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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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Wednesday, 07 January 15
2015 IS RIDDLED WITH CHALLENGES FOR THE SHIPPING SECTOR, MOST NOTABLY THE DRY BULK MARKET - HELLENIC SHIPPING NEWS
As the new year has now set foot for real, many are still looking to detect what’s in store for the various shipping markets, with the first ...
Tuesday, 06 January 15
SHIPPING MUST ADOPT CAN-DO ATTITUDE IN 2015 - MOORE STEPHENS
Shipping needs to adopt a can-do attitude in order to successfully meet the challenges which are likely to come its way in 2015.
Shipping part ...
Tuesday, 06 January 15
Q4' 15 FOB INDONESIA COAL SWAP CLOSED 1.81% HIGHER COMPARED TO Q1' 15 CLOSING
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 lost month on month and week over week.
The Q1 swap has lost US$ 0.74 (-1.51%) m ...
Tuesday, 06 January 15
FOB RICHARDS BAY COAL SWAPS LOST W-O-W AND M-O-M, SGX DATA SHOWS
COALspot.com: API 4 FOB Richards Bay Coal for delivery Q1' 2015 lost month on month and week over week.
The Q1 swap has lost US$ 3.52 (-5. ...
Monday, 05 January 15
CFR SOUTH CHINA COAL SWAPS GAINED WEEK OVER WEEK, SGX DATA SHOWS
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery has decreased by US$ 2.50 (-4.02%) month over month and gained US$ 0.20 ( ...
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- Aditya Birla Group - India
- Latin American Coal - Colombia
- Kumho Petrochemical, South Korea
- Goldman Sachs - Singapore
- Minerals Council of Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Energy Link Ltd, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- Karbindo Abesyapradhi - Indoneisa
- Savvy Resources Ltd - HongKong
- Cigading International Bulk Terminal - Indonesia
- The Treasury - Australian Government
- India Bulls Power Limited - India
- International Coal Ventures Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Malabar Cements Ltd - India
- Agrawal Coal Company - India
- Siam City Cement PLC, Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Bharathi Cement Corporation - India
- Maharashtra Electricity Regulatory Commission - India
- Tamil Nadu electricity Board
- Sree Jayajothi Cements Limited - India
- Salva Resources Pvt Ltd - India
- Deloitte Consulting - India
- Gujarat Sidhee Cement - India
- Electricity Generating Authority of Thailand
- Electricity Authority, New Zealand
- Medco Energi Mining Internasional
- Siam City Cement - Thailand
- Indika Energy - Indonesia
- Eastern Coal Council - USA
- IHS Mccloskey Coal Group - USA
- Economic Council, Georgia
- Thai Mozambique Logistica
- Antam Resourcindo - Indonesia
- Grasim Industreis Ltd - India
- The University of Queensland
- Thiess Contractors Indonesia
- Coastal Gujarat Power Limited - India
- Meralco Power Generation, Philippines
- Pendopo Energi Batubara - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Kepco SPC Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Intertek Mineral Services - Indonesia
- Madhucon Powers Ltd - India
- Ministry of Transport, Egypt
- Indian Energy Exchange, India
- Krishnapatnam Port Company Ltd. - India
- Power Finance Corporation Ltd., India
- TNB Fuel Sdn Bhd - Malaysia
- Bhatia International Limited - India
- London Commodity Brokers - England
- Simpson Spence & Young - Indonesia
- SMG Consultants - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Toyota Tsusho Corporation, Japan
- Jorong Barutama Greston.PT - Indonesia
- Vedanta Resources Plc - India
- Ministry of Mines - Canada
- Altura Mining Limited, Indonesia
- Cement Manufacturers Association - India
- Mintek Dendrill Indonesia
- Gujarat Electricity Regulatory Commission - India
- AsiaOL BioFuels Corp., Philippines
- Ceylon Electricity Board - Sri Lanka
- Price Waterhouse Coopers - Russia
- Kartika Selabumi Mining - Indonesia
- Planning Commission, India
- Bulk Trading Sa - Switzerland
- Sical Logistics Limited - India
- Straits Asia Resources Limited - Singapore
- Star Paper Mills Limited - India
- Chamber of Mines of South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Coal and Oil Company - UAE
- Rio Tinto Coal - Australia
- Bhushan Steel Limited - India
- Wood Mackenzie - Singapore
- Holcim Trading Pte Ltd - Singapore
