGH - REUTERS
China’s coal production has surged this year as the government seeks to improve energy security by reducing dependence on imports and amassin ...
Friday, 23 September 22
EUROPEAN STEEL BUYERS SEEK DIRECTION IN VOLATILE MARKET - MEPS INTERNATIONAL
Demand for steel is slow to recover, after the summer break. Mill production costs continue to increase. Steel purchasers are uncertain about the f ...
Friday, 23 September 22
BUOYANT COAL INDUSTRY SEEKS WAYS TO STAY IN THE LONG-TERM ENERGY MIX - REUTERS
There’s no doubt that the global coal industry has been a major beneficiary of Russia’s invasion of Ukraine and the subsequent energy c ...
Friday, 23 September 22
MARKET INSIGHT - INTERMODAL
In view of the forthcoming winter, Europe is trying to escape from its energy (oil & gas) dependency from Russia to ensure energy abundance eve ...
Tuesday, 20 September 22
CHINA'S DAILY COAL OUTPUT HITS 3-MONTH LOW IN AUGUST ON RAINS, COVID CURBS - REUTERS
China’s daily coal output in August slipped to a three-month low as some mines in its biggest coal mining regions reduced operations or even ...
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- ASAPP Information Group - India
- Goldman Sachs - Singapore
- Coastal Gujarat Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- Mercuria Energy - Indonesia
- Orica Mining Services - Indonesia
- Altura Mining Limited, Indonesia
- Chettinad Cement Corporation Ltd - India
- Maheswari Brothers Coal Limited - India
- Central Electricity Authority - India
- Riau Bara Harum - Indonesia
- Merrill Lynch Commodities Europe
- Sojitz Corporation - Japan
- Larsen & Toubro Limited - India
- Tata Chemicals Ltd - India
- White Energy Company Limited
- ICICI Bank Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- PNOC Exploration Corporation - Philippines
- Posco Energy - South Korea
- Energy Development Corp, Philippines
- Marubeni Corporation - India
- Romanian Commodities Exchange
- GN Power Mariveles Coal Plant, Philippines
- Renaissance Capital - South Africa
- Metalloyd Limited - United Kingdom
- Banpu Public Company Limited - Thailand
- Cigading International Bulk Terminal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Indian Oil Corporation Limited
- Anglo American - United Kingdom
- PTC India Limited - India
- Gujarat Sidhee Cement - India
- Indian Energy Exchange, India
- Vijayanagar Sugar Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- MS Steel International - UAE
- Bulk Trading Sa - Switzerland
- Ambuja Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- San Jose City I Power Corp, Philippines
- GVK Power & Infra Limited - India
- Therma Luzon, Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Iligan Light & Power Inc, Philippines
- The University of Queensland
- Planning Commission, India
- Indo Tambangraya Megah - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Grasim Industreis Ltd - India
- Trasteel International SA, Italy
- Parry Sugars Refinery, India
- GMR Energy Limited - India
- Bhushan Steel Limited - India
- Thai Mozambique Logistica
- Coal and Oil Company - UAE
- Aboitiz Power Corporation - Philippines
- CNBM International Corporation - China
- Georgia Ports Authority, United States
- Global Business Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vedanta Resources Plc - India
- Sinarmas Energy and Mining - Indonesia
- Medco Energi Mining Internasional
- Power Finance Corporation Ltd., India
- Rashtriya Ispat Nigam Limited - India
- Cement Manufacturers Association - India
- Mjunction Services Limited - India
- Makarim & Taira - Indonesia
- Samtan Co., Ltd - South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Directorate General of MIneral and Coal - Indonesia
- Petron Corporation, Philippines
- Siam City Cement - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Mineral Development Corp Ltd - India
- Australian Commodity Traders Exchange
- Semirara Mining and Power Corporation, Philippines
- Star Paper Mills Limited - India
- Meralco Power Generation, Philippines
- Bhatia International Limited - India
