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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, 30 January 15
U.S. YEAR-TO-DATE COAL PRODUCTION REACHED 65.7 MMST
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.9 million short tons (mmst) of coal ...
Friday, 30 January 15
CAN BULKER CONVERSIONS SPOIL THE TANKER MARKET'S PARTY? - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Oversupply of tonnage has always been in the back of the head of ship owners when it comes to taking advantage of favorable market conditions. As s ...
Thursday, 29 January 15
CHINA ENERGY DEMAND MUST BE REVIEWED DUE TO FUNDAMENTAL ECONOMIC CHANGES - WOOD MACKENZIE
New patterns emerging as energy demand growth decoupled significantly from GDP growth for the first time in 2014
Wood Mackenzie says 2014 was ...
Thursday, 29 January 15
CAPE MARKET IS STILL STRUGGLING WITH LOW DEMAND AND LOW COMMODITY PRICES
Handy
Supramax rates are heading south with slipping rates all across the block. USG activity is slow with mid-week levels in the mid 8.000s, Fea ...
Wednesday, 28 January 15
MARKET INSIGHT - STELIOS KOLLINTZAS
With most traders having returned to action from year end festivities, we have already seen signs of activity in the specialized product markets. L ...
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- Kumho Petrochemical, South Korea
- Rio Tinto Coal - Australia
- Madhucon Powers Ltd - India
- Sojitz Corporation - Japan
- Meenaskhi Energy Private Limited - India
- Ambuja Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- Orica Mining Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- ASAPP Information Group - India
- London Commodity Brokers - England
- Global Business Power Corporation, Philippines
- Energy Development Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Thai Mozambique Logistica
- PowerSource Philippines DevCo
- SN Aboitiz Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Sarangani Energy Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Latin American Coal - Colombia
- Central Electricity Authority - India
- Eastern Energy - Thailand
- Indonesian Coal Mining Association
- Parliament of New Zealand
- Bharathi Cement Corporation - India
- Makarim & Taira - Indonesia
- Africa Commodities Group - South Africa
- San Jose City I Power Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Leighton Contractors Pty Ltd - Australia
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- Marubeni Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Romanian Commodities Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Coalindo Energy - Indonesia
- White Energy Company Limited
- Chamber of Mines of South Africa
- Siam City Cement - Thailand
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Aboitiz Power Corporation - Philippines
- GMR Energy Limited - India
- Cement Manufacturers Association - India
- LBH Netherlands Bv - Netherlands
- Heidelberg Cement - Germany
- Directorate Of Revenue Intelligence - India
- Semirara Mining and Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- Minerals Council of Australia
- The Treasury - Australian Government
- TeaM Sual Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- New Zealand Coal & Carbon
- Agrawal Coal Company - India
- Dalmia Cement Bharat India
- Kaltim Prima Coal - Indonesia
- Mintek Dendrill Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Australian Coal Association
- Uttam Galva Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cigading International Bulk Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- Orica Australia Pty. Ltd.
- Meralco Power Generation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Simpson Spence & Young - Indonesia
- Ministry of Mines - Canada
- Thiess Contractors Indonesia
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- Lanco Infratech Ltd - India
- Interocean Group of Companies - India
- Planning Commission, India
- Bangladesh Power Developement Board
- IEA Clean Coal Centre - UK
- Kohat Cement Company Ltd. - Pakistan
- Renaissance Capital - South Africa
- ICICI Bank Limited - India
- SMG Consultants - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- Medco Energi Mining Internasional
- Essar Steel Hazira Ltd - India
- SMC Global Power, Philippines
- Carbofer General Trading SA - India
- CIMB Investment Bank - Malaysia
- Tata Chemicals Ltd - India
- Goldman Sachs - Singapore
- Mercator Lines Limited - India
- Bhushan Steel Limited - India
- Bhoruka Overseas - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Aditya Birla Group - India
- Therma Luzon, Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Merrill Lynch Commodities Europe
- McConnell Dowell - Australia
- The University of Queensland
- Salva Resources Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Kobexindo Tractors - Indoneisa
- Australian Commodity Traders Exchange
- Videocon Industries ltd - India
- VISA Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- Baramulti Group, Indonesia
- Antam Resourcindo - Indonesia
- Iligan Light & Power Inc, Philippines
- Siam City Cement PLC, Thailand
- PNOC Exploration Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Indogreen Group - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sinarmas Energy and Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Bukit Baiduri Energy - Indonesia
- Grasim Industreis Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Asmin Koalindo Tuhup - Indonesia
- Coal and Oil Company - UAE
- Wood Mackenzie - Singapore
- Parry Sugars Refinery, India
- Formosa Plastics Group - Taiwan
- Malabar Cements Ltd - India
- Economic Council, Georgia
- Kapuas Tunggal Persada - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Xindia Steels Limited - India
- Bulk Trading Sa - Switzerland
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CNBM International Corporation - China
- Metalloyd Limited - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Riau Bara Harum - Indonesia
- The State Trading Corporation of India Ltd
- Ministry of Transport, Egypt
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Petron Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Larsen & Toubro Limited - India
- Vedanta Resources Plc - India
- Banpu Public Company Limited - Thailand
- Tamil Nadu electricity Board
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- Singapore Mercantile Exchange
- Toyota Tsusho Corporation, Japan
- Chettinad Cement Corporation Ltd - India
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- PTC India Limited - India
- Binh Thuan Hamico - Vietnam
- Oldendorff Carriers - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Central Java Power - Indonesia
- Semirara Mining Corp, Philippines
- Sical Logistics Limited - India
- Standard Chartered Bank - UAE
- Indika Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Indian Energy Exchange, India
- Edison Trading Spa - Italy
- Bahari Cakrawala Sebuku - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- European Bulk Services B.V. - Netherlands
- Altura Mining Limited, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Electricity Authority, New Zealand
- Price Waterhouse Coopers - Russia
- Eastern Coal Council - USA
- Port Waratah Coal Services - Australia
- Jaiprakash Power Ventures ltd
- South Luzon Thermal Energy Corporation
- Savvy Resources Ltd - HongKong
- Deloitte Consulting - India
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Holcim Trading Pte Ltd - Singapore
- Indo Tambangraya Megah - Indonesia
- Sakthi Sugars Limited - India
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Star Paper Mills Limited - India
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- Mercuria Energy - Indonesia
- Trasteel International SA, Italy
- Barasentosa Lestari - Indonesia
- Intertek Mineral Services - Indonesia
- Power Finance Corporation Ltd., India
- Bukit Makmur.PT - Indonesia
- Anglo American - United Kingdom
- Manunggal Multi Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- MS Steel International - UAE
- Kalimantan Lumbung Energi - Indonesia
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