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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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Monday, 05 January 15
FIVE ENERGY SURPRISES FOR 2015: THE POSSIBLE AND THE IMPROBABLE - KURT COBB
The coming year is likely to be as full of surprises in the field of energy as 2014 was. We just don't know which surprises! I am not predictin ...
Monday, 05 January 15
THE SHIPPING MARKET IN 2014 AND LOOKING FORWARD - BIMCO
2014 started with plenty of optimism for a considerably better global economy and an improved shipping market. Things turned out somewhat different ...
Monday, 05 January 15
API 5 FOB NEWCASTLE COAL SWAP FOR Q1'15 DELIVERY CLOSED US$ 0.45 HIGHER COMPARED TO Q2'15 CLOSING
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 0.60 per MT (-1.15%) month over month and gained US$ 0.02 (+0.04%) ...
Sunday, 04 January 15
BALTIC DRY INDEX CONTINUES ITS DECLINE IN 2015
Wish you all a very Happy New Year 2015. The last report was dated 19th Dec 2014 and due to Christmas and new year holidays no reports were publish ...
Saturday, 03 January 15
U.S WEEKLY COAL PRODUCTION FELL 11.2% TO 17.6 MMST WEEK OVER WEEK - EIA
COALspot.com – United States the world's one of the largest coal producers, produced approximately 17.6 million short tons (mmst) of coal ...
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- Krishnapatnam Port Company Ltd. - India
- Lanco Infratech Ltd - India
- Ministry of Finance - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- International Coal Ventures Pvt Ltd - India
- Chamber of Mines of South Africa
- Africa Commodities Group - South Africa
- Indogreen Group - Indonesia
- Bukit Baiduri Energy - Indonesia
- Cement Manufacturers Association - India
- Sarangani Energy Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- LBH Netherlands Bv - Netherlands
- Simpson Spence & Young - Indonesia
- Banpu Public Company Limited - Thailand
- Bayan Resources Tbk. - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Planning Commission, India
- Straits Asia Resources Limited - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Port Waratah Coal Services - Australia
- Heidelberg Cement - Germany
- Bukit Makmur.PT - Indonesia
- PowerSource Philippines DevCo
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- SMC Global Power, Philippines
- Uttam Galva Steels Limited - India
- Therma Luzon, Inc, Philippines
- Mercuria Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Goldman Sachs - Singapore
- IEA Clean Coal Centre - UK
- VISA Power Limited - India
- Bangladesh Power Developement Board
- Energy Development Corp, Philippines
- Aditya Birla Group - India
- Meenaskhi Energy Private Limited - India
- Bhatia International Limited - India
- GAC Shipping (India) Pvt Ltd
- Toyota Tsusho Corporation, Japan
- Coalindo Energy - Indonesia
- Singapore Mercantile Exchange
- Karaikal Port Pvt Ltd - India
- Anglo American - United Kingdom
- New Zealand Coal & Carbon
- SN Aboitiz Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Oldendorff Carriers - Singapore
- Global Business Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Indonesian Coal Mining Association
- London Commodity Brokers - England
- Sinarmas Energy and Mining - Indonesia
- Borneo Indobara - Indonesia
- Sical Logistics Limited - India
- Tata Chemicals Ltd - India
- The Treasury - Australian Government
- Globalindo Alam Lestari - Indonesia
- Australian Commodity Traders Exchange
- Price Waterhouse Coopers - Russia
- The State Trading Corporation of India Ltd
- Makarim & Taira - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- GMR Energy Limited - India
- Romanian Commodities Exchange
- European Bulk Services B.V. - Netherlands
- Timah Investasi Mineral - Indoneisa
- Savvy Resources Ltd - HongKong
- Pendopo Energi Batubara - Indonesia
- Formosa Plastics Group - Taiwan
- Alfred C Toepfer International GmbH - Germany
- AsiaOL BioFuels Corp., Philippines
- Jindal Steel & Power Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- McConnell Dowell - Australia
- Jorong Barutama Greston.PT - Indonesia
- Xindia Steels Limited - India
- Global Coal Blending Company Limited - Australia
- Billiton Holdings Pty Ltd - Australia
- Australian Coal Association
- Altura Mining Limited, Indonesia
- South Luzon Thermal Energy Corporation
- Siam City Cement - Thailand
- Coastal Gujarat Power Limited - India
- Deloitte Consulting - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mintek Dendrill Indonesia
- Larsen & Toubro Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Ambuja Cements Ltd - India
- PNOC Exploration Corporation - Philippines
- Samtan Co., Ltd - South Korea
- Carbofer General Trading SA - India
- Metalloyd Limited - United Kingdom
- Global Green Power PLC Corporation, Philippines
- Ministry of Mines - Canada
- Kumho Petrochemical, South Korea
- Coal and Oil Company - UAE
- Sakthi Sugars Limited - India
- CNBM International Corporation - China
- Ceylon Electricity Board - Sri Lanka
- Attock Cement Pakistan Limited
- Ministry of Transport, Egypt
- Indo Tambangraya Megah - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement PLC, Thailand
- Independent Power Producers Association of India
- Madhucon Powers Ltd - India
- Chettinad Cement Corporation Ltd - India
- San Jose City I Power Corp, Philippines
- Orica Australia Pty. Ltd.
