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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, 12 February 15
DRY BULK OWNERS SCRAP MORE VESSELS, AS MARKET REACHES HISTORICAL LOWS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has reached historical lows this week, with the Baltic Dry Index (BDI) now trading at levels below operating expense levels for ...
Thursday, 12 February 15
INDONESIAN COAL PRICE REFERENCE INCHED DOWN 1.44% IN FEBRUARY
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia revised down Indonesian coal bench mark price this month to US$ 62.92 pe ...
Thursday, 12 February 15
NEWBUILDING ORDERING ACTIVITY DRAGS ON, AS OWNERS ARE LOOKING FOR LOWER PRICES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Ship owners appear to be waiting for lower prices in their dealings with Asian shipyards, as the dry bulk market is at historical lows. According t ...
Wednesday, 11 February 15
DRY BULK MARKET REMAINED UNDER PRESSURE : STABILIZING CAPE MARKET HARDLY HELPED SENTIMENT
COALspot.com: The Dry Bulk market remained under pressure last week, while the stabilizing Cape market hardly helped sentiment.
Greece based s ...
Wednesday, 11 February 15
BDI HITTING THE ALL-TIME LOW; FFA MARKETS NOT SHOWING ANY POSITIVE SIGNS
With the BDI hitting the all-time low and with FFA markets not showing any positive signs for a possible recovery in the near future, pessimism is ...
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- Malabar Cements Ltd - India
- Indogreen Group - Indonesia
- Coal and Oil Company - UAE
- Minerals Council of Australia
- Mercuria Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Dalmia Cement Bharat India
- Kapuas Tunggal Persada - Indonesia
- Marubeni Corporation - India
- Ambuja Cements Ltd - India
- Australian Commodity Traders Exchange
- Meenaskhi Energy Private Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Ceylon Electricity Board - Sri Lanka
- Iligan Light & Power Inc, Philippines
- Salva Resources Pvt Ltd - India
- Georgia Ports Authority, United States
- Merrill Lynch Commodities Europe
- VISA Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- European Bulk Services B.V. - Netherlands
- Simpson Spence & Young - Indonesia
- Siam City Cement PLC, Thailand
- Tata Chemicals Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Toyota Tsusho Corporation, Japan
- ASAPP Information Group - India
- Electricity Generating Authority of Thailand
- Anglo American - United Kingdom
- Eastern Coal Council - USA
- Bhatia International Limited - India
- Siam City Cement - Thailand
- Edison Trading Spa - Italy
- Australian Coal Association
- Pipit Mutiara Jaya. PT, Indonesia
- Savvy Resources Ltd - HongKong
- Offshore Bulk Terminal Pte Ltd, Singapore
- LBH Netherlands Bv - Netherlands
- Directorate Of Revenue Intelligence - India
- Intertek Mineral Services - Indonesia
- Sarangani Energy Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Formosa Plastics Group - Taiwan
- Rio Tinto Coal - Australia
- Jaiprakash Power Ventures ltd
- Baramulti Group, Indonesia
- IEA Clean Coal Centre - UK
- Orica Australia Pty. Ltd.