- Oldendorff Carriers - Singapore
- Aboitiz Power Corporation - Philippines
- Essar Steel Hazira Ltd - India
- The State Trading Corporation of India Ltd
- SMC Global Power, Philippines
- Merrill Lynch Commodities Europe
- Coalindo Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Posco Energy - South Korea
- Edison Trading Spa - Italy
- Carbofer General Trading SA - India
- Meenaskhi Energy Private Limited - India
- Kobexindo Tractors - Indoneisa
- Trasteel International SA, Italy
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
- Directorate Of Revenue Intelligence - India
- PNOC Exploration Corporation - Philippines
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- Mercuria Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Makarim & Taira - Indonesia
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- Marubeni Corporation - India
- White Energy Company Limited
- Central Java Power - Indonesia
- Ind-Barath Power Infra Limited - India
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Sindya Power Generating Company Private Ltd
- Sojitz Corporation - Japan
- Iligan Light & Power Inc, Philippines
- Australian Coal Association
- Australian Commodity Traders Exchange
- European Bulk Services B.V. - Netherlands
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- CIMB Investment Bank - Malaysia
- Port Waratah Coal Services - Australia
- Indogreen Group - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Larsen & Toubro Limited - India
- TeaM Sual Corporation - Philippines
- MS Steel International - UAE
- Chettinad Cement Corporation Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Heidelberg Cement - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- New Zealand Coal & Carbon
- OPG Power Generation Pvt Ltd - India
- Romanian Commodities Exchange
- Directorate General of MIneral and Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Barasentosa Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Semirara Mining Corp, Philippines
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- McConnell Dowell - Australia
- Central Electricity Authority - India
- GN Power Mariveles Coal Plant, Philippines
- SN Aboitiz Power Inc, Philippines
- Orica Mining Services - Indonesia
- Xindia Steels Limited - India
- Samtan Co., Ltd - South Korea
- Baramulti Group, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Indian Oil Corporation Limited
- Therma Luzon, Inc, Philippines
- ICICI Bank Limited - India
- Gujarat Mineral Development Corp Ltd - India
- GVK Power & Infra Limited - India
- Parliament of New Zealand
- Tata Chemicals Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Maheswari Brothers Coal Limited - India
- Global Business Power Corporation, Philippines
- CNBM International Corporation - China
- Global Green Power PLC Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- Jaiprakash Power Ventures ltd
- Interocean Group of Companies - India
- Independent Power Producers Association of India
- Standard Chartered Bank - UAE
- Formosa Plastics Group - Taiwan
- Kideco Jaya Agung - Indonesia
- Parry Sugars Refinery, India
- Kalimantan Lumbung Energi - Indonesia
- Borneo Indobara - Indonesia
- Metalloyd Limited - United Kingdom
- Energy Development Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Attock Cement Pakistan Limited
- Bayan Resources Tbk. - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Wilmar Investment Holdings
- Semirara Mining and Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Manunggal Multi Energi - Indonesia
- Indo Tambangraya Megah - Indonesia
- Africa Commodities Group - South Africa
- Orica Australia Pty. Ltd.
- PowerSource Philippines DevCo
- Indonesian Coal Mining Association
- VISA Power Limited - India
- Commonwealth Bank - Australia
- Renaissance Capital - South Africa
- Lanco Infratech Ltd - India
- PTC India Limited - India
- Videocon Industries ltd - India
- Ministry of Finance - Indonesia
- Ambuja Cements Ltd - India
- Sakthi Sugars Limited - India
- GAC Shipping (India) Pvt Ltd
- Karaikal Port Pvt Ltd - India
- Eastern Energy - Thailand
- South Luzon Thermal Energy Corporation
- Mercator Lines Limited - India
- GMR Energy Limited - India
- Petron Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Dalmia Cement Bharat India
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