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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, 10 February 15
IRON ORE MARKET TO REMAIN OVERSUPPLIED IN 2015: PRICE FORECAST $70/T - WOOD MACKENZIE
COALspot.com: With January witnessing the price of iron ore falling to its lowest levels since May 2009, Roger Emslie, Principal Metals & ...
Tuesday, 10 February 15
SUB-BIT FOB INDONESIA COAL SWAP ADVANCES 3.79% WEEK ON WEEK
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 rose week over week and month on month.
The Q2 swap up US$ 0.85 (+1.81%) month o ...
Tuesday, 10 February 15
FOB NEWCASTLE COAL SWAPS SURGE WEEK OVER WEEK, RAISING HOPES?
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery rose US$ 0.95 per MT (+1.91%) week over week and declined US$ 0.06 (-0.12%) ...
Monday, 09 February 15
AUSTRALIAN COAL PRODUCERS BEST POSITIONED IN OVERSUPPLIED MARKET; US MINES MOST AT RISK - WOOD MACKENZIE
In a 2015 global coal outlook report, Wood Mackenzie says that Australia and Indonesian coal suppliers will see some upside in the difficult months ...
Monday, 09 February 15
FOB RICHARDS BAY COAL SWAP GAINS 3.65% TO ONE-MONTH HIGH
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 surge month over month and day on day.
The Q2 swap has soared US$ 2.1 ...
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- Marubeni Corporation - India
- Maharashtra Electricity Regulatory Commission - India
- SMC Global Power, Philippines
- Jindal Steel & Power Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Global Green Power PLC Corporation, Philippines
- Independent Power Producers Association of India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Xindia Steels Limited - India
- Metalloyd Limited - United Kingdom
- Indika Energy - Indonesia
- CNBM International Corporation - China
- Offshore Bulk Terminal Pte Ltd, Singapore
- Banpu Public Company Limited - Thailand
- Intertek Mineral Services - Indonesia
- Agrawal Coal Company - India
- Sinarmas Energy and Mining - Indonesia
- Parry Sugars Refinery, India
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Essar Steel Hazira Ltd - India
- TeaM Sual Corporation - Philippines
- Heidelberg Cement - Germany
- ICICI Bank Limited - India
- Merrill Lynch Commodities Europe
- Commonwealth Bank - Australia
- PetroVietnam Power Coal Import and Supply Company
- Altura Mining Limited, Indonesia
- India Bulls Power Limited - India
- CIMB Investment Bank - Malaysia
- Salva Resources Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Coal and Oil Company - UAE
- GAC Shipping (India) Pvt Ltd
- Vedanta Resources Plc - India
- SN Aboitiz Power Inc, Philippines
- Minerals Council of Australia
- Sree Jayajothi Cements Limited - India
- Sojitz Corporation - Japan
- Leighton Contractors Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- Siam City Cement - Thailand
- LBH Netherlands Bv - Netherlands
- Kapuas Tunggal Persada - Indonesia
- Wilmar Investment Holdings
- Sakthi Sugars Limited - India
- Price Waterhouse Coopers - Russia
- Central Electricity Authority - India
- Singapore Mercantile Exchange
- Global Coal Blending Company Limited - Australia
- Coastal Gujarat Power Limited - India
- Ministry of Transport, Egypt
- Mercuria Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Kepco SPC Power Corporation, Philippines
- Ministry of Finance - Indonesia
- South Luzon Thermal Energy Corporation
- Bayan Resources Tbk. - Indonesia
- Energy Link Ltd, New Zealand
- Electricity Authority, New Zealand
- PowerSource Philippines DevCo
- Baramulti Group, Indonesia
- Power Finance Corporation Ltd., India
- Barasentosa Lestari - Indonesia
- The Treasury - Australian Government
- Tamil Nadu electricity Board
- Renaissance Capital - South Africa
- Semirara Mining and Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- PTC India Limited - India
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- Thiess Contractors Indonesia
- Kartika Selabumi Mining - Indonesia
- Lanco Infratech Ltd - India
- Indogreen Group - Indonesia
- Thai Mozambique Logistica
- Bahari Cakrawala Sebuku - Indonesia
- Manunggal Multi Energi - Indonesia
- Orica Australia Pty. Ltd.