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- Sindya Power Generating Company Private Ltd
- Commonwealth Bank - Australia
- MS Steel International - UAE
- Antam Resourcindo - Indonesia
- Videocon Industries ltd - India
- Global Business Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Indonesian Coal Mining Association
- Maheswari Brothers Coal Limited - India
- Barasentosa Lestari - Indonesia
- Bharathi Cement Corporation - India
- Romanian Commodities Exchange
- Power Finance Corporation Ltd., India
- Oldendorff Carriers - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Goldman Sachs - Singapore
- Energy Link Ltd, New Zealand
- Sical Logistics Limited - India
- Miang Besar Coal Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- The University of Queensland
- Interocean Group of Companies - India
- Binh Thuan Hamico - Vietnam
- India Bulls Power Limited - India
- ICICI Bank Limited - India
- Trasteel International SA, Italy
- GVK Power & Infra Limited - India
- New Zealand Coal & Carbon
- Sakthi Sugars Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Leighton Contractors Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Renaissance Capital - South Africa
- Directorate General of MIneral and Coal - Indonesia
- Petron Corporation, Philippines
- Standard Chartered Bank - UAE
- Bulk Trading Sa - Switzerland
- Agrawal Coal Company - India
- Sojitz Corporation - Japan
- London Commodity Brokers - England
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Transport, Egypt
- Kideco Jaya Agung - Indonesia
- South Luzon Thermal Energy Corporation
- OPG Power Generation Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Heidelberg Cement - Germany
- Straits Asia Resources Limited - Singapore
- Pendopo Energi Batubara - Indonesia
- Energy Development Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Borneo Indobara - Indonesia
- Chettinad Cement Corporation Ltd - India
- Deloitte Consulting - India
- Posco Energy - South Korea
- Bhushan Steel Limited - India
- Bukit Baiduri Energy - Indonesia
- Mintek Dendrill Indonesia
- Riau Bara Harum - Indonesia
- Independent Power Producers Association of India
- Aditya Birla Group - India
- Cement Manufacturers Association - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ind-Barath Power Infra Limited - India
- Tamil Nadu electricity Board
- Gujarat Sidhee Cement - India
- Therma Luzon, Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- Electricity Authority, New Zealand
- Eastern Energy - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Metalloyd Limited - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMG Consultants - Indonesia
- Grasim Industreis Ltd - India
- Kartika Selabumi Mining - Indonesia
- Parry Sugars Refinery, India
- Makarim & Taira - Indonesia
- GAC Shipping (India) Pvt Ltd
- Kohat Cement Company Ltd. - Pakistan
- International Coal Ventures Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Singapore Mercantile Exchange
- Kumho Petrochemical, South Korea
- Wilmar Investment Holdings
- Central Electricity Authority - India
- Carbofer General Trading SA - India
- Bangladesh Power Developement Board
- Lanco Infratech Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- Thai Mozambique Logistica
- Planning Commission, India
- Indika Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Banpu Public Company Limited - Thailand
- Parliament of New Zealand
- Samtan Co., Ltd - South Korea
- Jorong Barutama Greston.PT - Indonesia
- Kobexindo Tractors - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- PTC India Limited - India
- Wood Mackenzie - Singapore
- Port Waratah Coal Services - Australia
- Mercator Lines Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- AsiaOL BioFuels Corp., Philippines
- Vizag Seaport Private Limited - India
- Jindal Steel & Power Ltd - India
- Thiess Contractors Indonesia
- Vedanta Resources Plc - India
- Economic Council, Georgia
- Karbindo Abesyapradhi - Indoneisa
- White Energy Company Limited
- PowerSource Philippines DevCo
- IHS Mccloskey Coal Group - USA
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- Chamber of Mines of South Africa
- Maharashtra Electricity Regulatory Commission - India
- Kaltim Prima Coal - Indonesia
- Ministry of Finance - Indonesia
- Bhoruka Overseas - Indonesia
- Attock Cement Pakistan Limited
- Xindia Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- Medco Energi Mining Internasional
- San Jose City I Power Corp, Philippines
- Indian Oil Corporation Limited
- Larsen & Toubro Limited - India
- PNOC Exploration Corporation - Philippines
- CNBM International Corporation - China
- Meralco Power Generation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Aboitiz Power Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- CIMB Investment Bank - Malaysia
- Sree Jayajothi Cements Limited - India
- Ministry of Mines - Canada
- Global Coal Blending Company Limited - Australia
- SN Aboitiz Power Inc, Philippines
- Madhucon Powers Ltd - India
- SMC Global Power, Philippines
- Latin American Coal - Colombia
- Manunggal Multi Energi - Indonesia
- Coastal Gujarat Power Limited - India
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Price Waterhouse Coopers - Russia
- McConnell Dowell - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Africa Commodities Group - South Africa
- Orica Mining Services - Indonesia
- Karaikal Port Pvt Ltd - India
- The Treasury - Australian Government
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The State Trading Corporation of India Ltd
- Kepco SPC Power Corporation, Philippines
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