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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, 26 December 14
SHIPS FACE LOWER SULPHUR FUEL REQUIREMENTS IN EMISSION CONTROL AREAS FROM 1 JANUARY 2015 - IMO
Ships trading in designated emission control areas will have to use on board fuel oil with a sulphur content of no more than 0.10% from 1 January 2 ...
Wednesday, 24 December 14
CAPE DEMAND WAS STILL EXTREMELY SOFT THIS PAST WEEK ACROSS BOTH BASINS - INTERMODAL
COALspot.com: The performance of the Dry Bulk market, which found itself in desperate search of support for yet another week, has left very little ...
Wednesday, 24 December 14
MARKET INSIGHT - JOHN N. COTZIAS, INTERMODAL SNP BROKER
The year is coming to an end, and we should be able to assess if this was a good year, a bad year, or even a lousy one? The answer clearly de ...
Tuesday, 23 December 14
Q1'15 FOB INDONESIA COAL SWAP GAINED 48 CENTS IN ONE WEEK
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 lost month on month and gained week over week and day on day.
The Q1 swap has lo ...
Tuesday, 23 December 14
Q4'15 FOB RICHARDS BAY COAL SWAPS FALL $ 3.85 IN A MONTH
COALspot.com: API 4 FOB Richards Bay Coal for delivery Q1' 2015 lost month on month.
The Q1 swap has lost US$ 2.13 (-3.17%) month on month ...
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- PowerSource Philippines DevCo
- Karbindo Abesyapradhi - Indoneisa
- Bukit Baiduri Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Commonwealth Bank - Australia
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- Eastern Energy - Thailand
- Straits Asia Resources Limited - Singapore
- Rashtriya Ispat Nigam Limited - India
- Iligan Light & Power Inc, Philippines
- GMR Energy Limited - India
- Jindal Steel & Power Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Bangladesh Power Developement Board
- Sree Jayajothi Cements Limited - India
- PTC India Limited - India
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- ASAPP Information Group - India
- Standard Chartered Bank - UAE
- Africa Commodities Group - South Africa
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bulk Trading Sa - Switzerland
- Larsen & Toubro Limited - India
- Chamber of Mines of South Africa
- AsiaOL BioFuels Corp., Philippines
- Sical Logistics Limited - India
- Pendopo Energi Batubara - Indonesia
- Gujarat Sidhee Cement - India
- Salva Resources Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Agrawal Coal Company - India
- Chettinad Cement Corporation Ltd - India
- ICICI Bank Limited - India
- Kumho Petrochemical, South Korea
- Kideco Jaya Agung - Indonesia
- Jaiprakash Power Ventures ltd
- Independent Power Producers Association of India
- Mintek Dendrill Indonesia
- Maheswari Brothers Coal Limited - India
- TeaM Sual Corporation - Philippines
- Romanian Commodities Exchange
- Intertek Mineral Services - Indonesia
- Posco Energy - South Korea
- GAC Shipping (India) Pvt Ltd
- Wood Mackenzie - Singapore
- Coalindo Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- The State Trading Corporation of India Ltd
- Electricity Authority, New Zealand
- Siam City Cement PLC, Thailand
- Price Waterhouse Coopers - Russia
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- Sakthi Sugars Limited - India
- Maharashtra Electricity Regulatory Commission - India
- White Energy Company Limited
- Bukit Makmur.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mercator Lines Limited - India
- Kobexindo Tractors - Indoneisa
- Merrill Lynch Commodities Europe
- CNBM International Corporation - China
- IEA Clean Coal Centre - UK
- Bukit Asam (Persero) Tbk - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Meenaskhi Energy Private Limited - India
- Dalmia Cement Bharat India
- Vedanta Resources Plc - India
- Mjunction Services Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Marubeni Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Savvy Resources Ltd - HongKong
- Interocean Group of Companies - India
- Gujarat Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Bhoruka Overseas - Indonesia
- Orica Australia Pty. Ltd.
