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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, 30 December 14
U.S WEEKLY COAL PRODUCTION ALMOST FLAT AT -0.2%
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.8 million short tons (mmst) of coal ...
Monday, 29 December 14
CHINESE COAL IMPORTS: REGULATORY RISKS? - CLARKSONS
In recent years, Chinese seaborne coal imports have surged, registering average growth of 67% p.a. between 2009 and 2013 to total 265mt. However, t ...
Monday, 29 December 14
BULK MARKET ENDS YEAR ON SOUR NOTE, SHIPBROKER SEES 'BUMPY ROAD AHEAD' - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
2014 was supposed to be the year that the dry bulk market would stage a comeback and a sustainable one for that matter. However, while for the most ...
Monday, 29 December 14
Q1'15 CFR SOUTH CHINA COAL SWAP CLOSED AT $59.42
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery has decreased by US$ 3.51 (-5.58%) month over month and US$ 0.08 (-0.13%) ...
Monday, 29 December 14
SGX'S FOB NEWCASTLE COAL SWAPS IMPROVED W-O-W, LOST M-O-M
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 1.44 per MT (-2.73%) month over month and gained US$ 0.36 (+0.71%) ...
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- Videocon Industries ltd - India
- South Luzon Thermal Energy Corporation
- Sojitz Corporation - Japan
- Krishnapatnam Port Company Ltd. - India
- Ministry of Finance - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Heidelberg Cement - Germany
- OPG Power Generation Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Borneo Indobara - Indonesia
- Pendopo Energi Batubara - Indonesia
- Power Finance Corporation Ltd., India
- Sindya Power Generating Company Private Ltd
- PTC India Limited - India
- SMG Consultants - Indonesia
- GMR Energy Limited - India
- Rio Tinto Coal - Australia
- Goldman Sachs - Singapore
- Straits Asia Resources Limited - Singapore
- Coalindo Energy - Indonesia
- Star Paper Mills Limited - India
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- Cement Manufacturers Association - India
- Vedanta Resources Plc - India
- CIMB Investment Bank - Malaysia
- Thai Mozambique Logistica
- The Treasury - Australian Government
- Bharathi Cement Corporation - India
- Ind-Barath Power Infra Limited - India
- Semirara Mining and Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- IEA Clean Coal Centre - UK
- India Bulls Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Marubeni Corporation - India
- Orica Australia Pty. Ltd.
- White Energy Company Limited
- Medco Energi Mining Internasional
- Binh Thuan Hamico - Vietnam
- IHS Mccloskey Coal Group - USA
- London Commodity Brokers - England
- MS Steel International - UAE
- Maheswari Brothers Coal Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Manunggal Multi Energi - Indonesia
- Formosa Plastics Group - Taiwan
- Thiess Contractors Indonesia
- Grasim Industreis Ltd - India
- Kobexindo Tractors - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- Indonesian Coal Mining Association
- Sinarmas Energy and Mining - Indonesia
- Altura Mining Limited, Indonesia
- PNOC Exploration Corporation - Philippines
- Samtan Co., Ltd - South Korea
- Aboitiz Power Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- Global Coal Blending Company Limited - Australia
- Vizag Seaport Private Limited - India
- San Jose City I Power Corp, Philippines
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- SN Aboitiz Power Inc, Philippines
- Mercator Lines Limited - India
- McConnell Dowell - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Malabar Cements Ltd - India
- Jindal Steel & Power Ltd - India
- Oldendorff Carriers - Singapore
- Indo Tambangraya Megah - Indonesia
- Bhushan Steel Limited - India
- Essar Steel Hazira Ltd - India
- Bukit Makmur.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Romanian Commodities Exchange
- Xindia Steels Limited - India
- Commonwealth Bank - Australia
- GN Power Mariveles Coal Plant, Philippines
- Banpu Public Company Limited - Thailand
- Lanco Infratech Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Parry Sugars Refinery, India
- Metalloyd Limited - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coastal Gujarat Power Limited - India
