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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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Sunday, 15 February 15
BALTIC DRY INDEX CONTINUALLY DIPPED IN RED
COALspot.com: The Baltic Dry Index continues its decline and fell 5.18 pct to 530 points week on week due to falling commodity prices and declining ...
Saturday, 14 February 15
SHALE GAS AND TIGHT OIL ARE COMMERCIALLY PRODUCED IN JUST FOUR COUNTRIES - EIA
KNOWLEDGE TO ELEVATE
The United States, Canada, China, and Argentina are currently the only four countries in the world that are producing com ...
Friday, 13 February 15
U.S. WEEKLY COAL PRODUCTION SHOWS 10% DECLINE
COALspot.com – United States the world's one of the largest coal producers, produced approximately 18.1 million short tons (mmst) of coal ...
Friday, 13 February 15
SMALL AND MEDIUM-SIZED SHIP OWNERS SQUEEZED OUT OF THE MARKET ON CRASHING DRY BULK MARKET AND EUROZONE CRISIS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Financing issues have started to tighten the noose in the throats of small and medium-size ship owners, who were already facing problems over the p ...
Thursday, 12 February 15
CAPESIZE: THE BEST DESCRIPTION FOR THE MARKET IS, FLAT - FEARNRESEARCH
Handy
The handy and supra market is also being affected by the marginal volume of activity in the commodity sales. We see a small upturn in the T ...
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- Madhucon Powers Ltd - India
- Rio Tinto Coal - Australia
- Ministry of Finance - Indonesia
- Jaiprakash Power Ventures ltd
- Coalindo Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Orica Australia Pty. Ltd.
- Bhoruka Overseas - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Metalloyd Limited - United Kingdom
- Indo Tambangraya Megah - Indonesia
- Coal and Oil Company - UAE
- Binh Thuan Hamico - Vietnam
- Mercuria Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Minerals Council of Australia
- Malabar Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Independent Power Producers Association of India
- Formosa Plastics Group - Taiwan
- Sojitz Corporation - Japan
- Gujarat Sidhee Cement - India
- Alfred C Toepfer International GmbH - Germany
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Mines - Canada
- Petron Corporation, Philippines
- PTC India Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement - Thailand
- Aditya Birla Group - India
- SN Aboitiz Power Inc, Philippines
- Mintek Dendrill Indonesia
- Chamber of Mines of South Africa
- Meenaskhi Energy Private Limited - India
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- TNB Fuel Sdn Bhd - Malaysia
- Planning Commission, India
- Global Business Power Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Star Paper Mills Limited - India
- Bharathi Cement Corporation - India
- McConnell Dowell - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Xindia Steels Limited - India
- Latin American Coal - Colombia
- Edison Trading Spa - Italy
- Attock Cement Pakistan Limited
- Kapuas Tunggal Persada - Indonesia
- Port Waratah Coal Services - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Posco Energy - South Korea
- Carbofer General Trading SA - India
- Vizag Seaport Private Limited - India
- Meralco Power Generation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Asmin Koalindo Tuhup - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Wood Mackenzie - Singapore
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- Borneo Indobara - Indonesia
- GMR Energy Limited - India
- Manunggal Multi Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Mercator Lines Limited - India
- Iligan Light & Power Inc, Philippines
- Commonwealth Bank - Australia
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- Trasteel International SA, Italy
- Straits Asia Resources Limited - Singapore
- Australian Commodity Traders Exchange
- Ind-Barath Power Infra Limited - India
- Samtan Co., Ltd - South Korea
- Dalmia Cement Bharat India
- Globalindo Alam Lestari - Indonesia
- Agrawal Coal Company - India
- Cement Manufacturers Association - India
- Bhushan Steel Limited - India
- Uttam Galva Steels Limited - India
- Merrill Lynch Commodities Europe