- Kobexindo Tractors - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- London Commodity Brokers - England
- Chamber of Mines of South Africa
- Karaikal Port Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Binh Thuan Hamico - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- New Zealand Coal & Carbon
- Standard Chartered Bank - UAE
- Central Java Power - Indonesia
- Georgia Ports Authority, United States
- Sindya Power Generating Company Private Ltd
- Madhucon Powers Ltd - India
- IEA Clean Coal Centre - UK
- The University of Queensland
- Trasteel International SA, Italy
- GVK Power & Infra Limited - India
- ASAPP Information Group - India
- Straits Asia Resources Limited - Singapore
- Australian Coal Association
- Eastern Energy - Thailand
- Planning Commission, India
- Medco Energi Mining Internasional
- Asmin Koalindo Tuhup - Indonesia
- European Bulk Services B.V. - Netherlands
- Meenaskhi Energy Private Limited - India
- IHS Mccloskey Coal Group - USA
- Gujarat Sidhee Cement - India
- Makarim & Taira - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- PNOC Exploration Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Edison Trading Spa - Italy
- Petron Corporation, Philippines
- Savvy Resources Ltd - HongKong
- The State Trading Corporation of India Ltd
- Sarangani Energy Corporation, Philippines
- Bangladesh Power Developement Board
- Holcim Trading Pte Ltd - Singapore
- White Energy Company Limited
- Africa Commodities Group - South Africa
- Wood Mackenzie - Singapore
- Tata Chemicals Ltd - India
- Maheswari Brothers Coal Limited - India
- Global Business Power Corporation, Philippines
- Carbofer General Trading SA - India
- Siam City Cement PLC, Thailand
- San Jose City I Power Corp, Philippines
- Orica Mining Services - Indonesia
- MS Steel International - UAE
- Ambuja Cements Ltd - India
- Romanian Commodities Exchange
- Larsen & Toubro Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Bukit Makmur.PT - Indonesia
- Grasim Industreis Ltd - India
- Ministry of Mines - Canada
- Vijayanagar Sugar Pvt Ltd - India
- Attock Cement Pakistan Limited
- Alfred C Toepfer International GmbH - Germany
- Electricity Generating Authority of Thailand
- Indian Energy Exchange, India
- Uttam Galva Steels Limited - India
- Bharathi Cement Corporation - India
- Bukit Baiduri Energy - Indonesia
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- Directorate Of Revenue Intelligence - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- OPG Power Generation Pvt Ltd - India
- Goldman Sachs - Singapore
- McConnell Dowell - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- VISA Power Limited - India
- Malabar Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- Economic Council, Georgia
- Krishnapatnam Port Company Ltd. - India
- Bhushan Steel Limited - India
- Cement Manufacturers Association - India
- Anglo American - United Kingdom
- Deloitte Consulting - India
- Formosa Plastics Group - Taiwan
- International Coal Ventures Pvt Ltd - India
- Energy Development Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Interocean Group of Companies - India
- Miang Besar Coal Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Kumho Petrochemical, South Korea
- Indian Oil Corporation Limited
- Indonesian Coal Mining Association
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Videocon Industries ltd - India
- Antam Resourcindo - Indonesia
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- SMG Consultants - Indonesia
- Latin American Coal - Colombia
- Eastern Coal Council - USA
- Sical Logistics Limited - India
- Mjunction Services Limited - India
- Billiton Holdings Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bhatia International Limited - India
- Iligan Light & Power Inc, Philippines
- Aditya Birla Group - India
- GMR Energy Limited - India
- Kaltim Prima Coal - Indonesia
- Bulk Trading Sa - Switzerland
- Aboitiz Power Corporation - Philippines
- Dalmia Cement Bharat India
- Port Waratah Coal Services - Australia
- Riau Bara Harum - Indonesia
- Posco Energy - South Korea
- Timah Investasi Mineral - Indoneisa
- Parliament of New Zealand
- Borneo Indobara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- Meralco Power Generation, Philippines
- Samtan Co., Ltd - South Korea
- Pendopo Energi Batubara - Indonesia
- Vizag Seaport Private Limited - India
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