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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, 11 January 15
BDI DECLINED 8% ON WEEK; BCI LOST 31%
COALspot.com: The BDI continued its decline in the first week of this year or lost 8 pct week over week. The BDI was closed at 709 points whi ...
Friday, 09 January 15
U.S. EASTERN SPOT STEAM COAL PRICES FELL IN 2014; ROSE IN WEST - EIA
U.S. Eastern spot steam coal prices declined in 2014 compared to 2013 levels because of a decline in steam coal exports.
According to U.S. Ene ...
Friday, 09 January 15
WEEKLY U.S. COAL PRODUCTION UP AN ESTIMATED 2.2% Y-O-Y
COALspot.com – United States the world's one of the largest coal producers, produced approximately 17.6 million short tons (mmst) of coal ...
Thursday, 08 January 15
INDONESIA PRESSES ON WITH HIGHER COAL ROYALTY FEE TO BOOST STATE REVENUE - JG
The Indonesian government is pressing on with its plan to raise the royalty charged to coal miners in order to increase state revenue, but the move ...
Wednesday, 07 January 15
FUEL EFFICIENT SHIPS MAKE LESS SENSE IN LOWER BUNKER PRICE MARKET, BUT FUEL COSTS ARE BOUND TO RISE AGAIN
The shipping industry entered 2015 on mixed emotions, as a relatively buoyant tanker market is met by a rather lackluster dry bulk market. Still, a ...
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- Rio Tinto Coal - Australia
- Heidelberg Cement - Germany
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- Coal and Oil Company - UAE
- Billiton Holdings Pty Ltd - Australia
- Metalloyd Limited - United Kingdom
- Xindia Steels Limited - India
- Marubeni Corporation - India
- MS Steel International - UAE
- Mercuria Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Kepco SPC Power Corporation, Philippines
- Commonwealth Bank - Australia
- SMC Global Power, Philippines
- Petron Corporation, Philippines
- Electricity Authority, New Zealand
- European Bulk Services B.V. - Netherlands
- PetroVietnam Power Coal Import and Supply Company
- Sarangani Energy Corporation, Philippines
- Sical Logistics Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Energy Development Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Maharashtra Electricity Regulatory Commission - India
- Medco Energi Mining Internasional
- Global Green Power PLC Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- ICICI Bank Limited - India
- Attock Cement Pakistan Limited
- Holcim Trading Pte Ltd - Singapore
- White Energy Company Limited
- Madhucon Powers Ltd - India
- PTC India Limited - India
- Anglo American - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- SMG Consultants - Indonesia
- Star Paper Mills Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Mineral Development Corp Ltd - India
- Malabar Cements Ltd - India
- Miang Besar Coal Terminal - Indonesia
- ASAPP Information Group - India
- South Luzon Thermal Energy Corporation
- Banpu Public Company Limited - Thailand
- Parry Sugars Refinery, India
- Minerals Council of Australia
- Cement Manufacturers Association - India
- Alfred C Toepfer International GmbH - Germany
- Barasentosa Lestari - Indonesia
- Trasteel International SA, Italy
- Binh Thuan Hamico - Vietnam
- Global Business Power Corporation, Philippines
- Mjunction Services Limited - India
- Ministry of Transport, Egypt
- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- OPG Power Generation Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Mercator Lines Limited - India
- Dalmia Cement Bharat India
- Essar Steel Hazira Ltd - India
- Renaissance Capital - South Africa
- GMR Energy Limited - India
- Wilmar Investment Holdings
- London Commodity Brokers - England
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Altura Mining Limited, Indonesia
- Kapuas Tunggal Persada - Indonesia
- San Jose City I Power Corp, Philippines
- Tata Chemicals Ltd - India
- Agrawal Coal Company - India
- PowerSource Philippines DevCo
- Makarim & Taira - Indonesia
- The University of Queensland
- The State Trading Corporation of India Ltd
- India Bulls Power Limited - India
- Antam Resourcindo - Indonesia
- Sakthi Sugars Limited - India
- Therma Luzon, Inc, Philippines
- Coalindo Energy - Indonesia
- Mintek Dendrill Indonesia
- Posco Energy - South Korea
- Kohat Cement Company Ltd. - Pakistan