- Economic Council, Georgia
- Thiess Contractors Indonesia
- Marubeni Corporation - India
- Kepco SPC Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Deloitte Consulting - India
- Power Finance Corporation Ltd., India
- Tamil Nadu electricity Board
- Parliament of New Zealand
- Energy Development Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Barasentosa Lestari - Indonesia
- New Zealand Coal & Carbon
- Semirara Mining Corp, Philippines
- Jindal Steel & Power Ltd - India
- Heidelberg Cement - Germany
- Makarim & Taira - Indonesia
- South Luzon Thermal Energy Corporation
- Indika Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- GAC Shipping (India) Pvt Ltd
- Energy Link Ltd, New Zealand
- Renaissance Capital - South Africa
- Timah Investasi Mineral - Indoneisa
- ICICI Bank Limited - India
- CIMB Investment Bank - Malaysia
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- Neyveli Lignite Corporation Ltd, - India
- LBH Netherlands Bv - Netherlands
- Eastern Coal Council - USA
- Ministry of Transport, Egypt
- Medco Energi Mining Internasional
- Electricity Authority, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Siam City Cement PLC, Thailand
- Lanco Infratech Ltd - India
- Indonesian Coal Mining Association
- Altura Mining Limited, Indonesia
- SMG Consultants - Indonesia
- International Coal Ventures Pvt Ltd - India
- Central Java Power - Indonesia
- Baramulti Group, Indonesia
- Kartika Selabumi Mining - Indonesia
- Savvy Resources Ltd - HongKong
- MS Steel International - UAE
- Semirara Mining and Power Corporation, Philippines
- Bangladesh Power Developement Board
- Chettinad Cement Corporation Ltd - India
- India Bulls Power Limited - India
- Larsen & Toubro Limited - India
- Bukit Makmur.PT - Indonesia
- Parry Sugars Refinery, India
- VISA Power Limited - India
- Aboitiz Power Corporation - Philippines
- The University of Queensland
- Gujarat Mineral Development Corp Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Sical Logistics Limited - India
- Singapore Mercantile Exchange
- AsiaOL BioFuels Corp., Philippines
- White Energy Company Limited
- Antam Resourcindo - Indonesia
- Directorate Of Revenue Intelligence - India
- Leighton Contractors Pty Ltd - Australia
- Grasim Industreis Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Maheswari Brothers Coal Limited - India
- OPG Power Generation Pvt Ltd - India
- Tata Chemicals Ltd - India
- Eastern Energy - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Rashtriya Ispat Nigam Limited - India
- Kobexindo Tractors - Indoneisa
- Thai Mozambique Logistica
- Krishnapatnam Port Company Ltd. - India
- Banpu Public Company Limited - Thailand
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- Global Coal Blending Company Limited - Australia
- Bayan Resources Tbk. - Indonesia
- Kumho Petrochemical, South Korea
- Coastal Gujarat Power Limited - India
- Indian Oil Corporation Limited
- Wilmar Investment Holdings
- Sarangani Energy Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- SMC Global Power, Philippines
- Intertek Mineral Services - Indonesia
- Therma Luzon, Inc, Philippines
- The Treasury - Australian Government
- Oldendorff Carriers - Singapore
- The State Trading Corporation of India Ltd
- Maharashtra Electricity Regulatory Commission - India
- Global Green Power PLC Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sakthi Sugars Limited - India
- Riau Bara Harum - Indonesia
- Pendopo Energi Batubara - Indonesia
- CNBM International Corporation - China
- Central Electricity Authority - India
- Sree Jayajothi Cements Limited - India
- Simpson Spence & Young - Indonesia
- Standard Chartered Bank - UAE
- Romanian Commodities Exchange
- Gujarat Electricity Regulatory Commission - India
- Sinarmas Energy and Mining - Indonesia
- Bhatia International Limited - India
- IEA Clean Coal Centre - UK
- London Commodity Brokers - England
- Orica Mining Services - Indonesia
- Goldman Sachs - Singapore
- TeaM Sual Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Interocean Group of Companies - India
- Indian Energy Exchange, India
- ASAPP Information Group - India
- PowerSource Philippines DevCo
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