- New Zealand Coal & Carbon
- Sakthi Sugars Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Timah Investasi Mineral - Indoneisa
- Price Waterhouse Coopers - Russia
- Makarim & Taira - Indonesia
- Salva Resources Pvt Ltd - India
- Madhucon Powers Ltd - India
- Tata Chemicals Ltd - India
- Chettinad Cement Corporation Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Energy Development Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Indian Oil Corporation Limited
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Trasteel International SA, Italy
- Meenaskhi Energy Private Limited - India
- Global Green Power PLC Corporation, Philippines
- Dalmia Cement Bharat India
- Bayan Resources Tbk. - Indonesia
- Ambuja Cements Ltd - India
- Bhoruka Overseas - Indonesia
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Uttam Galva Steels Limited - India
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement - Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Baramulti Group, Indonesia
- TeaM Sual Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- The State Trading Corporation of India Ltd
- Kalimantan Lumbung Energi - Indonesia
- Jaiprakash Power Ventures ltd
- Economic Council, Georgia
- Miang Besar Coal Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Australian Commodity Traders Exchange
- Jorong Barutama Greston.PT - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Singapore Mercantile Exchange
- Wilmar Investment Holdings
- Port Waratah Coal Services - Australia
- Semirara Mining Corp, Philippines
- Therma Luzon, Inc, Philippines
- VISA Power Limited - India
- Energy Link Ltd, New Zealand
- Renaissance Capital - South Africa
- Iligan Light & Power Inc, Philippines
- Wood Mackenzie - Singapore
- GAC Shipping (India) Pvt Ltd
- Cigading International Bulk Terminal - Indonesia
- Electricity Authority, New Zealand
- Directorate Of Revenue Intelligence - India
- Ceylon Electricity Board - Sri Lanka
- Antam Resourcindo - Indonesia
- Karaikal Port Pvt Ltd - India
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Sree Jayajothi Cements Limited - India
- Electricity Generating Authority of Thailand
- The University of Queensland
- Tamil Nadu electricity Board
- Coal and Oil Company - UAE
- Toyota Tsusho Corporation, Japan
- PetroVietnam Power Coal Import and Supply Company
- ICICI Bank Limited - India
- Globalindo Alam Lestari - Indonesia
- Interocean Group of Companies - India
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
- Chamber of Mines of South Africa
- Simpson Spence & Young - Indonesia
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- Parliament of New Zealand
- GVK Power & Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Agrawal Coal Company - India
- Riau Bara Harum - Indonesia
- Australian Coal Association
- Standard Chartered Bank - UAE
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- AsiaOL BioFuels Corp., Philippines
- Kumho Petrochemical, South Korea
- Minerals Council of Australia
- LBH Netherlands Bv - Netherlands
- Eastern Coal Council - USA
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- Mjunction Services Limited - India
- Ministry of Transport, Egypt
- Merrill Lynch Commodities Europe
- Posco Energy - South Korea
- Carbofer General Trading SA - India
- Central Electricity Authority - India
- Rashtriya Ispat Nigam Limited - India
- Sarangani Energy Corporation, Philippines
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Kaltim Prima Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Aditya Birla Group - India
- Petron Corporation, Philippines
- Planning Commission, India
- Gujarat Mineral Development Corp Ltd - India
- Anglo American - United Kingdom
- Ministry of Mines - Canada
- Attock Cement Pakistan Limited
- Meralco Power Generation, Philippines
- Eastern Energy - Thailand
- International Coal Ventures Pvt Ltd - India
- CNBM International Corporation - China
- Deloitte Consulting - India
- Mintek Dendrill Indonesia
- Mercuria Energy - Indonesia
- Intertek Mineral Services - Indonesia
- Central Java Power - Indonesia
- Gujarat Sidhee Cement - India
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