- Lanco Infratech Ltd - India
- Antam Resourcindo - Indonesia
- IHS Mccloskey Coal Group - USA
- Edison Trading Spa - Italy
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Baiduri Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- AsiaOL BioFuels Corp., Philippines
- Sakthi Sugars Limited - India
- Tamil Nadu electricity Board
- Bahari Cakrawala Sebuku - Indonesia
- India Bulls Power Limited - India
- Wood Mackenzie - Singapore
- Kobexindo Tractors - Indoneisa
- Essar Steel Hazira Ltd - India
- Singapore Mercantile Exchange
- European Bulk Services B.V. - Netherlands
- SMG Consultants - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- SMC Global Power, Philippines
- Indogreen Group - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Madhucon Powers Ltd - India
- IEA Clean Coal Centre - UK
- Kalimantan Lumbung Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Wilmar Investment Holdings
- Oldendorff Carriers - Singapore
- Eastern Energy - Thailand
- Heidelberg Cement - Germany
- Economic Council, Georgia
- Bukit Makmur.PT - Indonesia
- Ministry of Finance - Indonesia
- Global Green Power PLC Corporation, Philippines
- Sical Logistics Limited - India
- Port Waratah Coal Services - Australia
- Xindia Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- Dalmia Cement Bharat India
- Baramulti Group, Indonesia
- Jaiprakash Power Ventures ltd
- Semirara Mining Corp, Philippines
- Electricity Generating Authority of Thailand
- Manunggal Multi Energi - Indonesia
- Aditya Birla Group - India
- Bhoruka Overseas - Indonesia
- Karaikal Port Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- CIMB Investment Bank - Malaysia
- Standard Chartered Bank - UAE
- Timah Investasi Mineral - Indoneisa
- PowerSource Philippines DevCo
- Malabar Cements Ltd - India
- The State Trading Corporation of India Ltd
- OPG Power Generation Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Interocean Group of Companies - India
- Ind-Barath Power Infra Limited - India
- Latin American Coal - Colombia
- VISA Power Limited - India
- Deloitte Consulting - India
- Billiton Holdings Pty Ltd - Australia
- Borneo Indobara - Indonesia
- Mintek Dendrill Indonesia
- Carbofer General Trading SA - India
- London Commodity Brokers - England
- Australian Coal Association
- Energy Link Ltd, New Zealand
- Bharathi Cement Corporation - India
- Minerals Council of Australia
- Indika Energy - Indonesia
- Africa Commodities Group - South Africa
- Price Waterhouse Coopers - Russia
- Pipit Mutiara Jaya. PT, Indonesia
- The Treasury - Australian Government
- Rio Tinto Coal - Australia
- Formosa Plastics Group - Taiwan
- Chamber of Mines of South Africa
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Eastern Coal Council - USA
- Sindya Power Generating Company Private Ltd
- Attock Cement Pakistan Limited
- Karbindo Abesyapradhi - Indoneisa
- Simpson Spence & Young - Indonesia
- Parliament of New Zealand
- Ministry of Transport, Egypt
- Central Java Power - Indonesia
- Indonesian Coal Mining Association
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement PLC, Thailand
- South Luzon Thermal Energy Corporation
- Straits Asia Resources Limited - Singapore
- Bangladesh Power Developement Board
- Meenaskhi Energy Private Limited - India
- Uttam Galva Steels Limited - India
- Kaltim Prima Coal - Indonesia
- Independent Power Producers Association of India
- Agrawal Coal Company - India
- Kohat Cement Company Ltd. - Pakistan
- International Coal Ventures Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Vizag Seaport Private Limited - India
- GAC Shipping (India) Pvt Ltd
- Pendopo Energi Batubara - Indonesia
- Orica Australia Pty. Ltd.
- Videocon Industries ltd - India
- Sree Jayajothi Cements Limited - India
- Holcim Trading Pte Ltd - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Kideco Jaya Agung - Indonesia
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- Jorong Barutama Greston.PT - Indonesia
- Kumho Petrochemical, South Korea
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