- Jindal Steel & Power Ltd - India
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- Aditya Birla Group - India
- Aboitiz Power Corporation - Philippines
- Thiess Contractors Indonesia
- CIMB Investment Bank - Malaysia
- Manunggal Multi Energi - Indonesia
- Gujarat Sidhee Cement - India
- SN Aboitiz Power Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Australian Coal Association
- AsiaOL BioFuels Corp., Philippines
- Samtan Co., Ltd - South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Karaikal Port Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Sojitz Corporation - Japan
- LBH Netherlands Bv - Netherlands
- Cigading International Bulk Terminal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Merrill Lynch Commodities Europe
- Directorate Of Revenue Intelligence - India
- Latin American Coal - Colombia
- Parliament of New Zealand
- Indogreen Group - Indonesia
- Lanco Infratech Ltd - India
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Singapore Mercantile Exchange
- Grasim Industreis Ltd - India
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- New Zealand Coal & Carbon
- International Coal Ventures Pvt Ltd - India
- Indonesian Coal Mining Association
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- Wood Mackenzie - Singapore
- Romanian Commodities Exchange
- Eastern Coal Council - USA
- Petrochimia International Co. Ltd.- Taiwan
- Ambuja Cements Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kideco Jaya Agung - Indonesia
- Borneo Indobara - Indonesia
- Sindya Power Generating Company Private Ltd
- Energy Link Ltd, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The Treasury - Australian Government
- Meenaskhi Energy Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- IHS Mccloskey Coal Group - USA
- Bhoruka Overseas - Indonesia
- Chamber of Mines of South Africa
- Iligan Light & Power Inc, Philippines
- Siam City Cement - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Africa Commodities Group - South Africa
- Uttam Galva Steels Limited - India
- Interocean Group of Companies - India
- Standard Chartered Bank - UAE
- Kaltim Prima Coal - Indonesia
- Baramulti Group, Indonesia
- Intertek Mineral Services - Indonesia
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
- Videocon Industries ltd - India
- Central Java Power - Indonesia
- CNBM International Corporation - China
- Edison Trading Spa - Italy
- Indo Tambangraya Megah - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Jaiprakash Power Ventures ltd
- Electricity Generating Authority of Thailand
- Carbofer General Trading SA - India
- Kumho Petrochemical, South Korea
- TeaM Sual Corporation - Philippines
- Port Waratah Coal Services - Australia
- Ministry of Finance - Indonesia
- Coastal Gujarat Power Limited - India
- Bukit Makmur.PT - Indonesia
- Independent Power Producers Association of India
- Orica Australia Pty. Ltd.
- Sinarmas Energy and Mining - Indonesia
- McConnell Dowell - Australia
- Goldman Sachs - Singapore
- Bukit Baiduri Energy - Indonesia
- VISA Power Limited - India
- Maheswari Brothers Coal Limited - India
- Meralco Power Generation, Philippines
- Bhushan Steel Limited - India
- Deloitte Consulting - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bulk Trading Sa - Switzerland
- Straits Asia Resources Limited - Singapore
- Ind-Barath Power Infra Limited - India
- GVK Power & Infra Limited - India
- Orica Mining Services - Indonesia
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Tamil Nadu electricity Board
- Bangladesh Power Developement Board
- Price Waterhouse Coopers - Russia
- Eastern Energy - Thailand
- Georgia Ports Authority, United States
- Ministry of Mines - Canada
- Timah Investasi Mineral - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- Vizag Seaport Private Limited - India
- Indika Energy - Indonesia
- Indian Oil Corporation Limited
- Indian Energy Exchange, India
- Formosa Plastics Group - Taiwan
- Pendopo Energi Batubara - Indonesia
- Vedanta Resources Plc - India
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Planning Commission, India
- Globalindo Alam Lestari - Indonesia
- Economic Council, Georgia
- Toyota Tsusho Corporation, Japan
- Siam City Cement PLC, Thailand
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