- Semirara Mining Corp, Philippines
- Economic Council, Georgia
- Essar Steel Hazira Ltd - India
- Parliament of New Zealand
- Videocon Industries ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Rashtriya Ispat Nigam Limited - India
- Vedanta Resources Plc - India
- Intertek Mineral Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercator Lines Limited - India
- The University of Queensland
- Star Paper Mills Limited - India
- SMG Consultants - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indian Oil Corporation Limited
- IHS Mccloskey Coal Group - USA
- Medco Energi Mining Internasional
- OPG Power Generation Pvt Ltd - India
- Eastern Energy - Thailand
- Jaiprakash Power Ventures ltd
- Standard Chartered Bank - UAE
- Indian Energy Exchange, India
- Rio Tinto Coal - Australia
- ICICI Bank Limited - India
- Renaissance Capital - South Africa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CIMB Investment Bank - Malaysia
- Electricity Authority, New Zealand
- Trasteel International SA, Italy
- Agrawal Coal Company - India
- Pipit Mutiara Jaya. PT, Indonesia
- Latin American Coal - Colombia
- Vijayanagar Sugar Pvt Ltd - India
- Dalmia Cement Bharat India
- Binh Thuan Hamico - Vietnam
- Wood Mackenzie - Singapore
- Petron Corporation, Philippines
- Posco Energy - South Korea
- Directorate General of MIneral and Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Indika Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Riau Bara Harum - Indonesia
- Ind-Barath Power Infra Limited - India
- Gujarat Sidhee Cement - India
- Minerals Council of Australia
- Baramulti Group, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Georgia Ports Authority, United States
- MS Steel International - UAE
- Sree Jayajothi Cements Limited - India
- Maheswari Brothers Coal Limited - India
- Thai Mozambique Logistica
- Power Finance Corporation Ltd., India
- Commonwealth Bank - Australia
- Thiess Contractors Indonesia
- Central Electricity Authority - India
- Kideco Jaya Agung - Indonesia
- White Energy Company Limited
- Interocean Group of Companies - India
- Kepco SPC Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Edison Trading Spa - Italy
- Manunggal Multi Energi - Indonesia
- India Bulls Power Limited - India
- Iligan Light & Power Inc, Philippines
- ASAPP Information Group - India
- Kobexindo Tractors - Indoneisa
- Merrill Lynch Commodities Europe
- Energy Link Ltd, New Zealand
- Marubeni Corporation - India
- Bhoruka Overseas - Indonesia
- Mjunction Services Limited - India
- GVK Power & Infra Limited - India
- Aboitiz Power Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Sojitz Corporation - Japan
- Bulk Trading Sa - Switzerland
- Gujarat Electricity Regulatory Commission - India
- PTC India Limited - India
- Bhushan Steel Limited - India
- Meralco Power Generation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- GN Power Mariveles Coal Plant, Philippines
- Holcim Trading Pte Ltd - Singapore
- Malabar Cements Ltd - India
- Grasim Industreis Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining and Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Bharathi Cement Corporation - India
- Miang Besar Coal Terminal - Indonesia
- Parry Sugars Refinery, India
- Tamil Nadu electricity Board
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
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