- Therma Luzon, Inc, Philippines
- Meralco Power Generation, Philippines
- LBH Netherlands Bv - Netherlands
- Karaikal Port Pvt Ltd - India
- Sojitz Corporation - Japan
- Tata Chemicals Ltd - India
- Port Waratah Coal Services - Australia
- Attock Cement Pakistan Limited
- Rio Tinto Coal - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Makarim & Taira - Indonesia
- Kepco SPC Power Corporation, Philippines
- Economic Council, Georgia
- Oldendorff Carriers - Singapore
- Bayan Resources Tbk. - Indonesia
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- Bhushan Steel Limited - India
- CIMB Investment Bank - Malaysia
- Simpson Spence & Young - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- Samtan Co., Ltd - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indika Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Carbofer General Trading SA - India
- Cement Manufacturers Association - India
- MS Steel International - UAE
- Malabar Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Indian Oil Corporation Limited
- Goldman Sachs - Singapore
- Coal and Oil Company - UAE
- Ministry of Mines - Canada
- Bharathi Cement Corporation - India
- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- Georgia Ports Authority, United States
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Formosa Plastics Group - Taiwan
- Semirara Mining and Power Corporation, Philippines
- Ambuja Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Leighton Contractors Pty Ltd - Australia
- Indonesian Coal Mining Association
- Australian Commodity Traders Exchange
- PNOC Exploration Corporation - Philippines
- Thiess Contractors Indonesia
- Medco Energi Mining Internasional
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Riau Bara Harum - Indonesia
- Miang Besar Coal Terminal - Indonesia
- New Zealand Coal & Carbon
- VISA Power Limited - India
- Mercuria Energy - Indonesia
- Grasim Industreis Ltd - India
- Thai Mozambique Logistica
- Indogreen Group - Indonesia
- Indo Tambangraya Megah - Indonesia
- Globalindo Alam Lestari - Indonesia
- Central Electricity Authority - India
- Ministry of Finance - Indonesia
- Madhucon Powers Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Power Finance Corporation Ltd., India
- Xindia Steels Limited - India
- Coastal Gujarat Power Limited - India
- Energy Link Ltd, New Zealand
- Heidelberg Cement - Germany
- Bahari Cakrawala Sebuku - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Metalloyd Limited - United Kingdom
- Orica Mining Services - Indonesia
- Binh Thuan Hamico - Vietnam
- London Commodity Brokers - England
- Videocon Industries ltd - India
- Siam City Cement - Thailand
- Kaltim Prima Coal - Indonesia
- The University of Queensland
- OPG Power Generation Pvt Ltd - India
- Lanco Infratech Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Barasentosa Lestari - Indonesia
- Aditya Birla Group - India
- Banpu Public Company Limited - Thailand
- McConnell Dowell - Australia
- Sinarmas Energy and Mining - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bhatia International Limited - India
- Parliament of New Zealand
- Semirara Mining Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Wilmar Investment Holdings
- Essar Steel Hazira Ltd - India
- Edison Trading Spa - Italy
- India Bulls Power Limited - India
- Altura Mining Limited, Indonesia
- Baramulti Group, Indonesia
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Anglo American - United Kingdom
- Singapore Mercantile Exchange
- Minerals Council of Australia
- GVK Power & Infra Limited - India
- Renaissance Capital - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Holcim Trading Pte Ltd - Singapore
- IHS Mccloskey Coal Group - USA
- Parry Sugars Refinery, India
- The Treasury - Australian Government
- Electricity Generating Authority of Thailand
- Indian Energy Exchange, India
- Planning Commission, India
- Australian Coal Association
- Tamil Nadu electricity Board
- Energy Development Corp, Philippines
- European Bulk Services B.V. - Netherlands
- SMG Consultants - Indonesia
- Deloitte Consulting - India
- Global Business Power Corporation, Philippines
- Central Java Power - Indonesia
- Uttam Galva Steels Limited - India
- Sarangani Energy Corporation, Philippines
- Vizag Seaport Private Limited - India
- Latin American Coal - Colombia
- Cigading International Bulk Terminal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
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